Businessweek Archives

Commentary: Take Airline Reform Off Standby


News: Analysis & Commentary

Commentary: Take Airline Reform off Standby

Last year was supposed to be the year long-suffering airline passengers finally got revenge. It started on Jan. 2, 1999, when a snowstorm left hundreds of Northwest Airlines Corp. passengers trapped on a plane for hours within sight of the terminal at Detroit International Airport. The headlines galvanized support for passenger bill-of-rights legislation. The Clinton Administration floated plans to help monopoly-busting small carriers get into the air. House Transportation Committee Chairman Bud Shuster (R-Pa.) vowed to increase competition at hubs dominated by a single carrier.

But 1999 ended without any true reform--and with a record level of dissatisfaction with the industry. On Jan. 3, the Transportation Dept. reported that it received 16,420 complaints from airline passengers for the 11 months ended Nov. 30, an increase of some 115%.SCOT-FREE. Why were politicians willing to ignore the public outcry? They were listening to other voices. As the complaints rolled in, the airline lobbyists went into high gear, helping to kill Shuster's efforts to expand competition by building new gates at hub airports that could be given to rival carriers. The proposed passenger-rights bills, which were hastily written and considered unworkable by some, also were pushed aside in favor of a vow by the industry to clean house--a decision politicos already regret. So far, the industry's idea of passenger rights consists of promising to respond to customer complaints and tell customers of the lowest possible fare--things other industries do as a matter of course. "Airlines got off scot-free," complains Edward P. Faberman, executive director of the Air Carrier Assn., which represents budget carriers. At the same time, Transportation has lost its taste for a fight.

All this is bad news for fliers. Transportation guidelines to prevent predatory pricing by major carriers were a critical step in giving budget airlines a fair shot. Without the threat of government fines, upstarts could be forced out of business or into bankruptcy as Access Air of Des Moines was last November. And without the threat of competition, the majors may have no incentive to improve service or cut prices.

For a sign of what's to come, look at Sun Country Airlines Inc. For six months, the budget carrier has been flying from Minneapolis-St. Paul to points nationwide. It began by offering fares more than 50% below those of Northwest Airlines, the dominant carrier in Minneapolis. It didn't take long for Northwest to start matching Sun's fares and adding more and larger planes on routes served by the upstart. "They are playing a high-stakes, low-fares waiting game to see how long we can last," says Tammy Lee, Sun's director of public affairs. Transportation is investigating, but Northwest spokesman John M. Austin says the carrier shouldn't be punished for being competitive.

Northwest's type of behavior is precisely what the Administration guidelines were supposed to curb by letting regulators order carriers to stop predatory practices or face fines. Most of all, the guidelines were meant to be a club Transportation could wave at airline behemoths to keep them in line. On Jan. 20, a group of 38 state attorneys general will release a study detailing how their states have been hurt economically by the lack of air competition, bolstering Transportation's case for the guidelines.

Why is Transportation balking? For starters, the agency has changed. Half a dozen key architects of the competition policy, including Jim Craun, director of the Office of Aviation & International Economics, and Charles Hunnicutt, assistant secretary for aviation and international affairs in the DOT, have gone through the revolving door to industry. And with airlines threatening to sue Transportation on the grounds that it's overstepping its authority, some political appointees, such as Secretary Rodney E. Slater, are loath to stick their necks out in an election year. Some Slater aides say they'd rather let the Justice Dept.--which is probing American Airlines Inc.'s alleged predatory acts at its Dallas-Ft. Worth hub--restore competition to the industry than take political heat on the guidelines.

Slater insists he still stands behind the rules and paints a bright picture. "We've brought on line more new entrants and low-cost carriers [in 1999] since 1996," he crows. How many? Two, to be exact. That's a start. But Transportation can do better. It could at least make a sincere effort to turn its proposals into law. The flying public deserves no less.Woellert Covers Aviation from Washington.; By Lorraine Woellert


Hollywood Goes YouTube
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

 
blog comments powered by Disqus