COMMENTARY: SKY-HIGH AIRFARES: HOW TO BRING THEM DOWN
With airfares escalating at double-digit rates, Washington is wrestling with a controversial plan that, in theory, might lower ticket prices again. A bill on Capitol Hill would give the Transportation Dept. new power to crack down on predatory pricing in markets where airlines have near-monopolies. But the measure has riled big carriers, set the House and Senate at odds, and divided consumer groups, which can't decide whether reregulation would really help air travelers.
There may, however, be another way to stimulate competition in an industry increasingly dominated by six airlines. Instead of the awkward, top-down approach that Congress is considering, lawmakers should enlist local airport authorities to help unleash market forces. With a little encouragement, these authorities could wield tremendous power. Congress could start by lifting the $3 cap on airport ticket fees.HUB HOGS. At first blush, raising ticket prices to bring down fares sounds absurd. But since 1991, airports have had the power to earmark ticket surcharges for new construction. A dollar increase in the fees airports are allowed to charge would provide up to $400 million a year in new funding nationwide. Local authorities could use the money to expand facilities for competitors--a small step that would give discount carriers a foothold at airports now dominated by a single carrier.
Over the past two decades, big airlines have woven obstructionist webs around major airports, particularly at critical hubs. And local officials have helped them. In their zeal to build expensive new facilities and meet a demand for air travel that is expected to add some 300 million passengers during the next seven years, cities and towns have turned to the big carriers to help finance construction. But by doing so, they have signed away control, ceding airlines a major say in airport operations--in some cases, leasing all their gates for up to 20 years at a time.
The result: Discount airlines often pay a 100% to 200% premium each time they use a gate--if they can get access at all. They are also at the mercy of competitors, who can order schedule changes, impose delays, and force evictions at any time. Smaller carriers often have to add 20 minutes to flight time to account for what have become routine gate snafus or delays caused by air traffic control giving precedence to big carriers that call the shots at their airport. "We'll sometimes be sent way around Timbuktu to get into the airport," says Jason M. Rhen, director of market planning for Eastwind Airlines Inc. in Greensboro, N.C.
But even against such daunting odds, some community airports have begun to fight back. And they have support from business fliers furious over high fares. In Rochester, N.Y., things are so bad that Delphi Automotive Systems has been renting cars to shuttle executives the six hours to Detroit to sidestep the $800 airfare. So when the Rochester airport expanded, it built a county-owned gate, and officials then went shopping for a carrier to compete with United Airlines Inc. and US Airways Group Inc. on the busiest routes. They landed Eastwind, which will launch its low-fare service on Aug. 1.
At Chicago's O'Hare International Airport, Chicago Aviation Dept. Commissioner Mary Rose Loney last month broke United's lock on its terminal by using ticket fees to build five new gates. United will get to use the spots, but the airline has to share time with other carriers because federal law prohibits ticket fees from being spent on construction that will benefit a single user. Still, the expansion creates room at Chicago for another carrier--and the city is wooing one now. "If you can successfully negotiate a deal in a major hub like Chicago, other airports can do it, too," Loney says.
In all, more than 120 communities are pleading with new airlines to service their airports, reports the Business Travel Coalition. Before Congress starts down the road to reregulation, it might consider helping these potential allies find a solution to predatory pricing at the grass roots.By Lorraine WoellertReturn to top