Friday, December 25, 1998

Push is on to bring about more airline competition

By JAMES W. BROSNAN

Scripps Howard News Service

WASHINGTON -- Transportation Secretary Rodney Slater is expressing cautious optimism that he can reach agreement with the major airlines on new rules designed to spur competition in cities where one airline dominates.

"The longer we've gone with the processes the more we've come to see eye-to-eye. That's not to say that we'll get there," said Slater.

Slater would like to get the competition guidelines settled early next year before they get entangled in a debate over reauthorization of the Federal Aviation Administration.

But airline officials say they haven't seen the changes that would persuade them to get aboard.

"I'm not aware of anything that is moving on this and certainly nothing that suggests some kind of compromise," said John Meenan, senior vice president for industry policy at the Air Transport Association, the lobbying arm for the big airlines.

Slater proposed the competition guidelines last April. The guidelines would establish when the department would intervene to block a major airline from changing fares or offering incentives designed to drive out a new entrant from the marketplace.

In several markets -- Detroit, Denver and Wichita, Kan. -- fledgling airlines have been driven out by major airlines that lowered fares, then raised them once the new entrant left town.

Slater also said he hopes the guidelines will encourage investment in new airlines to serve cities such as Memphis, Tenn., and Cincinnati, which Department of Transportation studies show experience some of the highest air fares in the country.

T. Alan McArtor, a former head of the FAA, now heads Legend Airlines, which is awaiting regulatory approval to begin flying 56-seat jets out of Love Field in Dallas.

"Our company and any other new entrant airline ... is not only at a distinct disadvantage because of size, but the power of a major airline to engage in predatory behavior," said McArtor.

Pricing isn't the only tool of big airlines, says McArtor. Big airlines can reward bonus miles under frequent-flyer plans for certain routes, pay bonus commissions to travel agents to steer customers to them and offer discounts to corporations that book their officials exclusively on their flights on certain routes, he said.

Officials from the major airlines say that the guidelines proposed by Slater are unnecessary and would impede competition. Since deregulation in 1982, the number of passengers boarding a plane in the U.S. has climbed from just less than 400 million a year to more than 600 million a year, and average fares have declined 35 percent when measured against inflation, says the Air Transport Association.

Department of Transportation officials counter that the number of passengers goes up even faster in cities where there is competition to lower prices.

Meanwhile, the Association of Flight Attendants has complained the guidelines would protect low-cost carriers and hamstring the major, unionized carriers and their members' work rules and benefits.

Department of Transportation officials say they plan changes in the guidelines, but won't say what they will be.

Congress won't rule on any guidelines until the spring.

(James W. Brosnan is a reporter for Scripps Howard News Service. E-mail brosnanj(at)shns.com.)