| the new competing network carrier may or may not have a cost advantage relative to the incumbent dominant airline. moreover, an airline may be reluctant to enter or cut prices in a market where its rival has a large market share for fear that the rival would retaliate by cutting prices in markets where it has a large share--a practice known as mutual forbearance. | |
'' for new entrant airlines, access to an airport through its slots, gates, and facilities is necessary but not sufficient as dominant incumbent airlines' sales and marketing practices may make competitive entry difficult if not impossible. <bullet> service to small communities could likely be the first casualty of forced divestiture of critical assets. depending upon how intensively the dominant airline uses its gates and other facilities at an airport, a requirement that they surrender such assets could negatively affect the airline's ability to maintain service to its spoke communities. |
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airlines forced to reduce service would be expected to eliminate flights to and from communities that provide the least profit--likely smaller communities. based on the pattern of service provided by low-cost airlines such as frontier, spirit, and jetblue, each of which generally fly only to larger communities, there is no guarantee that new entrant low-fare carriers would choose to serve smaller markets abandoned by incumbent airlines. |
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similarly, other network carriers that might initiate service at the hub would also be unlikely to use that facility to begin service to routes they could more profitably serve from their own hubs. however, if dominant airlines could increase the frequency with which they use their gates, facilities, and other assets, service to smaller communities may be little affected. other provisions of the proposed legislation appear to provide clear direction regarding dot actions to exercise its current authority to preserve and enhance industry competition. section 4 requires dot to undertake a review of access in the nation's 35 largest airports and authorizes the secretary to require carriers to provide access at reasonable rates. section 6 conditions approval of aip funds and approval of passenger facility charges on an airport sponsor assuring open access to the airport. we have expressed concern about restrictions on access to essential airport facilities functioning as an important barrier to entry. | |
 as early as 1996 we recommended that dot be actively aware of airport and airline practices at the major airports and condition approval of aip funds on appropriate remedies being instituted. thus, we fully support the intent of these provisions. again, however, the specific language might be clarified to focus more on the intended result. for example, air 21 already requires the secretary to ensure ``that gates and other facilities are made available at costs that are fair and reasonable to air carriers at covered airports where a majority-in-interest clause'' of a contract or other agreement or arrangement inhibits the ability of the local airport authority to provide or build new gates or other facilities'' (section 155(d)). potentially there may be more value in calling for a status report on dot's implementation of their existing authority. | |
\20\ overall, we recognize that the proposed legislation seeks to focus dot's wide discretion under their current authority and direct a more activist role in overseeing, promoting and enhancing competition among carriers, as well as assuring a pro-competitive role by airport operators. |
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in this regard, we would suggest that there are a wide range of dot and faa policies, resources, tools and practices which affect competition in the airline industry which should be both better understood and more strategically aligned. another area not addressed in the proposed legislation is dot's inaction to fully investigate and remedy persistent charges of predatory actions by major network carriers to the entry by low cost carriers in their dominated markets in a timely manner. in short, a dramatic shift of emphasis, commitment and resources is required for dot to fully address their existing authority and responsibility for protecting and preserving competition in the airline industry. the proposed legislation makes clear many of the key areas where dot could and should be present in overseeing and enforcing principles of fair competition. the legislation would underscore congressional intent for an activist oversight role. the major remaining gap--whether or not the proposed legislation becomes law--is the adequacy of resources and technical capacity within dot to fulfill this vital role. | |
| over the past several years, dot has lost considerable expertise in airline competition issues due to staff attrition. this expertise needs to be replenished if dot is to undertake an assertive role in overseeing airline competition. for example, dot's ability to pursue investigations of potentially unfair competition is constrained by the limited available resources in the office of the assistant general counsel for aviation enforcement and proceedings and the office of the assistant secretary for aviation affairs. perhaps one way for the committee to promote an activist role by dot could be to require the secretary of transportation to make an immediate assessment of the resources available and required to fulfill their existing responsibilities under old section 411 and air 21, the resources needed to implement the proposed legislation, and to develop a strategic plan for meeting these responsibilities. | |
| we believe that oversight scheme contemplated when the industry was deregulated--with antitrust enforcement by doj and oversight of trade practices by --has not been entirely successful in and assuring the functioning of . in particular, while the current legislative scheme grants explicit authority for to regulate unfair competitive practices, the legislation does leave substantial discretion with on scope of action, if .. .. |