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however, before i address the substance of s. 415, the
aviation competition restoration act, i do want to expand on my
statement that the proposed mega-mergers are bad.
we believe, and our analysis shows, that the proposed mega-
mergers of united/us airways and us airways/american, if implemented, will create a coordinated duopoly that will
control the u. domestic market and marginalize smaller
carriers, like continental. for example, if the deal is approved, almost 80 percent of all slots at the four federally
constrained slot-regulated airports will be controlled by the
duopoly of american and united. |
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at washington reagan and new york la guardia, where slot
controls are likely to remain indefinitely, the two mega
airlines will control over 65 percent of all slots. by
comparison, continental currently operates with less then 5
percent of the slots at washington reagan and new york la
guardia.
on a broader scale today, each major airline has strengths
in specific regions of the country. |
| however, none is overly
dominant, and a competitive equilibrium exists. with their
proposed mega-mergers, united and american have proposed to divide and conquer the entire u.
their mou makes clear they intend to coordinate their
businesses. the immediate result will be two giant carriers
that jointly control nearly 50 percent of the u. they will each be 50 percent larger in terms of capacity, traffic, and revenues, than the next-largest non-
merged carrier, delta, and three times as large as continental. as my chairman has stated publicly on several occasions, the poor customer service which is characteristic of the current operations of those carriers
seeking to merge will look glorious compared to the inevitable
service disruptions and even worse customer service that will
prevail in a post-merger environment. |
air-travel consumers will suffer while
the new duopoly attempts to integrate the disparate operations
and disgruntled employees of the separate airlines--no small
task, especially for airlines currently unable to manage their
own operations.
we continue to believe that continental may benefit from
this consumer dissatisfaction in the short run, as we will
offer a welcome alternative to the surly and unreliable service
offered by the mega-carriers. |
| however, the truth is, over the
long-term, we simply will not be big enough fast enough.
our analysis indicates it would take nearly 20 years of rapid growth to offer a truly competitive alternative to the
giant american and united. we won't be in enough markets with enough planes and enough slots with enough gates and facilities
to put a dent in the market share of the mega-carriers. we
simply won't be able to offer effective competition.
the topic of gates and facilities brings me to the
substance of the bill. on behalf of my colleagues at continental, i want to commend senators mccain, hollings,
dorgan, and grassley for introducing this legislation.
continental supports the thrust of this legislation as to
mergers and acquisitions because it combines the aviation
expertise of the dot with the antitrust expertise of the doj.
we are concerned that the legislation, as drafted, could
result in the doj and the dot coming to separate conclusions
with regard to the same transaction, but we do agree the dot
ought to have an expanded role in the analysis of the proposed
mergers and their impact on competition. |
| the dot has the
information, knowledge, and experience needed and can and
should be a significant contributor to the hart-scott-rodino
process.
the legislation requires that dot do an analysis of the
impact on competition, concentration, and monopoly powers. that
analysis, as well as a detailed and specific list of recommendations as to which gates and facilities at all
airports, not just hub airports, ought to be divested in order
to preserve competition should be provided to the doj for their
use in conducting the hart-scott-rodino review. |
| and, as the
legislation points out, dot itself has the authority and the
responsibility to manage assets under dot's control to protect
competition.
this legislation is on the right track in setting up a standard, or a level of concentration, after which dot will
review the impact of constrained airports. while dot should be directed to make specific recommendations to doj on divestitures of gates and slots at other airports, dot should
also be required to act decisively to protect competition in those areas uniquely managed by the department of transportation, such as slots, international route rights, and
government-granted anti-trust immunity of international
alliances. |
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we would suggest strengthening dot action in this arena by setting a slot concentration level that simply cannot be exceeded as a result of mega-merger, as well as a process to redistribute government slots and gates and facilities
necessary to operate those slots.
we would also suggest that, in addition to international
route divestures, dot be directed to determine whether the
change in domestic dominance requires that dot revoke the anti-
trust immunity it has previously given to the applicants to fix
prices and coordinate schedules internationally.
this merger bill is clearly headed in the right direction,
and we look forward to working with the committee on it.
in closing, i would like to emphasize three points. first,
i want to repeat our primary message: these proposed mega-
mergers are bad and should not be approved. |
| should these
proposals be approved, however, united and american will each
have such vast scale and scope that other u. airlines will be unable to offer effective competition to them. other airlines,
like continental, will be forced to , be up, or put out of by onslaught brought on
united and american duopoly.
second, the mccain-hollings merger provisions represent a start at the heart of problem that
result from the proposed airline consolidation by
dot's role and taking clear aim at critical to .. .. |