- The Washington Times - Monday, March 20, 2000

American Airlines Chairman and Chief Executive Officer Don J. Carty came to Washington late last month to press his company's case for being given the right to begin service to China. As the debate heats up in Congress over whether to grant permanent normal trade relations to China, yet another debate is raging down the street at the Department of Transportation.
American is one of four air service companies including United Parcel Service Inc., Polar Air and Delta Airlines competing for access to China's highly lucrative, though tightly controlled, airspace. China, up until this year, has allowed only three U.S. companies into the country: United Airlines, Northwest Airlines and cargo service Federal Express.
The government last year asked, and China agreed, to allow one more U.S. company into China to serve its 1.2 billion people and two of the world's most populous cities: Beijing and Shanghai. China offered the slot, but said the U.S. government must decide which company gets it.
The competition is fierce as the powerful lobbying arms of each company especially American, the largest U.S. air carrier, and UPS, the largest private package delivery company muster their forces in the halls of Congress and the DOT. The DOT is expected to make its decision sometime this spring.
Mr. Carty discussed his company's bid, as well as American's renewed effort to improve air service for an increasingly disgruntled flying public.
Question: Why are airlines having to compete for just one spot into China? Shouldn't market forces determine which airlines get to that country?
Answer: In the perfect world, we would have open skies everywhere, and these alliances would develop by dent of the competitive interests of the various partners. As we transition from very regulated environments to open skies, governments want to make sure that no alliances get such a competitive advantage.
Q: How helpful has the U.S. government been in assisting companies like yours break into foreign markets?
A: The U.S. government has made a very substantial effort to liberalize markets all over the world. In one place where they are making, indeed, quite good progress is in places where we have done well, like Latin America. Liberalization hasn't yet occurred in Asia.
Q: If Congress grants China permanent normal trade relations, will this type of competition for access be a thing of the past?
A: Like our relations with most other countries, aviation has been treated differently. Why that is, your guess is as good as mine. There is a peculiar relationship between the business of air carriers and the sovereignty of nations. It is clear that the Chinese, like so many other countries, are interested in the development of their own aviation infrastructure.
They may or may not care about having their own sock company or chemical company, but they sure care about having airlines. Most countries seem to have expressed that sentiment over the last several years. I don't think that will always be true. If you go 30 years down the road, there will be less times where the origins of an airline becomes an issue.
Q: Could you talk about American Airlines' decision to add more leg room to its seats? Were you prompted by United's move to do the same?
A: I think it's fair to say that United's decision had a little bit of a bearing on it. It was an outgrowth of an effort we initiated about a year ago. We have become very troubled by the perception the public has of airlines. I think it reached its worst point last summer, when the air traffic control system almost collapsed on us.
Q: Do you blame the Federal Aviation Administration for the delay problems that have frustrated passengers?
A: I really don't want to blame the FAA entirely. Yes, they were struggling. But I think as a consequence of a number of things that have gone on in the airline industry, we have gone from being perceived as good providers of service to being considered dreadful.
We are in the service business. And there is no service business that is more competitive than ours. So we wanted to fix that perception. After deregulation, we realized that consumers wanted price above all else. So we focused on squeezing the fat out of our companies.
Q: Are you saying that American Airlines went too far in trading service for low air fares?
A: We made some trade-offs on costs versus service. We cared more about providing coast-to-coast service for $195 than carving roast beef in the aisles. But as time went on, we squeezed service in a number of ways where we didn't get the same trade-off.
So how do we begin to restore service while keeping prices down? We found that the single biggest thing customers have been complaining about for the past five years: space, space, space. While people are bigger than they were 30 years ago, our space is less than it was then.
Q: Wasn't this decision really driven by threats of a Passengers Bill of Rights on Capitol Hill?
A: Those efforts on the Hill were a commentary on the same things we observed, which was people were pretty unhappy with us. I don't blame Congress for taking this up. Congress was simply a mirror of the traveling public. They got involved because they were hearing from their constituents. We were hearing from their constituents too.
Timothy Burn

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