BTC U.S. DOT filing
October 19, 2006
The Honorable Mary Peters
Secretary
U.S. Department of Transportation
400 Seventh Street, S.W.
Washington, DC 20590
Re: Docket 2006-25275
Dear Secretary Peters:
The Business Travel Coalition has reviewed the rebuttal submissions of competing airlines in the China route case and would like to make several observations and recommendations to the Department. The US-China marketplace needs more competition, not more concentration. Awarding United Airlines more US-to-China frequencies would be analogous to the UK government handing British Airways more slots at London Heathrow. What’s more, in the United States the Northeast, Midwest, and West already enjoy nonstop air service to Beijing. The South does not. Every airline in this case already flies to Beijing except one, American Airlines.
If United is genuine in its public policy proclamation that air service between Washington and Beijing is of the most vital national interest, then it should be expected to redeploy frequencies to serve that market. Indeed, to the extent that the Department sees merit in United’s capital-to-capital argument, it should require the airline, as part of this proceeding, to use some of its existing frequencies to make such service a reality.
As should be obvious, nonstop service does not currently exist between these two capitals for only one reason: United has other more important commercial priorities. United should not be given additional frequencies to further its control and manipulation of the market as it has done in past China proceedings. (See attached March 30, 2001 Aviation Daily article: United’s China Service Switch Point’s To Carrier’s Honesty.)
Importantly, most of United's 28 weekly US-China frequencies are not tied to specific markets. In contrast, the Department’s recent award of 7 weekly frequencies each to new entrants American and Continental are, in fact, explicitly tied to specific markets. BTC believes that it is only equitable, and in the consumer's best interest, for the Department to treat the largest player in the market similarly and tie a certain number of United's current frequencies to the capital of the United States.
In reviewing United's most recent submission to the Department, BTC notes that of the letters of support from the US Congress some 50 percent are from Members from California and Illinois, which currently enjoy service to China. These states would not benefit from Washington-to-Beijing service. Nevertheless, given their stated public-interest aim of linking the countries' two capitals, BTC calls on these delegations to support the recommendation that the Department require a transfer of United Airlines’ frequencies from San Francisco and or Chicago to Washington to achieve this goal.
In closing, BTC urges the Department to not make the dominant player in the US-to-China market any more powerful. To do so would harm both the competitive structure of the marketplace and the consumer. Instead, the Department should support the long-held economic development aspirations of businesses and communities in the South and award the new frequencies to American Airlines in support of its proposal to fly to Beijing from Dallas/Fort Worth International Airport. Competition in the overall US-China market would be strengthened.
Sincerely,
Kevin Mitchell
Chairman
Attachment
+++
United's China Service Switch Points To Carrier's Honesty
Aviation Daily
03/30/2001, page 2
United's fortunes in the U.S.-China markets have shifted since it launched a fortune cookie war with American over the Chicago-Shanghai route. In May 2000, United sent out Chinese food containers with cookies containing a fortune reading "United will fly nonstop Chicago to Shanghai in April 2001" (DAILY, May 4, 2000). Despite its early commitment to Chicago-Shanghai, American predicted that United would not serve the market that American sought to enter.
On Sunday, United starts the first nonstops from Chicago to China -- but to Beijing. "United must have thought no one would notice if it did not follow through on its announcement. I hope this type of game playing by United is seen by DOT for what it is: anti-competitive behavior to block new competition in Asia, where United is dominant," Business Travel Coalition President Kevin Mitchell told The DAILY yesterday.
"Nothing was binding -- carriers are as good as their word," Mitchell said, questioning what someone like Rep. Louise Slaughter (D-N.Y.) might think of "the host of promises United has made with regard to its proposed merger with US Airways."
Chicago-Shanghai service became an issue in the U.S.-China proceeding, in which incumbent United undercut market hopeful American's bid for the one new U.S.-China designation. UPS, which also launches China service this weekend, gained the designation -- and six of 10 new frequencies -- when DOT determined that competition and capacity were lacking on the cargo side.
The International Brotherhood of Teamsters told DOT that United's planned Chicago-Shanghai service "makes American's passenger forecast and load factors substantially less viable and less attractive than American pictures it." Delta said American's proposal "has been demolished by United's announced decision." American, charging that United decided to shift service to Chicago "only under the threat of entry by American," told DOT "there is no guarantee that United would actually initiate or sustain such nonstop service once this proceeding has been concluded" (DAILY, May 8, 2000).
United, in a filing Nov. 23, 1999, denied that its proposal was a "defensive route-case ploy," as charged by American. "In fact, United has made its proposal...in response to marketplace reality." The carrier stressed, "Indeed, United is fully committed to starting nonstop service between Chicago and Shanghai in 2001 whether or not American itself is authorized to do so."
Since China is a highly restricted market, it is "difficult to project the market for a specific city," a United spokesman told The DAILY yesterday. While Shanghai is Chicago's sister city, United heard from business and tour groups that they preferred nonstops to Beijing from Chicago. The carrier is not flying beyond Beijing. It shifted frequencies from Los Angeles-Tokyo-Shanghai route to serve China from Chicago nonstop. It also flies daily SFO-Beijing nonstop.