Chairman, Ranking Member, and Members of the Subcommittee:

I appreciate the opportunity to submit this testimony to your Subcommittee regarding the imminent consolidation of the airline industry into perhaps three dominant airlines.

As you know, the current string of proposed airline consolidations including the merger of United Airlines and US Airways; the purchase by AMR Corporation / American Airlines of Trans World Airlines (TWA); the creation of DC Air; and now the possible acquisition of Delta Airlines by Continental Airlines would consolidate over 75% of the industry into three corporations.

I have serious concerns about the impact of these transactions, which are a serious threat to the national economy, and specifically to the local economy of upstate New York.

As an example of what limited competition can do to a small market, consider the plight of the business owners and residents of my district in upstate New York. This region has suffered from unacceptably high airfares for far too long. In the past few years, Buffalo Niagara International Airport (BNIA) and Rochester International Airport (RIA) have been among the top five highest fare per mile destinations in the country. In both cases, this was due primarily to the dominance of one carrier, US Airways, which had a market share of approximately 50% or more in both markets in 1997.

This monopoly stifled competition and inflated fares. This cost has burdened both business and retail travelers alike, and has been extremely distressing to the whole region’s economy. In fact, the region is home to several Fortune 500 companies who have struggled to remain competitive in no small part due to above market regional airfares.

Today, through the efforts of federal, state, and local officials, this region’s airfares are slightly more competitive with the addition of low fare airlines, such as JetBlue, Southwest, Shuttle America, Air Tran, and others. As a result, the most recent statistics indicate that approximately 4.25 million passengers used BNIA in 2000, breaking the previous record of 3.6 million passengers set in 1984. This enhanced competition has allowed BNIA to fall from second to 48th nationally on the list of cities with high airfares. The Rochester market, with new low-fare service from JetBlue, has improved, but not as significantly.

Airlines that dominate a specific market, like Buffalo or Rochester, can destroy competition from low-cost airlines that would otherwise spur these major carriers to lower fares. I am extremely concerned that these proposed airline transactions will reverse the scant progress we have made in upstate New York. Even today, smaller competitors such as Shuttle America or Vanguard Airlines have scaled back or eliminated service because of the presence of market dominators.

The pending TWA transaction will also permit American Airlines to invest in 49% of DC Air. I originally voiced my concerns about DC Air in May, 2000, when it was announced that this new airline would assume the routes flown by US Airways from the Washington D.C. metro area. I fail to see how these concerns about DC Air are addressed by effectively transferring control of these routes from one dominant carrier, US Airways, to another, American. Any solution that does not permit new competition, as opposed to repackaged monopolies, is unacceptable.

Many people regularly fly between Buffalo / Rochester and Washington, D.C., and are forced to pay much higher fares than those paid on routes of similar distance. For example, it is now possible to fly between Buffalo / Rochester and New York City for $100 round-trip (where JetBlue provides real competition), but it is often necessary to pay almost $800 to commute to Washington National Airport from upstate New York because of the dominance of one carrier, US Airways, in that market. As just one more example, US Airways once charged over $400 on a round-trip fare from Buffalo to Albany, New York. When Shuttle America began to compete on this route, offering a $200 round-trip, US Airways immediately matched that fare. Shuttle America has since discontinued this service and it comes as no surprise to me that the US Airways fare on this route is again close to $400.

Clearly, fundamental economic theory and these examples dictate that the crucial ingredient to low air fares is competition. The national economy, and the economy of communities like upstate New York, rely on competition to keep air fares low and business expenses reasonable. These mergers threaten to eliminate the very heart of competition in the airline industry and will negatively affect business growth in every industry save this one.

I urge you to keep these concerns in mind as you carefully examine airline consolidation.

Thank you.