Chairman Hatch, Ranking Member Leahy, and other Members of this distinguished Committee, on behalf of United Airlines’ more than 100,000 employees worldwide, thank you for the opportunity to appear again before you to discuss our proposed merger with US Airways.

Last June, I appeared before your Subcommittee on Antitrust, Business Rights and Competition to explain why United believes our customer-driven merger with US Airways should be approved and how this transaction will significantly benefit consumers and the communities served by both carriers. Since that time, there have been several relevant developments that United believes enhance the competitive benefits of our proposed merger with US Airways. We appreciate this opportunity to describe them to the Committee. Simply put, we believe a good deal for consumers has gotten even better.

In my testimony before you last year, I pledged that I would listen carefully to concerns you raised and, to the extent possible, United would attempt to respond constructively to them. Let me explain significant steps we have taken in response to concerns you and others have raised. Also, I wish to discuss the pro-consumer impact of other transactions related to our proposed merger.

Let me first turn to DC Air. When I appeared before your Subcommittee last year, United was very enthusiastic about the creation of DC Air, an independent, entrepreneurial carrier that will enhance competition at capacity-controlled Reagan Washington National Airport. In addition to providing consumers in the Washington-area with a new competitive choice in air service, we were pleased that DC Air committed to maintain the current service pattern from Reagan National to many small communities. United has a longstanding commitment to small city service and this was an important consideration for us.

The Subcommittee’s reaction to DC Air was cautious. Specifically, some Members of Congress were skeptical that DC Air would compete vigorously against United due to our commercial agreements with DC Air that were intended to assist that carrier in the initial phase of its start-up operations. There too was some concern expressed that DC Air lacked the experience to be a viable, long-term competitor.

Last month, American Airlines entered into an agreement to acquire a 49 percent stake in DC Air. We believe this transaction squarely and fully responds to concerns Members of Congress raised. First, the transaction provides DC Air with access to a substantial network and operating expertise, which will allow it to provide strong competition with United. Now American will provide the support United would have provided to DC Air. Second, as this Subcommittee knows, United and American are like the Hatfields and McCoys when it comes to competing vigorously against one another. We fully expect American to help DC Air carry-on this tradition. Finally, with American as a partner, concerns about DC Air’s long-term staying power should be laid to rest.

In addition to DC Air, some Members also expressed concern about a potential loss of competition in a limited number of city-pairs where United and US Airways were the sole non-stop competitors. Again, we have taken corrective action we believe fully addresses that concern. Last month, we entered into an agreement with American under which it will provide competitive non-stop service on these key hub-to-hub routes. Specifically, American has agreed to provide non-stop service on the following routes for a minimum of 10 years: Philadelphia to Los Angeles; Philadelphia to San Jose; Philadelphia to Denver; Charlotte to Chicago O’Hare; and Reagan National to Pittsburgh (service to be provided by DC Air). This service will ensure a minimum of two-carrier, non-stop competition on key United/US Airways hub-to-hub routes. In some cases, as I will explain in a moment, United also agreed to sell or lease to American facilities and equipment to support this competitive service.

Mr. Chairman, let me be clear that our agreement with American to ensure non-stop competition in these key United/US Airways hub-to-hub routes will not simply maintain the competitive status quo. To the contrary, the agreement will improve non-stop competition in these markets. By increasing the number of combined frequencies and overall seats on these non-stop routes, competition and consumer choice will be enhanced.

However, our efforts to make a transaction that is good for consumers even better did not stop there. Let me explain.

Last month, we agreed to sell American key US Airways assets at several capacity and facility constrained airports to ensure that it will be a meaningful competitor to United and other network carriers. At New York’s LaGuardia Airport, we agreed to sell American 22 jet slots and 14 commuter slots. We also agreed to sell American five gates at LaGuardia, three gates at Reagan National, three gates at Boston’s Logan Airport, one gate at Philadelphia International Airport, one gate at Atlanta Hartsfield International Airport and one gate at Newark International Airport.

In addition to slots and gates, we also agreed to sell American a large number of US Airways aircraft. Specifically, we agreed to transfer to American forty Fokker 100 aircraft, thirty-four Boeing 757 aircraft and twelve MD-82 aircraft.

Mr. Chairman, again, we did not stop there. United also entered into a 20-year joint venture agreement with American to jointly operate the US Airways Shuttle. Under this agreement, United and American will each fly half of the daily Shuttle flights between Reagan National, New York’s LaGuardia Airport and Boston’s Logan Airport, with each airline using its own planes and crews. Together, we will jointly market a Shuttle product and coordinate all relevant aspects of the operations. To ensure that consumers have the greatest choice possible, under the joint agreement, customers will be able to select their frequent flyer program of choice – either United Mileage Plus or American’s AAdvantage program – and earn reward and recognition regardless of which airline’s Shuttle flight they have selected.

Mr. Chairman, let me make several brief points relating to our agreement with American to jointly operate the Shuttle. This agreement increases consumer choice in the Washington, New York and Boston Shuttle markets. Instead of having the limited choice between US Airways and Delta as currently is the case, consumers of Shuttle service will have an added option of choosing between United, Delta or American. Moreover, our cooperative relationship with American on the Shuttle is strictly limited to the operation of the Shuttle. On all other routes, as is the case today, United and American will remain vigorous competitors.

So what does United believe the net effect of our proposed merger and these recent developments will be for consumers and competition? We believe domestic competition will be enhanced, and consumer choice and convenience will be improved. In fact, the New York Times, in an editorial on January 11, 2001, expressed the opinion that the United/American/DC Air agreements “are in the public interest.” The Times went on to note, “This deal should assuage any lingering concerns about the United-US Airways merger. Indeed, travelers in the Northeast will probably see more competition as a result of these agreements.”

First, the United-US Airways merger will create a 21st Century airline that offers consumers significantly improved choices for more convenient, single-carrier service on thousands of routes around the world. The transaction will enable United to fully use US Airways’ assets to compete vigorously in a way not currently possible due to that carrier’s financial challenges.

Second, the transactions will greatly enhance inter-hub competition. I was pleased to see DOT Secretary Mineta acknowledged the importance of inter-hub competition during his recent confirmation hearing before the Senate Committee on Commerce, Science and Transportation. Secretary Mineta is absolutely correct. United believes consumers will benefit greatly from improved inter-hub competition resulting from our proposed merger. The transaction will enable United’s Charlotte hub to compete more vigorously with Delta’s Atlanta hub. Also, it will permit United’s Philadelphia hub to compete more vigorously with Continental’s Newark hub.

Third, by creating a finished national airline network, the combined United/US Airways will have the scope and network efficiencies to compete vigorously in every region of the country.

Fourth, the transactions also will increase the number of competitors and level of competition in the Northeast region. Currently, three network carriers mainly compete in the Northeast region – US Airways, Delta and Continental. As a result of transactions, there will be four key network competitors – United, American, Delta and Continental – in this region. In addition, Southwest continues to expand significantly its competitive presence in the Northeast and according to recent DOT data, Southwest remains the largest domestic O&D carrier.

Finally, American’s separate deal to acquire 49 percent of DC Air will also ensure strong competition between United and DC Air in the Washington, D.C., region. The agreement gives DC Air a strong partner and will give its customers access to American’s vast global network, which will also promote vigorous competition with United.

In addition to these competitive benefits, let me take a moment to update the Committee on guarantees United has made to the traveling public, employees of US Airways and communities served by US Airways. As your Subcommittee will recall, we made the groundbreaking commitment that no United or US Airways employee will be furloughed because of this transaction. The daily reports of layoffs at companies across the country underscore the historic and important nature of this pledge to the employees of both companies and the communities in which they live. In addition, we will honor all labor agreements that both carriers currently have in place. Also, as I testified in June, United will continue to serve all cities currently served by US Airways. Further, for two years following the completion of our proposed merger, United has made the extraordinary commitment not to increase structure fares, with exceptions only for increases in fuel cost and the consumer price index.

More recently, we have made several other important commitments. United has committed to build a multi-million dollar maintenance facility in the Pittsburgh area. That decision is very important to the economy of the Pittsburgh area and Western Pennsylvania, and an important piece of our operational plan for the combined carrier. We too have committed to maintain the reservation centers that US Airways currently operates in Winston-Salem, North Carolina, Syracuse, New York and Pittsburgh. Again, we recognized the importance of these facilities to the local economies and we will be pleased to have them join our other reservation centers in providing the best service possible to our valued customers.

Mr. Chairman, let me conclude by again thanking you for the opportunity to testify. We have listened and responded to your concerns. We continue to strongly believe our proposed merger should be approved. It is in the best interest of consumers, communities served by both carriers and the U.S. economy. I’d be pleased to respond to questions at the appropriate time.