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SWAAAE: Airport News, "US suit vs American Airlines worries industry"
May 20, 1999
US suit vs American Airlines(AMR.N)worries industry
HOUSTON, Reuters [BR]: An antitrust lawsuit filed last week against American
Airlines came under attack from top executives at rival carriers on Tuesday,
one of whom said it showed the U.S. Justice Department had too little work
to do.
Continental Airlines chairman Gordon Bethune said the lawsuit, which accuses
American of predatory pricing to drive out competition at its Dallas-Fort
Worth International Airport hub, was the groundless work of idle government
hands.
``It shows you that the Justice Department's got way too much free time,''
Bethune told reporters after Continental's annual meeting in Houston. ``I
don't think it has any merit.''
Gerald Greenwald, chief executive of United Airlines, a unit of UAL Corp ,
said the Chicago-based carrier feared the lawsuit could set dangerous new
legal precedent for government action.
``We're hoping that the Justice Department will stay with existing precedent
as to what is predatory and what is not,'' Greenwald said at United's annual
meeting in Denver.
The lawsuit charges that American repeatedly cut fares and saturated routes
with additional flights to drive out smaller competitors, then jacked up
prices and reduced service once the intruder was gone.
American, a unit of AMR Corp., denied the accusations and said the lawsuit
violated the essence of free market competition.
Bethune agreed. ``Does the government want to start an airline and come and
compete?'' Bethune asked. ``If you want more competition, there you go.''
Bethune said Continental had not been asked to supply information to the
agency, which is investigating anti-competitive practices by major airlines.
Greenwald said he does not think United is vulnerable to a similar lawsuit:
``In our case, we've been aggressive, but careful.''
But, he also said United had received a request from the Justice Department
to send data after low-cost Denver-based Frontier Airlines lodged a
complaint in 1997.
Frontier alleged that United was engaging in ``predatory, anticompetitive
and monopolistic practices'' at Denver International Airport.
Greenwald said the airline delivered the data, but had heard nothing from
the government. ``We have not been notified of any investigation by Justice.
We have not changed our practices,'' he said.
Just as American dominates the Dallas-Fort Worth airport, Continental
dominates Houston Intercontinental Airport, but Bethune said potential
competitors were welcome.
``Houston's part of a free country. You want to come to Houston and fly,
come on down,'' he said. ``We do have rights.''
Steeply rising air fares have sparked the government probe, but Bethune said
prices were lower in the United States than in Europe and Asia and that
airplanes were flying nearly full.
``If prices are so high, why are planes full?'' he asked.
Continental, the nation's sixth-largest airline, tried unsuccessfully in
April to lead an industry-wide fare increase, but Bethune said it was likely
that rising oil prices would drive up the cost of tickets anyway.
``If oil continues to escalate, guess what's going to happen,'' he said.
``Figure this out: oil keeps going up, our costs keep going up. Pretty soon
we have no margin'' without fare increases.
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