Startup Carrier Recruiting U.S. Lawmakers To Thwart Predatory Behavior

Sun Country Airlines, a startup U.S. carrier based in Minneapolis-St. Paul, will try to line up key members of the U.S. Congress to pressure the new Bush Administration into quashing practices by major airlines allegedly designed to drive new entrants out of business.

Sun Country alleges that its very survival is threatened by the anticompetitive behavior of Northwest Airlines [NWAC]. The startup carrier hopes the lawmakers can grab the attention of Norman Mineta, who was unanimously confirmed by the Senate on Jan. 24 to be the new head of the Department of Transportation (DOT).

Allegations of anticompetitive or predatory behavior on the part of major carriers could turn into a major issue this year, especially since the U.S. airline industry is making an all-out effort to consolidate. Tammy Lee, Sun Country's vice president for corporate affairs, told World Airline News that allegations of anticompetitive actions extend far beyond Sun Country's grievances against Northwest.

Lee pointed out that similar disputes have erupted between Delta Air Lines [DAL] and Airtran Airlines [AAI], between Northwest Airlines and Spirit Airlines and between American Airlines [AMR] and Legend Airlines. Airtran has filed a complaint with DOT about Delta, Spirit has filed a lawsuit against Northwest; and Legend has filed a suit against American. In addition, DOJ has filed a suit against American for allegedly engaging in predatory practices against two other startups, Vanguard Airlines and Western Pacific.

According to Ed Faberman, executive director of the Air Carriers Association of America, the problem with litigation is that it drags on so long that the startups may not be able to survive the process. That is why smaller competitors want to persuade Mineta to take up their cause. Instead of litigation, Mineta could resolve the controversies administratively. Sun Country alleges that Northwest has flooded its routes with seats.

Lee said it is highly unlikely Northwest would voluntarily modify its practices in order to avoid the potential ire of Mineta. She said that other startups have run up against a brick wall with Northwest. "Reno Air, Kiwi Air and Access Air tried to go against Northwest and are no longer in business," she said. "In some cases they went against Northwest in specific routes. So there is a proven record [for Northwest] to obliterate the competition." She added that this has been a successful business model for Northwest.

Lee agrees that the analyses released by Slater will put pressure on Mineta to act against anticompetitive behavior of major carriers. But she added that Slater put too much emphasis on opening international markets and devoted too little attention to opening domestic routes.

On Jan. 16, Slater emphasized that the United States needs to look beyond bilateral Open Skies pacts and toward multilateral accords. He pointed out that the first multilateral Open Skies agreement was achieved last November when the United States, Brunei, Chile, New Zealand and Singapore agreed to eliminate restrictions on air services between their countries

These market-opening achievements, Slater said, stand in stark contrast to the lack of progress in liberalizing the aviation market with the United Kingdom, which he said has been unwilling to remove barriers to competition.

Lee said it would have been nice if Slater had flagged anticompetitive practices in the United States as well as abroad. "Slater left a big challenge for Mineta," Lee said. "I think he [Mineta] will be favorable to competition. He knows the issues well. [It is important] to get to him early enough so that he understands the severity of the issue. We are at a watershed, or there will just be three merger mega-carriers."

Sun Country Could Have Political Muscle Waiting To Be Flexed On Capitol Hill

Several well-positioned members of the House and Senate may step in to help start-up carrier Sun Country Airlines in its battle with the big birds. Sun Country Vice President for Corporate Affairs Tammy Lee said Sen. Byron Dorgan (D-ND), a member of the Senate Commerce Committee, is concerned about the allegations of Sun Country and other startups. Sun Country also may have the ear of Rep. James Oberstar (R-MN), ranking Democrat on the House Transportation Committee. Sun Country, based in Oberstar's home state, realizes that his backing would be a major asset. "His position on the House Transportation Committee should weigh heavily on Mineta," Lee said. Sun Country has not yet formally asked Oberstar for support.

Another potential ally is Sen. Herbert Kohl (D-WI), ranking Democrat on the antitrust panel of the Judiciary Committee. He has already expressed interest in the allegations of smaller, startup airlines, and Sun Country has a number of flights that originate in Milwaukee. Analyses released in January by former Transportation Secretary Rodney Slater indicate there may be a lot anticompetitive problems associated with Milwaukee.

Several months ago, Kohl was instrumental in setting up a meeting between officials from Sun Country and Francisco Sanchez, the assistant secretary of DOT under the Clinton Administration.