Last year it was the ticket tax; this year it's the Department of Transportation. The US majors have a new enemy in their gunsights and the atmosphere on Capitol Hill is bellicose once again.
In 1997 the carriers that united in a campaign to abolish the 10 per cent flat rate ticket tax succeeded only in earning themselves the nickname of the seven sisters and winning a dubious victory. While the ticket tax might be reduced and a segment fee partially phased in, the new system could cost the majors billions of extra dollars.
This time the war cries of the same seven are over the DOT's proposed competition policy document, which provides guidelines that define what constitutes predatory behaviour by airlines. In DOT secretary Rodney Slater's words, the document aims to provide a 'level playing field' for new-entrant carriers. But it is a battle field, not a playing field, that is being created in Washington DC. And this time the majors are facing a powerful opponent - not in the DOT, but in Congress. Senator John McCain, chairman of the Senate Commerce Committee, is the man the majors most fear and the potential ace card for supporters of the document.
McCain has taken a firm line with the US airline industry in recent months and has joined forces with other senators, most notably Bill Frist of Tennessee, to introduce the Aviation Bill, which he believes will help to promote competition if it is made law.
It is McCain's stance with this bill that gives hope to supporters of the DOT document. Rallying behind the DOT are the small carriers and startups, the travel agents, and some consumer organisations, such as the Business Travel Coalition. They see the DOT's guidelines as a step in the right direction in their campaign to see more low-cost carriers obtain a foothold in the hub-and-spoke dominated air transport system. While the proposed new policy merely outlines the conditions that could prompt a DOT predatory behaviour investigation, it represents a breakthrough for the small carriers, and they desperately do not want to see it killed. The majors cry 'reregulation' and want the document quashed before it becomes policy and sets a precedent for further interference.
The battle lines were first drawn at a House committee meeting where a bill was introduced calling for an independent study of competition in the airline industry before the document becomes formal policy. The pro-DOT camp says such a study is only a delaying tactic by the majors.
As so often happens in warfare, both sides are claiming victory after the first clash. 'Considering the majors have spent millions trying to kill this, they have walked away with very little,' says Edward Faberman, executive director of the Air Carrier Association of America, which represents small airlines. Faberman points out that the majors have not succeeded in challenging the DOT's jurisdiction in such matters and that the study would focus on the need for a new policy document, not on the document itself.
The Air Transport Association contends that it is exactly where it wants to be after the House hearing. 'Our goal was to require the DOT to go back to Congress and justify its policy, and also to get an independent study. We have accomplished that,' says the ATA.
But it is in the next round that the fight becomes most interesting. Then, the issue comes under the scrutiny of the Senate. This is where the small carriers are pinning their hopes. 'The House bill might call for some delay, but I would be astounded if Congress would allow this to emasculate the policy,' says Paul Dempsey, vice chairman of Denver-based Frontier Airlines. 'There are four major constituents standing together on this issue. Many Congressmen are very unhappy about the level of competition and service that is available. Small communities perceive they are getting poorer service and higher fares. Business travellers are upset about high fares. And the small airlines themselves have become very vocal.'
Several of the small carrier campaigners cite McCain's name when stating their belief that support at Senate level will be strong. 'This battle is not over yet. This has to go all the way to the White House,' says John Bennison, vice president of government affairs at the American Society of Travel Agents. 'With McCain you have an individual who really is independent. He has a bulldog tenacity when it comes to correcting abuses. He may very well do it for us.'
The ATA is aware of this possibility and is spending 'considerable sums of money' in advertising and lobbying to get over its message that predatory behaviour is a non-issue and that competition already is at cut-throat levels. It is interesting that Southwest Airlines, although an ATA member, is maintaining a neutral position during this campaign.
But while the ATA has won over support from the airline unions and some special interest groups, it has not yet gained the sort of widespread public support that will persuade senators such as McCain and Frist that the majors will do a first-rate job without a new pro-competition policy hanging over them. The DOT's latest consumer report on the 10 largest carriers shows that there were 914 complaints about airline service in May - a 25 per cent increase over May 1997. The ATA counters that the number is still 'minuscule' when set against the 600 million passenger enplanements over the last year, and that in a poll it conducted in May 70 per cent of passengers described their most recent flight experience as 'favourable'.
It is, however, the upward trend in complaints and business fares that is worrying Congressmen, and the ATA campaign to date seems to have done little to calm their concerns or improve their perception of the majors. As one industry insider puts it: 'Last year they were known as the seven sisters. This year it's the sinister sisters.'
Source: Airline Business
