Airline Chiefs Return to Capitol

Wednesday, June 21st 2000, 12:00 am
By: News On 6

WASHINGTON (AP) — The chiefs of United Airlines and US Airways tried Wednesday to deflect Capitol Hill criticism of their proposed merger. Instead, they faced more tough questioning.

The executives sought to address fears the $4.3 billion bid they announced last month would stifle competition and result in higher airfares, poorer service and fewer routes to small communities.

``This merger will create immediate and sure competition,'' James Goodwin, chairman and chief executive of Elk Grove Village, Ill.-based UAL Corp., United's parent, told the Senate Commerce Committee. ``We view this transaction as very consumer-friendly.''

Goodwin noted that 93 new domestic and international nonstop routes are planned, and that customers would have access through the bigger airline to a global network that would make travel more convenient.

But Committee Chairman John McCain, R-Ariz., sharply questioned US Airways Chairman Stephen Wolf about a 1999 letter to Transportation Secretary Rodney Slater. In it, Wolf complained that United was apparently trying to target US Airways by matching the airlines' increase in service at the Washington area's Dulles International Airport.

``In the domestic arena, the threat to unobstructed competition continues to grow,'' Wolf wrote. ``The unrelenting attempts of the major trunk carriers to undermine the operations and expansion of smaller carriers, both domestically and internationally, is a clear and present danger to free market competition.''

Wolf answered that the only way for US Airways to compete in the current market was to get ``substantially bigger.''

``So you now are becoming competitive by becoming monopolistic?'' said Sen. Hollings, D-S.C., ranking member of the panel.

United already is the world's largest airline, while US Airways ranks sixth. If the merger is approved by federal regulators, the combined airline would dwarf American Airlines, United's closest competitor in size. The two prospective partners had a combined $26.6 billion in revenue in 1999, compared with $17.7 billion for American.

To try to placate regulators, United plans to sell the bulk of its operations at Washington's Reagan National Airport to Robert L. Johnson, founder of Black Entertainment Television. The new airline, to be called DC Air, would be the nation's only black-owned airline.

At the hearing, lawmakers expressed skepticism about DC Air's viability as a low-cost airline.

Johnson responded that he would rely on United and US Airways for some of its equipment and employees, and lease jets for a short time before substantially reducing costs.

Only Sen. Jay Rockefeller, D-W.Va., praised the deal as a boon for more out-of-the-way communities.

``From where I stand today, the US Air-United-DC Air deal looks like one that will be good for West Virginia,'' he said.

McCain's panel scheduled a second hearing on the deal Thursday. The airline executives also are to appear Friday before the House Judiciary Committee.

Congress does not have authority to approve or reject the proposed merger, but the issues raised by lawmakers likely will be considered by the Justice and Transportation departments, which will rule on the deal.

The Federal Aviation Administration also is examining any safety issues that might be raised.