Carriers get antitrust relief

By Frank Cho
Advertiser Staff Writer

Aloha and Hawaiian can cooperate on routes between Honolulu and Lihue, Kahului, Kona and Hilo. Deborah Booker • The Honolulu Advertiser

The approval is a significant milestone for the carriers, which have said for nearly a year that they are struggling financially and need the ability to coordinate in some areas to survive a slumping interisland market.

The move also means that interisland passengers likely will begin to see changes and reductions in the number of flights on certain routes offered by the carriers, which together control more than 90 percent of the interisland market.

The exemption — the only one of its kind to be granted by airline regulators since Sept. 11 — takes effect immediately and will allow the carriers to coordinate capacity on routes between Honolulu and Lihue, Kahului, Kona and Hilo through Oct. 1, 2003.

While the exemption does not allow the airlines to coordinate specific flight schedules or fares, some critics including a Maui commuter airline and the U.S. Justice Department have warned that the exemption could lead to fewer choices and higher fares for consumers.

In announcing the decision yesterday, U.S. Department of Transportation Secretary Norman Mineta said a condition of the waiver will be that the airlines file monthly reports on average fares, passenger loads and yields on affected routes to the federal transportation agency.

"We are adopting this reporting requirement because of our concern with the potential impact of this agreement on consumers, and we intend to monitor closely the schedules and fares being offered by each of the carriers in those markets," transportation officials said in the 12-page ruling.

The decision also notes that both carriers say they have been operating below a capacity that would enable them to financially break even. The decline in Japanese tourism since the Sept. 11 terrorist attacks and the increasing number of flights operating directly from the U.S. Mainland to Neighbor Islands are cited as reasons for the smaller loads.

Bill Mosley, a spokesman for the Transportation Department, said the department could still rescind the antitrust exemption at any time if it is determined that the carriers are not acting in the public interest.

After a failed merger effort, Aloha and rival Hawaiian applied for a one-year exemption from antitrust laws to coordinate passenger-seat levels among five Hawai'i airports under the recently enacted Transportation Security Act.

The law, which was passed by Congress after the Sept. 11 attacks, was designed to help financially struggling air carriers reduce their costs.

Yesterday the airlines said they were welcomed with the approval.

"We are pleased that the department has recognized Hawai'i's unique circumstances and agrees that this is in the public interest," said John Adams, Hawaiian's chairman, president and chief executive officer.

Glenn Zander, Aloha's president and chief executive, said he was also grateful for the antitrust exemption for his airline.

"It will provide the flexibility needed to respond to a changing interisland market while protecting the interests of the traveling public," said Zander.

The coordination of certain routes will allow the airlines to reduce fuel costs, landing fees and other maintenance-related items.

Yesterday, it was unclear how flights would be affected. While cuts in service were expected by both carriers with or without the exemption, some experts said yesterday's decision will likely speed a reduction in flights between the Neighbor Islands and Honolulu.

"Sure it's going to affect schedules, but how we don't know yet," said Stu Glauberman, a spokesman for Aloha Airlines.

BJ Wie, a transportation economist with the University of Hawai'i at Manoa, said the waiver "will surely mean a reduction in frequency, something that both carriers have already been doing, but the federal exemption now allows them to do it at a much faster rate than they otherwise would have."

Floyd Baptist, a spokesman for the union representing mechanics, declined to comment saying his union would need more time to evaluate the decision.

Some aviation experts said yesterday that the general financial pressures facing the airlines also could mean consumers may end up generally paying more for travel over the next year as both carriers try to raise revenues.

"I think you can expect fare increases," said Bill Oliver, vice president of The Boyd Group, an Evergreen, Colo., aviation consulting and research firm. "But if the carriers start to raise fares too high or too fast there is going to be an outcry."

Oliver said consumers could see the introduction of a "tiered" pricing plan that will have different ticket prices for different destinations based on distance and the demand for those seats.

"I would be shocked if you did not see that," Oliver said. "Many airlines have already learned that you cannot save your way to prosperity. You have to grow revenues."

The two airlines filed an application July 31 for the antitrust exemption, but it quickly ran into opposition from at least one interisland competitor, as well as the U.S. Justice Department's antitrust division.

In a filing with the Transportation Department last month, Justice officials said Aloha and Hawaiian were both improving financially and the carriers did not need the exemption.

Sen. Dan Inouye, a key supporter of the airlines' request, declined to comment yesterday.