- The Washington Times - Thursday, February 8, 2001

A Senate panel warned yesterday that reregulation of the airline industry may be inevitable as recent mergers and acquisitions reduce the number of major air carriers.

Senate Judiciary Committee Chairman Orrin G. Hatch said Justice Department officials who must approve or deny the deals should consider whether passengers can reach their destinations faster, cheaper and more safely.

"Effective antitrust enforcement today will prevent the need for stifling regulations tomorrow," the Utah Republican said during the Judiciary antitrust, business rights and competition subcommittee hearing.

But airline executives testifying at the hearing protested that tough competition and high operating costs are forcing them to form the new business alliances.

Delta Air Lines Inc. Chairman Leo Mullin said his company had little choice but to consider a merger, faced with the "huge duopoly" being created by United Airlines and American Airlines.

United Airlines plans to buy most of US Airways. American has announced plans to acquire financially ailing Trans World Airlines. Any remaining parts of US Airways after the United purchase would be sold to American. The United-US Airways deal would give US Airways' flights from Ronald Reagan Washington National Airport to a new carrier, DC Air, run by Black Entertainment Television founder Robert L. Johnson.

Critics say the fact that DC Air would depend on US Airways and United for its airplanes and service personnel indicated it was not really an independent competitor.

However, Mr. Johnson told the senators, "Under my leadership, DC Air will be an independent company."

The deals also would give United and American nearly half of the U.S. airline industry. Meanwhile, Delta and Continental have been discussing a merger.

Some of the senators warned the nation would be left with only three major airlines if all the deals are approved.

Even Alfred Kahn, a leader of airline deregulation 22 years ago while he was chairman of the former Civil Aeronautics Board, warned that service could suffer and fares rise if a few airlines are allowed to dominate the industry.

"These are transactions that clearly threaten competition," Mr. Kahn said.

Congress is not authorized to approve or deny industry mergers and acquisitions. Instead, the Justice Department in conjunction with Transportation Department input must make the decision. However, Congress can decide the regulations airlines must follow and can lobby the agencies.

Several senators asked the airline executives about the "slots" available at airports. Slots refer to the right to operate airplanes at high-density airports during specific times and at specific gates. In many cases, the slots are dominated by major carriers like United or American.

"These slots are public property, and I think they've been abused," said Sen. Charles E. Schumer, New York Democrat.

Said Sen. Patrick J. Leahy, Vermont Democrat: "In many cases, it's already an uphill battle for low-cost carriers to break into new markets. We need to get more slots to JetBlue, Southwest and AirTran, and other low-cost carriers to increase real competition."

The hearing was held one day after President Bush asked four major airlines and their unions to avoid strikes and said he would "explore all options" if they cannot resolve their labor disputes.

The president's options include creating a Presidential Emergency Board that could force an end to any airline strike for 60 days while the board considers how to settle it.

The threat of strikes was mentioned by some senators at the hearing yesterday. If the airline industry continues consolidating, a single union could threaten air transportation nationally, they said.

"The industry will also be one work-stoppage away from closing down one-fourth to one-third of America's air system," Mr. Leahy said.

"If we don't tread carefully, reregulation will be around the corner with all its inefficiencies," he warned.

Added Sen. Harry Reid, Nevada Democrat: "No one wants the federal government to micromanage private industry. But our airways are not just a private industry, they are a public trust."

US Airways Chairman Stephen M. Wolf said that by merging with United, US Airways' 45,000 jobs, with service to many communities, would be preserved, and airline competition would increase.

"In today's competitive marketplace, there are only two platforms on which to operate an airline successfully," Mr. Wolf testified. "There is the low-cost, low-fare business model … and the fully mature, full-service, network carriers. US Airways is neither and there is no place for a 'neither.' This is simply an economic reality."

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