Report: DOT should promote more airline competition

By Staff -- Logistics Management, 9/1/1999

A new report from a committee of the National Research Council (NRC) calls for the federal government to take steps to increase competition in the domestic airline industry.

The report, Entry and Competition in the U.S. Airline Industry: Issues and Opportunities, urges the Department of Transportation (DOT) to eliminate restrictions that prevent new carriers from operating at some airports. It also calls for policy changes that would make it easier for airport operators to construct new gates and for the Department of Justice to review any proposed alliances or partnerships among airlines.

John R. Meyer, chairman of the committee and professor emeritus of economics at Harvard University, said upon the report's release, "On the whole, we believe the Department of Transportation should concentrate on building an environment where it's difficult to engage in anti-competitive conduct because rivals can easily enter markets."

In the report, the committee suggests that DOT encourage air traffic to shift to secondary airports in major cities, possibly by establishing fees for using congested airports at peak periods. Such "congestion pricing" has been proposed from time to time for use on overcrowded highways. The NRC committee says funds raised through those fees could be used for airport gate and terminal construction.

The committee also wants DOT to eliminate what it considers to be antiquated slot-control and "perimeter" rules that were designed to reduce congestion but now work against it. The slot controls, imposed at Chicago's O'Hare, New York's Kennedy and LaGuardia, and Washington's Reagan National airports, set hourly limits on the number of takeoffs and landings. Perimeter rules at LaGuardia, Reagan National, and Love Field in Dallas limit nonstop flights originating beyond a specified distance. Both sets of rules are more than 30 years old. Those regulations make it difficult for new carriers to begin service at those airports, according to the report.

The committee also criticized federal aid policies that led some airport operators to give certain airlines exclusive gate contracts in order to raise funds for construction. Instead, the report says, federal aid should be tied to efforts to increase gate access.

The airlines are likely to take issue with the NRC's findings, but at press time a representative of the Air Transport Association, the industry's major trade organization, said the group was still reviewing the report and had no comment.