brokenwrench
Senior
- Oct 27, 2006
- 482
- 16
Statement of Daniel K. Inouye
Hearing: State of the Airline Industry: the Potential Impact of Airline Mergers and Industry Consolidation
Wednesday, January 24, 2007
--------------------------------------------------------------------------------
Over the past five years, the airline industry has suffered its worst financial performance in the history of commercial flight. Collectively, domestic air carriers have lost nearly $40 billion, but after intense restructuring among the major carriers, the industry may have turned a corner. Even conservative estimates suggest the airline industry will turn a profit of $4 billion in 2007. Despite this positive outlook, most industry observers warn that external factors or other negative business trends could dramatically impact any potential profits next year or beyond.
In this climate, US Airways has proposed a merger with Delta Air Lines that many believe would lead to rapid consolidation of the legacy air carriers serving the United States. Due to the industry-wide implications of the proposed consolidation, it is critical that the Senate Commerce Committee review and understand the potential effects of such a deal. Aviation is vitally important to our nation’s system of transportation and commerce. We must be quite certain that the likely benefits of various merger proposals far outweigh any potential consequences.
Financial analysts generally agree that consolidation will be good for the airline industry because it will quickly ease problems of overcapacity. However, industry is just one part of the equation the Congress must consider. We must also weigh the extent to which consolidation is in the best interest of consumers, particularly since the impact of decreased capacity on travelers and local communities is less clear.
Multiple mergers would reduce air service where combined route structures overlap significantly, and consequently allow industry to raise fares and maintain much higher fares. Both of these consequences -- fewer options and sustained higher prices -- hurt the consumer. Further, airline workers, who have already given so much in wage and benefit cuts during the past five years, would have to compete for the fewer jobs that remain after consolidation of the fleet.
In the coming months, the Commerce Committee will be working on a significant reauthorization of the Federal Aviation Administration (FAA). We will continue to closely follow the state of the industry and the impact of airline mergers on the American public. If the benefits of consolidation are less than promised, we will have to consider addressing this matter in the context of the FAA Reauthorization legislation we plan to develop this Congress.
Hearing: State of the Airline Industry: the Potential Impact of Airline Mergers and Industry Consolidation
Wednesday, January 24, 2007
--------------------------------------------------------------------------------
Over the past five years, the airline industry has suffered its worst financial performance in the history of commercial flight. Collectively, domestic air carriers have lost nearly $40 billion, but after intense restructuring among the major carriers, the industry may have turned a corner. Even conservative estimates suggest the airline industry will turn a profit of $4 billion in 2007. Despite this positive outlook, most industry observers warn that external factors or other negative business trends could dramatically impact any potential profits next year or beyond.
In this climate, US Airways has proposed a merger with Delta Air Lines that many believe would lead to rapid consolidation of the legacy air carriers serving the United States. Due to the industry-wide implications of the proposed consolidation, it is critical that the Senate Commerce Committee review and understand the potential effects of such a deal. Aviation is vitally important to our nation’s system of transportation and commerce. We must be quite certain that the likely benefits of various merger proposals far outweigh any potential consequences.
Financial analysts generally agree that consolidation will be good for the airline industry because it will quickly ease problems of overcapacity. However, industry is just one part of the equation the Congress must consider. We must also weigh the extent to which consolidation is in the best interest of consumers, particularly since the impact of decreased capacity on travelers and local communities is less clear.
Multiple mergers would reduce air service where combined route structures overlap significantly, and consequently allow industry to raise fares and maintain much higher fares. Both of these consequences -- fewer options and sustained higher prices -- hurt the consumer. Further, airline workers, who have already given so much in wage and benefit cuts during the past five years, would have to compete for the fewer jobs that remain after consolidation of the fleet.
In the coming months, the Commerce Committee will be working on a significant reauthorization of the Federal Aviation Administration (FAA). We will continue to closely follow the state of the industry and the impact of airline mergers on the American public. If the benefits of consolidation are less than promised, we will have to consider addressing this matter in the context of the FAA Reauthorization legislation we plan to develop this Congress.
