DOT Eyes Air Opportunities

<H1> DOT Eyes Air Opportunities</H1><H3> Seeks Routes Suitable For Low-Fare Entrant Competition</H3>By Barbara Cook

Washington, D.C. - The Department of Transportation is attempting to identify domestic city-pair markets that would support new carriers and boost the level of low-cost travel available to travelers in this country, a high-ranking DOT official said.

In a recent address to the Washington International Aviation Club, DOT Deputy Assistant Secretary Mark Gerchick said the department estimates that domestic travelers save more than $6 billion annually in air fares because of the existence of low-fare carriers.

Despite their small size, this new generation of low-fare airlines is having "a profound competitive impact" on the travel product in the United States, according to Gerchick. He noted that these carriers have focused their service on particular high-density, high-yield city pairs where they can gain a substantial market share, allowing them to exert a downward pressure on fares while stimulating traffic levels. The discount carriers also are eliminating much of the fare-premium phenomenon in so-called "fortress hubs"-cities dominated by a single carrier-that concerned DOT and Congress in the early 1990s.

DOT is nearing completion of a report on new carriers that not only will document their positive impact on competition but also will identify cities where conditions may be ripe for new airlines, according to Gerchick.

While DOT cannot ensure the success of these fledgling carriers, the administration nevertheless has a responsibility "to help see that new entrants have a real chance to enter, compete and succeed in the market," Gerchick said. DOT, which has "rejected a laissez-faire approach to efforts to constrain or exclude new entry through predatory activity," will "remain vigilant and work closely with the Justice Department to see that low-cost new entry has a fair shot," he pointed out.

Hardly a month goes by that DOT doesn't receive complaints about competitive threats to new entry carriers, ranging from "sudden and targeted service increases and sharp and highly selective fare cuts, to less traditional attempts to hoard unneeded gate space or slots," Gerchick said. He stressed that DOT takes these complaints seriously and tries to work with the carriers involved to evaluate the merit of the complaints and to resolve them informally.

Since 1992, 23 jet airlines have launched operations, Gerchick said, and 21 of them are still operating. As of this month, 16 more applications are pending from companies wanting to start jet service. "Compare this with the fact that in 1990, DOT received only a single application to begin a scheduled passenger jet carrier," Gerchick noted.

Studies have documented the effectiveness of existing carrier alliances, such as the Northwest/ KLM agreement, Gerchick said. "In fact," he added, "our internal studies show that each of the three largest strategic alliances-Northwest/KLM, United/Lufthansa and USAir/British Airways-reports strong traffic growth, compared with relatively little change in traffic for the balance of the market overall for the same period."

Gerchick acknowledged that several requests for antitrust immunity for carrier alliances are pending at DOT, and said that the department is "clearly aware that the potential for antitrust immunity has proven to be an incentive for foreign nations to open their markets to U.S. carriers, to the substantial benefit of U.S. consumers."

However, he stressed that the United States will not treat the grant of antitrust immunity "as merely a bilateral bargaining chip" but will weigh the merits of each case individually.