Senators question air merger guarantees

By Susan Hooper
Advertiser Staff Writer

State senators yesterday questioned the executive leading the proposed merger of Aloha and Hawaiian airlines about the strength of fare and service guarantees for the new carrier, and asked for an analysis of how those guarantees could be legally binding.

Greg Brenneman, who is leading the planned merger of Aloha and Hawaiian airlines, answered questions at a Senate hearing yesterday in the State Capitol's auditorium. Richard Ambo • The Honolulu Advertiser

In particular, Menor said, the attorney general's office is questioning whether agreements the airline has proposed making with the state would be legally enforceable after the merger is approved.

Greg Brenneman, the former Continental Airlines executive leading the merger effort, told the senators that anti-trust attorneys with expertise in state and federal anti-trust law have said the proposed agreements are "perfectly legitimate."

Menor asked Brenneman to provide the senators with a written legal analysis of the guarantees and how they could be enforced.

In January, Brenneman said the merged airline would guarantee passenger and cargo fare rates and increases for five years following the date of the merger through an agreement with the state attorney general's office. The proposal was subject to a number of conditions, including unexpected increases in security and fuel costs, and the entry of a new carrier into the market.

Brenneman also said the airline would commit to flying to all of the interisland markets currently served by Hawaiian, Aloha and Aloha Island Air. He later said the total number of interisland flights by both airlines is likely to drop by between 10 percent and 12 percent if the merger is completed.

About 330 people attended yesterday's hearing on two Senate resolutions opposing the merger, and about 20 people testified. Those who spoke against the merger outnumbered those speaking in favor of it.

Wearing stickers representing opposing sides of the proposed airline merger, pilots Capt. John Miller of Aloha Airlines, left, and Capt. Richard Rogers of Hawaiian Airlines, listened to testimony at the hearing yesterday. Richard Ambo • The Honolulu Advertiser

Richard Humphreys, executive director of the Hawai'i Tourism Authority, told the senators that the authority supports the merger in part because it offers "greater opportunities in airlift capacity to Hawai'i from Mainland destinations."

Menor later asked Tony Vericella, head of the Hawai'i Visitors and Convention Bureau, to provide the senators with detailed information about how the tourism authority members reached their decision to support the merger.

Among those testifying against the merger was Tom Gill, a former lieutenant governor, member of Congress, territorial and state representative and Democratic Party leader. "In Hawai'i, we don't need monopolies," said Gill, recalling the "tightly bound society" imposed prior to statehood by Hawai'i's major monopoly corporations, known as the "Big Five."

"Why should we kill possible competition in interisland travel, and subject our economy and society to a disease which we have struggled for years to destroy?" Gill said.

The committees deferred decision-making on the resolutions until next week at the earliest. In the meantime, Kawamoto and Menor said after the hearing that they expect to introduce a resolution today asking Congress to pass legislation that would allow Hawai'i to establish an air carrier commission to regulate such areas as fares and service in interisland air travel.

Without congressional approval, such a commission would be prohibited under the 1978 federal Airline Deregulation Act, Menor said.

A state law passed in the early 1990s authorized the establishment of such a commission, but the commission was never set up and that law expires this year. A bill passed by the state Senate last week and sent to the state House would extend the life of that law, Menor said.

"I would be the first to admit that it's going to be an uphill battle to get Congress to pass an exemption that would allow Hawai'i to regulate interisland air travel," Menor said. "It will take considerable effort on the part of the Hawai'i (congressional) delegation. ... However, given the concerns about the merger, I think it's important for state legislators to ask Congress for legislation that would exempt Hawai'i from airline deregulation and allow us to regulate interstate travel to protect consumer interests."

Reach Susan Hooper at 525-8064 or shooper@honoluluadvertiser .com.