- The Washington Times - Tuesday, July 4, 2000

Industry officials are skeptical that DC Air, the new airline being created by the planned merger of United Airlines and US Airways, can fly on its own.

Many critics say the new carrier, owned by BET founder Robert Johnson, would need support from the new United giant.

"Unless [Mr. Johnson] is closely aligned with the new United, he would have no chance having any longtime stability," said Ed Faberman, executive director of Air Carrier Association of America, a coalition of small- to mid-sized airlines. "It's difficult for me to believe that he will be running a totally independent airline."

Mr. Johnson, the media mogul who founded Black Entertainment Television, will invest about $200 million of his own money to buy US Airways' operations at Ronald Reagan Washington National Airport. The price tag includes the purchase of 222 takeoff and landing slots at Reagan National, giving the new regional carrier flights to 43 markets.

The spinoff airline was offered to Mr. Johnson, a US Airways board member, as a way to eliminate antitrust concerns federal regulators may have with the $4.3 billion deal.

"This relationship is way too cozy," said Terry Trippler, airline expert for 1travel.com. "There's going to be a connection."

DC Air's fleet initially will be made up of eight turboprop planes bought from US Airways, 10 Boeing 737 airplanes leased from United and 19 regional jets leased from another carrier likely Mesa Airlines, which has partnership agreements with US Airways to operate the US Airways Express regional jets. With those planes come crew and other personnel.

Industry watchers also said they believe DC Air will use United's marketing power and frequent-flyer program to increase traffic and minimize its costs.

"It's a nice little package of support," Mr. Trippler said. "It's United operating under an assumed name."

Mr. Johnson disagrees.

When asked how much DC Air will rely on United, Mr. Johnson said, "Not much at all."

His airline will lease from United "as long as we need to," he said. "We'll transition out when its economically viable."

The estimated 1,200 DC Air employees will not necessarily be US Airways or United employees, Mr. Johnson said. About 700 US Airways employees work in airport operations and another 900 to 1,000 employees are at corporate headquarters in Arlington, Va.

United officials have said that no area employees will lose their jobs from the merger.

At first, most of DC Air's staff will be borrowed some employees from United and others from the regional carrier chosen to handle the regional jets.

But as the company grows, he will hire permanent employees and buy his own planes, he said.

DC Air will have its own frequent-flyer program, which likely will be linked to another airline not necessarily United's, Mr. Johnson said.

The DC Air spinoff is just one part of the merger between United and US Airways that is being scrutinized by federal regulators. The Justice Department is examining the proposal and will determine whether the merger, which would create the world's largest airline, violates antitrust laws.

Many critics say the DC Air part of the United deal is unfair, spinning off an airline to a board member without offering the US Airways assets to a true competitor.

"DC Air is a Trojan horse," said Michael Boyd, president of the Boyd Group, a Colorado-based aviation research and consulting firm. "It's the shiny trinket used to bamboozle the regulators."

Last month, members of Congress began hearings that take a closer look at the deal, including the creation of DC Air, which would be the country's only minority-owned airline.

Many members raised criticisms, including Rep. James L. Oberstar, Minnesota Democrat. The ranking Democratic member of the House Transportation and Infrastructure Committee said the merger would create a "plantation" that would leave DC Air unfairly dependent on United. He later apologized for the comment.

But DC Air's affiliation with United will help United "maintain some control of what goes on at [National] airport," Mr. Faberman said.

"It freezes out the new competition," he said.

Mr. Johnson, who built BET into a $2 billion media conglomerate, is entering a "lousy" industry one with low returns and high risks, Mr. Boyd said.

There have been 43 airlines that began operations between 1978 when the airline industry was deregulated and 1992. Only two airlines America West and Midwest Express still exist, he said.

But industry officials are convinced Mr. Johnson has been handed a better deal than most startup airlines.

Darryl Jenkins, professor of airline economics at George Washington University, said DC Air already has one advantage an established route network.

"He's starting with routes that more or less work," Mr. Jenkins said. "That's a big deal."

The survival of DC Air ultimately comes down to how successful the airline will be when operating and maintaining its flight schedules, getting passengers from one place to another safely and charging enough that the airline makes money, he said.

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