A new US Department of Transportation policy document defining anticompetitive behaviour, is prompting cries of 'reregulation' from most US majors.
The document has appeared in the wake of a Senate hearing on the competitive impact of the US hub-and-spoke system, adding heat to an uncomfortable spotlight that seems set to pursue the majors through 1998.
The DOT policy document follows an increasing number of predatory pricing complaints by startups against the majors and an almost total absence of new startups in 1997.
Startups and the Air Carrier Association, a lobbying organisation formed to represent small carriers, have applauded the resulting document, which DOT Secretary Rodney Slater insists is not an attempt to reregulate the industry. 'Major airlines do not want to go back to the days of reregulation and neither do we,' says Slater.
But the 'big seven' US majors seem shocked by its content and most will be using the 60-day comment period to respond to the proposals in no uncertain terms. Within 120 days of the 6 April publication date, the document could become formal policy.
At the core of the document are definitions of three types of potentially predatory behaviour giving sufficient cause to trigger a DOT investigation. These are: if a major adds capacity and sells large numbers of very low fares, resulting in lower local revenues than would be reasonable; if the number of a major's local passengers at the low fares exceeds the new entrant's total seat capacity; or if the number of its low-fare local passengers exceeds the number carried by the new entrant.
The Air Transport Association accuses the document of 'putting government bureaucrats in the business of setting fares.' Individual carriers can scarcely contain their indignation. 'The mantra of free enterprise is "we will not be undersold". That's just another way of saying we will match a competitor's price, but we're being told we can't do that,' says American Airlines. Elliott Seiden, Northwest Airlines' vice president of law and government affairs, describes the document as 'unwise and unconstitutional', adding 'this is much worse than anybody could have expected.'
The Department of Justice and the General Accounting Office are also looking at how the majors respond to startup competition, while various senators have proposed a number of 'procompetition' bills.
Senator Mike DeWine, chairman of the antitrust subcommittee, held a hearing on 1 April to examine the impact that fortress hubs have on competition. United Airlines' vice president for international affairs, Cyril Murphy, admitted at the hearing that the airline was 'more than a little taken aback' at the recent spate of criticism in Washington.' And that criticism is gaining an increasing momentum.
Source: Airline Business
