Thank you Mr. Chairman. The great experiment with airline deregulation has proved largely -- but not entirely -- successful. And, in that context, let me make a few points.
First, though consumer choice has increased as a direct result of airline deregulation, the benefits have not been distributed equally or universally. On a large number of routes, including those between some popular business destinations, only one carrier provides service. Why the lack of competition? Part of the answer may be the size of a particular market. But clearly, some markets could support several carriers, and the lack of competition is disturbing.
The problem is not only flying out of hubs, but also flying into them. For example, if we look at fares from Milwaukee to Minneapolis on Northwest, and compare them to fares from Milwaukee to three more distant cities on the same airline -- San Francisco, New York and Washington [point to chart] -- we see some striking disparities.
The difference is even more dramatic when you look at the "Dollars per Mile" numbers, which show that it sometimes costs a walk-up passenger over twelve times as much to fly from Milwaukee to Minneapolis as it does from Milwaukee to San Francisco on the same airline -- and connecting on the very same flight through the same Minneapolis hub. These disparities don't always exist, of course, but we see them all too often, so I am glad that we have a representative from Northwest here today who can explain the "logic" behind this fare structure. Although self-evident, the bottom line for consumers -- and especially business travellers -- is that they don't feel they are paying a "fair" price for a ticket unless they have choice.
Second, if prices are higher in some markets, we should see rival airlines come in and compete for a share of that revenue. But this isn't happening; in fact, quite the opposite is true. Major airlines are afraid to go after their rivals' hubs because that could invite attack on their own hubs; startup airlines that try to establish footholds in markets controlled by the majors are often knocked out of the market; and smaller airlines won't even enter some markets because they are afraid of being unfairly "hammered" by the incumbent monopolist. They won't even try.
The story of Pro-Air, a startup airline who is represented at our hearing today, in the Milwaukee-Detroit market says a lot about competition in small and medium-sized cities. But this issue is much larger. Just the other week, Assistant Secretary of Transportation Hunnicutt told us that he believes predatory pricing exists today on some domestic routes. And just yesterday, we received a letter from Alfred Kahn -- the father of airline deregulation -- saying:
The most grievous governmental failure in recent years has ... been the failure to prosecute a single case against ... flagrant ... predatory competition by ... major airlines ... So my message to the airlines today is simply this: get smart. You are all terrific business people and you surely understand that, if you don't resolve these problems yourselves, you will be inviting the enforcement agencies to do it for you. Or, even worse, encouraging Congress to change the bedrock antitrust laws that have served us so well for so many years. Because when large airlines chase away competition by dropping fares and flooding the market with more flights, only to increase the fares once the competition leaves, all of us lose in the long run.
Thank you, Mr. Chairman, these are clearly complex issues -- no one suggests that the airlines are making monopoly profits across the board. I look forward to some answers from our witnesses today. Thank you.