Merger Concerns Spur Momentum for New Competition Laws

World Airline News, March 16, 2001

Senator McCain Pushes Legislation to Reign in Major Airlines

Growing concern on Capitol Hill over proposed U.S. airline mergers has provoked rapid legislative action by one of the Senate's heaviest hitters. Questions about the effect of the mergers on domestic competition has led to a slew of bills in both the House and Senate, and observers say this momentum makes it likely that some sort of measure will be passed during this session.

Senate Commerce, Science, and Transportation Committee Chairman John McCain (R-AZ) quickly pushed an airline competition bill through a March 13 hearing, and the bill was expected to be approved by the Commerce Committee on March 15 and sent to the Senate floor. Titled the Aviation Competition Restoration Act of 2001, the bill was introduced by Sen. Fritz Hollings (D-SC) and cosponsored by McCain.

Although this bill is currently regarded as the standard-bearer for efforts to regulate mergers, at least five other bills are also being considered by Congress, some far more restrictive than the Hollings bill.

Most of the bills under discussion would prohibit or impose new restrictions on mergers that would give one carrier a dominant position in the overall market or at hub airports. The bills differ in their definition of what constitutes a dominant position, and what action should be taken by federal agencies.

Observers say that the Hollings bill - S.415 - is likely to be passed by the Senate due to its high-level support, in spite of opposition to the bill from some Commerce Committee Republicans. Opponents of the competition bills are expected to concentrate their efforts in the House, where attempts to pass any such legislation are likely to face more hurdles.

The recent flurry of lawmaking activity was sparked by the proposed merger between United Airlines [UAL] and US Airways [U], and to a lesser extent the proposed acquisition of TWA [TWA] by American Airlines [AMR].

Observers agree that the industry response to the congressional action will differ from airline to airline, depending on how they would be impacted by the proposed mergers. Regional airlines have applauded the Hollings bill, and a Continental Airlines [CAL] representative told Congress that the proposed mergers would seriously erode competition.

However, some airlines are in general opposed to legislation that would impose restrictions on mergers or intervene to ensure fair competition. "The feeling of industry is that these kinds of issues are best left to the marketplace," one airline source said.

Airline and congressional sources say that enough momentum is building to push through a competition bill in some form. "This issue hits home with the American public," said a spokesman for Rep. John Dingell (D-MI), a vocal advocate of airline passenger rights.

DOT oversight role would be expanded

The Hollings bill that was expected to be sent to the Senate floor would direct the U.S. Department of Transportation (DOT) to examine any airline acquisition that would give one carrier more than 10 percent of domestic passenger enplanements. The DOT could prohibit the acquisition if it would "lessen competition substantially," or result in market dominance at any large hub airport or in at least 10 percent of the top 500 domestic passenger markets.

The DOT would take into consideration whether a dominant airline created by a merger would make gates and other facilities at a hub airport available to other carriers. The bill also requires the DOT to investigate the current use of gates at the 35 largest U.S. airports to ensure that fair access is being granted at these airports.

Money would be authorized by Congress for a new program that would allow airport authorities to apply for improvement funds that would increase competition at airports.

Another Senate bill relating to airline competition has been introduced by Sen. Mike DeWine (R-OH) with Sen. Herb Kohl (D-WI) as a cosponsor. This bill, S.520, is aimed directly at preventing the dominance at LaGuardia and Ronald Reagan Washington National airports that the bill's authors say would result from the United and American Airlines mergers.

The bill would require an airline that controls "an unreasonably high percentage" of slots at the airports to relinquish slots to give other carriers an opportunity to enter these markets. Any carrier with more than 15 percent of the national market would not be allowed to control more than 20 percent of the slots at LaGuardia or Washington National.

In a summary of their proposal, DeWine and Kohl say that no airline with at least a 15 percent market share controls 20 percent of the slots at these two airports, but this would not be the case if the United and American Airlines acquisitions proceed.

DeWine and Kohl have steered their bill towards the Senate Judiciary Committee, as they are the highest-ranking representatives of their respective parties on the committee's antitrust, business rights and competition subcommittee.

A number of competition bills have been introduced in the House, but no hearings on the issue have been scheduled in the House Transportation and Infrastructure Committee's aviation subcommittee, through which most airline measures must pass.