I thank Chairman Dewine for holding this follow up hearing on airline competition issues. The subject is of extreme significance to my state. In Iowa, airline travelers and businesses have been increasingly vocal about the lack of competition in air service out of their cities, and about how high the fares are. Many Iowans are driving past their airports and out of the state because they can save substantial amounts of money if they fly out of Omaha or Kansas City.

According to a survey by the Air Service Council, last October it cost business travelers $1.40 a mile to fly to Chicago O'Hare from Des Moines, while flights to O'Hare from Omaha, St. Louis, Kansas City, Nashville, Indianapolis and Columbus cost only 20¢ to 40¢ a mile. Airline tickets can cost 4 times more for a passenger flying from Des Moines than from Omaha. For example, one airline charged $752 for a round-trip business fare between Chicago and Des Moines, whereas it charged only $192 for a round-trip between Chicago and Omaha. On another airline, a round-trip walk-up fare last September was $843 from Des Moines to Chicago, while it was only $190 from Omaha to Chicago. How can that be?

Business travelers have been hit the worst. With costs of flying so high, some Des Moines business people have resorted to driving to Chicago for their meetings. The business community in Des Moines has gotten so desperate for convenient and reasonable air service, that they are considering forming their own airline to service the city. Des Moines has also made its pitch to low-cost carriers like Southwest Airlines to persuade them to come to Iowa.

Small and mid-sized airports and smaller independent carriers have also alleged airline predatory behavior in Iowa. Recently, the Des Moines Register described Vanguard Air's ill-fated attempt to enter the Des Moines market. When the low-cost airline tried to establish service between Des Moines and Chicago, United responded by slashing fares. Once Vanguard left Des Moines, average fares soared 83%, higher than the original fares. Is this normal airline behavior or predatory pricing? I'd like to hear what the airlines have to say about this.

I know that airfare pricing is complex, based on things like customer demand, proximity of ticket purchase to flight date, and seating availability. But the outrageous swings in ticket prices and the substantial difference in fares between cities just don't seem reasonable to me. The established airlines argue that they need to match prices when low-cost carriers enter the market and this is all it is. Yet, it sure looks like predatory behavior - and not competition - when an airline charges from $500 to $700 to fly to Chicago when it has no competitors, then reduces its fares to under $100 - below direct operating costs - when a low cost carrier comes in, and then hikes the ticket price back up over $800 when the competitor has left the market.

High air fares and inconvenient connections are major impediments to economic growth, especially in smaller communities. Business opportunities are being lost because of non-existent jet service and inconvenient schedules. Twenty years ago, 7 cities in Iowa had jet service, now only 3 cities have jets. Once cities began losing jet service and passengers, they also began losing jobs. A Des Moines Register article described Waterloo's attempt at a bid for a $1.3 billion, 3,000 job computer chip factory. Waterloo was among 13 finalists for the factory, but was eliminated from the running because they didn't have jet service.

The complaints that we are hearing are not unfounded. The GAO reported that airports servicing small and medium-sized communities in the East and Midwest have experienced higher fares and worse service since deregulation. The GAO found that certain industry practices, such as restrictive gate-leasing arrangements at a number of key hub airports in these regions and the dominance of routes to and from airports by one or two established airlines have contributed to this problem. According to the GAO, operating barriers such as slot controls at hub airports and incumbent airline marketing strategies such as special incentives for travel agents and frequent flier plans have also made it more difficult for airline competition in these communities. Consequently, I have to be concerned when I hear that 8 of the 10 Iowa cities with commercial air service in 1978 handle fewer passengers today than before deregulation. And it's not because there are no airline passengers in Iowa, it's because there is no competition to lower ticket prices.

We need to address these problems, which are not unique to Iowa, and find a solution. I still believe that the free market is the best system by which to solve the air service problems of Des Moines and other cities in Iowa. But if there is anti-competitive behavior, the free market system cannot work. At this past Judiciary Antitrust subcommittee hearing, I made clear to DOJ and DOT that they must use their statutory authority to enforce the antitrust laws and impose sanctions when airlines violate the law. Also, violations must be dealt with expeditiously and before competition is completely snuffed out. After-the-fact enforcement when any hope of viable competition is long gone just isn't good enough, not for me. But perhaps we have to go beyond tough and timely antitrust enforcement when there is anti-competitive activity by the airlines. Certainly I don't believe that we should re-regulate the airline industry; however, we may want to explore ways to minimize barriers to entry and encourage competition.

I look forward to hearing from our witnesses.