A leading airline industry analyst told a Senate committee yesterday that the industry is so highly concentrated that he is "tempted to conclude" that none of the airline mergers that the Department of Transportation has allowed should have been permitted.
"The airline industry today is more highly concentrated than anyone has realized," said Julius Maldutis, a vice president of Salomon Brothers Inc.
Maldutis focused his analysis on concentration at individual airports, which, he said, is a more significant measure than national market share.
Airports increasingly have been dominated by one or two airlines using them as hubs, or connecting points, for flights. For instance, Delta Air Lines and Eastern Air Lines together account for nearly 95 percent of all boardings at Atlanta's Hartsfield International Airport; Piedmont handles 70 percent of the boardings at Dayton, Ohio; Continental Airlines has 71.5 percent of the enplanements from Houston Intercontinental Airport; and Texas Air Corp. (Continental and Eastern) and merging USAir and Piedmont Aviation handle 56 percent of the boardings at Washington National Airport.
Using the Justice Department's index, 80 percent of the 50 largest airports nationwide would be considered highly concentrated markets, Maldutis said. Passengers living in cities served by those airports or flying into them don't get the benefits of competition that exist in the so-called national market, he said.
Maldutis testified before the Senate Committee on Commerce, Science and Transportation, which is studying whether the airline industry should be regulated again. The hearing spotlighted growing congressional concern about DOT's hands-off policy toward mergers, increasing industry concentration, and diminishing service in largely rural states, where fares are high and direct flights are few.
Senators also said they are concerned about competition at airports such as National, LaGuardia and Chicago O'Hare, where landing and departure rights are limited. DOT has said it will review the allocation of "slots" at congested airports. America West raised the issue in opposing the recently approved merger of USAir and Piedmont, arguing that it was shut out of the market at National Airport because no other carrier would sell it enough slots to operate.
In response to those concerns yesterday, DOT argued that airlines can establish service at other airports that serve the same metropolitan areas, such as Baltimore-Washington International Airport and Dulles International Airport in the Washington area. That argument didn't appear to persuade several senators yesterday.
"This senator does not want to land in Baltimore," said Sen. J. James Exon (D-Neb.).
Matthew V. Scocozza, the DOT's assistant secretary for policy and international affairs, defended deregulation and the agency's record on mergers. More Americans are flying, he noted, and more are flying at discount fares that have saved consumers billions of dollars. There also are more carriers than before deregulation, he said.
"This perspective reveals a very dynamic, highly competitive industry, not one tightly controlled and held by a limited number of parties intent on gouging the public and monopolizing a vital social and commercial transportation resource," Scocozza said.
"My service has gone down and my fare has quadrupled and yet we're hearing ... everything is just fine," said committee Chairman Sen. Ernest F. Hollings (D-S.C).
Former Civil Aeronautics Board chairman Alfred E. Kahn, often described as the father of airline deregulation, called deregulation a success in many respects. Problems have occured because of DOT's failure to police mergers and to protect consumers adequately, he said. "It's not fair to come to me because this administration didn't enforce the antitrust laws and say, 'what are you going to do about it, Fred?' " he said.