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Friday, September 29, 2000
By U.S. Rep. Bud Shuster
US Airways is Pennsylvania's hometown airline. The fate of that airline affects not only the more than 17,000 Pennsylvanians who work for the company and the thousands who fly with them each day, but also many of our neighbors who benefit from the trade and tourism the airline fosters. US Airways spends more than $2 billion in Pennsylvania each year and pays $57 million in annual state taxes.
When the proposed merger with United was first announced earlier this summer, one of my first thoughts was how this would affect our state. Did we really want our hometown airline taken over by a carrier from Chicago?
But the more I thought about it, the more apparent it became that this merger is an extremely good deal for US Airways, its employees and the people of Pennsylvania. Some seem to believe that the status quo can be maintained - that US Airways can remain a viable independent airline. I don't think so.
The choice is not between this merger and the status quo, rather the choice is between this merger and a weakened and perhaps failing hometown airline.
In June, the U.S. House of Representatives' Transportation and Infrastructure Committee, which I chair, held two days of hearings on this transaction. We heard from the chairmen of US Airways, United and the new DC Air, as well as both the U.S. Justice and Transportation departments, plus several opponents of the merger.
After reviewing all the evidence, I became more convinced than ever that the status quo cannot be maintained. The sad fact is, at a time when other airlines have been making record profits, US Airways has been hemorrhaging losses. It lost $85 million in the third quarter of 1999, $81 million in the fourth quarter and $115 million in the first quarter of 2000. Even the $80 million it made in the second quarter of 2000 was 74.8 percent below the comparable 1999 period and much less than most of its competitors. While other airline hubs were growing, those of US Airways showed declines last year.
US Airways may not be on the verge of bankruptcy. But looking five or 10 years down the road, its prospects are not good. United, despite its recent problems, is a strong airline with a bright future.
I know US Airways officials do not want to hear this. They have not been so dire in their public predictions. But, of course, they cannot be so pessimistic as that would likely hurt their business.
Nevertheless, the fact remains that US Airways is getting squeezed from above by the big network carriers such as American and Delta - and from below by the low-cost carriers such as Southwest and Jet Blue. Its costs are more than 30 percent higher than its competitors. Its costs per seat-mile are 14 cents, while all the other major carriers are under 10 cents.
Two other comparable mid-sized airlines, Continental and TWA, have already gone through two bankruptcies each in order to effectively compete. Do we want that for our hometown airline? I think not. But it is my judgment that, if this merger is blocked, we will see US Airways in bankruptcy, if not out of business in the future.
Such a result would be bad for Pennsylvania and tragic for the employees of the airline, who would lose their livelihoods and seniority. Even more than in other industries, seniority is crucial. Moving to another airline as a result of a bankruptcy rather than a merger would mean the loss of seniority. Former US Airways employees would be at the bottom of the ladder with he worst assignments and the lowest pay.
If the merger is approved, United has committed to a new maintenance base in Pittsburgh, the retention of all US Airways employees, continued hub operations at Philadelphia and Pittsburgh and retention of the US Airways reservation center in Pittsburgh. If this merger is not approved, there is no assurance that any of these will occur.
In know many people think that airfares in Pennsylvania are too high. I agree.
But blocking this merger will not lower airfares. What we need to do is develop the infrastructure that will accommodate new low-fare airline competition. I am pleased to say that in April, legislation (known as AIR 21) was enacted to do just that. This legislation takes effect in October and will begin to provide the funding needed to make room for the type of airlines that could bring lower fares to our state.
We can't be sentimental about US Airways. We need to be realistic. And realistically, Pennsylvania is better off hitching its wagon to a big and strong United Airlines rather than a financially endangered US Airways.
U.S. Rep. Bud Shuster, R-Everett, is chairman of the House Transportation and Infrastructure Committee.