ACAA Applauds Department Studies Demonstrating That the Growth of New Entrants is Critical to Real Airline Competition.

Business Editors

WASHINGTON--(BUSINESS WIRE)--Jan. 16, 2001

The Air Carrier Association of America ("ACAA") applauds the Department of Transportation ("Department") for issuing comprehensive studies that clearly demonstrate the importance of new entrants in bringing fare savings to consumers and communities throughout the country.

The papers also support previous ACAA findings that predatory practices have been utilized by some of the nation's largest carriers to protect primary markets.

Ed Faberman, ACAA's Executive Director, stated, "We welcome the Department's conclusion that new entrant low-fare carriers provide the primary fare discipline in the marketplace. Data clearly demonstrates that large carriers do no compete on price." Faberman stated that the Department notes "responses by the major network airlines to low-fare new entrants are much stronger and more vigorous than responses to other new entrants."

In particular, the report addresses predatory behavior of large carriers, such as Northwest's anti-competitive actions against low-fare carriers in the Reno-Minneapolis and Detroit-Philadelphia markets.

"These papers are particularly critical at a time that we are seeing unprecedented actions by the nation's largest carriers to further consolidate the airline industry and attempts by the nation's two largest carriers to divide and control markets," added Faberman.

The Department debunks large carriers' claims that prohibiting unfair conduct will impact the ability of network carriers to serve small communities. To those who will claim that anti-competitive behavior does not exist or that there is no need to address practices aimed at driving new entrants out of markets, Faberman suggested that such claims are best addressed by Abraham Lincoln, when he stated:

"It is true that you may fool all the people some of the time; you

can even fool some of the people all the time; but you can't fool

all of the people all the time."

ACAA welcomes the Department's conclusions detailing the multiple competitive tools that airlines have at their disposal, including a discussion of the effects of yield management systems on capacity planning across fare categories, flight frequency, capacity, scheduling, frequent flier programs, the competitive use of route networks, and the role of signaling.

Faberman added, "The Department has disclosed a blueprint for bringing the dream of deregulation to travelers and communities throughout this country by acknowledging that the participation of a low-fare carrier in markets at network hub airports reduces the market power (and the corresponding hub premiums) of the major network airlines."

Faberman concluded, "Unfortunately, the clock is ticking. While the report is critical, action must now be taken to address each issue raised in the report before further consolidation and asset control are allowed to take place. We look forward to working with Secretary-designee Norm Mineta and Congress to bring competition to all Americans."