The US Department of Transportation (DoT) has pledged to act against anti-competitive behaviour by major network carriers, which the country's low-cost start-ups claim is driving them out of business. The pledge came only days before Western Pacific Airlines became the latest start-up forced to file for bankruptcy protection.
DoT deputy assistant secretary for aviation, Patrick Murphy, says that two "detailed investigations" have taken place into allegations of anti-competitor behaviour, which will now provide the basis for "individual enforcement action "as well as broader industry guidelines.
"I anticipate in the coming weeks and months you will see a number of concrete actions being taken," he says, answering criticism that the DoT and Justice Department have been dragging their heels.
"We are now moving to formalise policy that will identify behaviour that we believe constitutes unfair activity," added Murphy, speaking in Washington DC on 3 October at a policy forum hosted by the Business Travel Contractors Corporation (BTCC), a policy and procurement body set up by some of the largest US corporate giants.
Murphy concedes that start-ups have been driven out of markets by undercutting from the majors and appears to have evidence that some actions had been anti-competitive. "After low-fare competition has been driven out of a market, we have observed that average fares generally increase to even higher levels than were charged prior to the new entry, "he says.
Further concerns over slot restrictions at major congested hubs and rules over computer reservation systems (CRS)are also being addressed by the DoT.
The DoT is due to rule on 44 requests for exemptions to slot rules at Chicago O'Hare Airport and 29 for New York La Guardia Airport. Murphy admits that exemptions have been rare to date, but promises that the DoT is being "more responsive" and that rulings will be made shortly. An evaluation now being carried out into slot utilisation will also "keep in mind" the option to redistribute slots away from incumbents to new entrants.
Rulings on alleged abuse of airline-owned CRS systems are also promised "shortly". One of those centred on a complaint by Frontier Airlines that United Express feeders were being given an online preference over its own services. Other airlines have complained that the Apollo CRS did not distinguish between connecting services and their shorter direct flights. Both instances would be outlawed by DoT proposals.
Murphy adds that the DoT is examining CRS regulations, following a notice of proposed rulemaking a month ago, and expects to complete the process in the next 18 months.
The proposals appear to have won support from BTCC members as well as champions within Congress. At the Washington meeting Senator John McCain, chair of the Senate transport committee, pledged to propose legislation, while Representative Loise Slaughter promised similar action in the lower House.
Start-up carriers have welcomed the DoT's apparent support for their cause, but are still awaiting positive action. "Saying it is nice, but what's more important is to see what action is taken," says Ed Fabermann, executive director of the Air Carriers Association of America, set up to champion the country's start-ups.
"The West Pac filing highlights how fragile these carriers are," says Faberman, who has helped lobby against what many start-ups believe is an effort by the majors to push them out of the market.
Virtually all of the start-ups have been making heavy losses over the past 18 months ever since the ValuJet Airlines crash in Florida in May 1996 triggered a serious reversal in their fortunes. Pan American World Airways has been the only new low-fare carrier to start operations in that time, a fact which the DoT concedes raised concern over the health of the sector.
US major airlines have given a muted response to the DoT comments, with some warnings that the proposals could effectively add up to "re-regulation". There has been a cautious welcome, however, for the promise of clearer guidelines as to what exactly constitutes anti-competitive behaviour.
Source: Flight International
