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These television companies and more, including Cox. | |
| When connection is needed most, Cox is there to help. | ||
| Bringing affordable internet to families in need, new tech to boys and girls clubs, and support to veterans. | ||
| Whenever and wherever it matters most, we'll be there. | ||
| Cox supports C-SBAM as a public service, along with these other television providers, giving you a front-row seat to democracy. | ||
| Senators questioned airline CEOs about competition in their sector during a hearing on Capitol Hill. | ||
| Lawmakers highlight issues including additional fees and the use of artificial intelligence and pricing. | ||
| The Judiciary Subcommittee hearing is 2 hours and 15 minutes. | ||
| Thanks to all of you for being here. | ||
| We look forward to today's conversation. | ||
| Every day in America, millions of passengers rely on airlines to get them safely, easily, and efficiently to life's most important moments. | ||
| Weddings, funerals, the birth of children and grandchildren, professional opportunities, job interviews, meeting with clients, old or new, and even in some cases, daily commutes. | ||
| Air travel has become and genuinely is essential to our lives. | ||
| Since deregulation of the airline industry began in 1978 and increasingly in the years that followed from that, competition has driven affordability innovation and improved service in countless respects within the industry. | ||
| For decades, rivalry among carriers allowed for consumer choice and it kept fares within reach. | ||
| Yet in recent years, there has been significant consolidation in the industry. | ||
| This has reshaped in some ways the U.S. airline market, reducing the number of total competitors. | ||
| Today, there are just four major carriers, American Delta United, and Southwest, that control over 80% of U.S. domestic air travel. | ||
| And that's a change from not too many decades ago when there were more players than that, far less market concentration. | ||
| Legacy carriers have invested in creating a hub and spoke model. | ||
| The model routes passengers through central airports more efficiently, and that has the effect of lowering maintenance costs, increasing connectivity, and otherwise increasing the beneficial network effects available to a larger airline. | ||
| The hub system has also created some dominant positions, particularly at a few key airports. | ||
| In Atlanta, Dallas, Fort Worth, Charlotte, and Newark, for example, a single airline controls between 70 and 80 percent of passenger traffic. | ||
| In Salt Lake City, St. Louis, and Minneapolis, one carrier accounts for roughly 60 percent of passenger traffic. | ||
| Even at airports with far less concentrated market shares, carriers often don't compete on the same routes, leaving travelers effectively with only one direct option for a specific destination. | ||
| Some of this, of course, is going to happen in any system that involves as many cities, as many places where people might want to travel as others. | ||
| Nonetheless, we see the trend as what it is, a trend that is perhaps resulting in less competition within the industry than we've seen at times in the past. | ||
| This concentration is, at least in part, the result of a wave of mergers. | ||
| Delta Northwest, then United Continental, and Southwest Airtram. | ||
| The Obama administration initially challenged the American-U.S. Airways merger, but it reached a settlement, one that seemingly failed to address the broader nationwide concerns alleged in the complaint in that case. | ||
| Most recently, the Biden administration blocked the proposed JetBlue-Spirit merger, ostensibly to preserve Spirit as an ultra-low-cost competitor. | ||
| In that case, the Department of Justice took an acrobatic distortion and contortion of the market and overlooked a lot of the real-world dynamics. | ||
| The merger likely would have enhanced competition by creating a more financially stable airline with a larger network, one that could provide additional competition to the legacy carriers. | ||
| This would have enabled more competition with these legacy carriers nationwide. | ||
| And one thing we know about competition, it tends to bring down prices and it tends to result in improvements to quality as different competitors try to compete for the money of the passengers they want to carry. | ||
| Yet after the merger was blocked, Spirit ended up filing for bankruptcy, as many predicted. | ||
| This development raises key questions about enforcement and our antitrust framework, such as how a market ought to be defined and whether the failing firm defense captures real-world dynamics and incentives, and how this ought to frame how we think about antitrust law and the manner in which it's enforced moving forward. | ||
| Low-cost carriers and ultra-low-cost carriers have been an important competitive constraint on pricing, of course. | ||
| There's a lot that they add to the picture. | ||
| When one of these airlines enters a market, average fares typically drop, at least for the affected routes. | ||
| But those competitive forces are facing financial headwinds. | ||
| Spirit is in bankruptcy. | ||
| Southwest is abandoning, in some ways, the very business model that made Southwest the disruptor that it's been, eliminating free checked bags and charging for seat assignments, moving closer to the legacy carrier model. | ||
| JetBlue's partnership with American and the proposed merger with Spirit were blocked. | ||
| JetBlue is now seeking collaboration with United in order to survive. | ||
| Broader economic conditions also present challenges. | ||
| Aircraft supply shortages, engine repair delays, and rising labor costs all contribute in weighing on the overall competitive dynamic in the industry. | ||
| Additionally, with fewer competitors than we've had in the past, the remaining airlines can coordinate on capacity more easily. | ||
| This limits seat growth across the industry. | ||
| Limited slots and limited gates also tend to reinforce those same constraints. | ||
| So do shortages of air traffic controllers and an antiquated air traffic control system. | ||
| The U.S. Department of Transportation is modernizing our air traffic control system. | ||
| They're streamlining FAA hiring and raising the pay that they offer to controllers. | ||
| And I want to commend Secretary Duffy at the Department of Transportation for his leadership in addressing these challenges and working towards solutions to each of them. | ||
| The reforms are essential, not just for safety and reliability, but also for creating the capacity that we need in order to allow for an increase in competition. | ||
| Today's hearing is one that I hope will be an important first step in examining competition issues as we face them in the airline industry. | ||
| Americans deserve the benefits of competition, especially when they fly in the form of lower fares, better service, and more choices. | ||
| And in advance, I want to thank each of our witnesses for coming today. | ||
| I look forward to their insights. | ||
| Now we're going to turn to my friend and colleague, the ranking Democrat on the committee, Senator Corey Booker. | ||
| I'm really grateful to the chairman of this committee for calling this. | ||
| This is an actual area. | ||
| In fact, this whole subcommittee is an area where there's a lot of bipartisan alignment and a lot of really growing concern as Americans are seeing prices on everything go up. | ||
| This is not the relegation of any political party. | ||
| These are trends in many ways that have been going on for too long. | ||
| About the airline industry, I have to say I'm a very impacted witness as well as the ranking member because at six foot three and larger than most Americans, I find our airline seats really inadequate, feeling that pain that many Americans are feeling in addition to a lot of the other challenges with air travel. | ||
| There's just things folks don't understand. | ||
| They really can, and it's understandable the confusion and the frustrations that American consumers are feeling when it comes to airlines. | ||
| Most Americans don't understand why Google Flights will say that it's cheaper to fly for 10 hours with a stop without a stop instead of a six-hour non-stop, or why it's cheaper to have a layover in Atlanta when you're flying from Philadelphia to Kansas City when no reasonable person can consider Atlanta on the way. | ||
| Nowadays, airlines advertise so many different fares and classes, whether it's premium, economy, board first, priority, economic, basic, and they tack on so many fees for everything from taking a bag on board to sitting with your other family members. | ||
| It is unbelievable. | ||
| Those fees get labeled as either ancillary or junk fees. | ||
| And we really believe that, at least I believe, that this is a regulatory question and more. | ||
| And here's the thing. | ||
| American passengers spend what seems like a third of their monthly mortgage to fly nowadays. | ||
| Major airlines that have repeatedly benefited from federal government bailouts now pay less in taxes and out-of-pocket and pocket more from consumers because of these separate fees customers pay on add-ons that are not tax-like based airfare. | ||
| Back when consumers paid an all-in-airfare, that tax revenue actually went towards improving airports and improving airport infrastructure. | ||
| But the system as it was before is not what it is now. | ||
| And these problems are hurting airline competition and really hurting consumers. | ||
| And there are more issues than just fees. | ||
| But let's just say that when the former Secretary Budijej initiated rulemaking that would have required airlines to be more transparent about these extra fees, unfortunately that's been rolled back now under the current administration, which is going to make a bad situation far worse. | ||
| But fees aren't the only thing. | ||
| Price discrimination or price hikes due to the implementation of AI-based surveillance pricing unfairly targets consumers and takes advantage of their circumstances, like flying solo or having must-go trips where a loved one is ill or worse, where there's a funeral to attend. | ||
| If AI-based surveillance pricing, for example, sees a consumer search for funeral home and palliative care, while others searches last-minute couples getaway, the airline could show the grieving traveler higher prices based on their estimated willingness to pay. | ||
| And that's where we go. | ||
| That's where we go to low-cost airlines. | ||
| And it's important that we realize that low-cost airlines have a role to play in the industry because when low-cost carriers enter the market, we see fundamentally that competition flourishes and prices go down. | ||
| I remember a moment of honesty with JetBlue when they warned that all that power in the hands of a very few deep-pocketed airlines has implications for consumers in the form of reduced options, high fares, and often poor service. | ||
| Now, that is really something that is getting worse. | ||
| Anti-competitive practices seemingly have left Americans with less and less access to air travel. | ||
| After both 9-11 and COVID-19 pandemics, Congress bailed out the airlines to avoid a collapse of our entire airline industry. | ||
| Yet, since the pandemic, big airlines have dropped dozens of cities from services, places like Flint, Michigan, and Lincoln, Nebraska. | ||
| Some cities like Dubuque, Iowa, and Toledo, Ohio have lost all major carrier service. | ||
| The capital city of Wyoming, Cheyenne, has lost service on and off over the last decade and has had to guarantee the revenue of a major airline merely to secure regularly scheduled service to a single hub, all through taxpayer dollars. | ||
| That's just not right. | ||
| We're going to hear from incredible experts today about rural and mid-sized cities, routes, and connectivity, and how airport hubs don't work or how airport hubs don't work. | ||
| But it's clear to me that taxpayers and government have been invested in the success of airlines and airports in America, and we deserve better returns on that investment in the form of efficient, safe, meaningful air choices and competitive pricings. | ||
| The stakes are really high. | ||
| Competition is critical for safety and for maintaining and supporting the essential workforce that ensures safety and maintenance. | ||
| I believe that we have to do more. | ||
| We must invest in our systems, including addressing our air traffic controller shortage and our infrastructure needs. | ||
| And it seems like this industry needs capacity, more routes to smaller, mid-sized cities, and a bit of a buffer. | ||
| This is something we should all be committed to. | ||
| More staff, bigger seats, and extra aircrafts on standby should be part of this conversation. | ||
| To weather crisis and the natural boom and bus cycles in the market, as well as to prevent bankruptcies and unfair competition that lead to ultimately less meaningful choices and higher airfares for American travelers is truly at issue. | ||
| A resilient airline industry is the most important goal here to keep American carriers competitive around the world and to protect travelers from safety issues that DC locals have been tragically reminded this year could have serious consequences. | ||
| We have work to do and competition is at the center of it and this committee, I'm grateful for, is hopefully going to start finding some solutions. | ||
| The last thing I want to say is I want to add to these witnesses: it is a big deal when you come and testify before Congress, before the United States Senate. | ||
| It's also a bit of a sacrifice leaving your jobs and your families off and come here. | ||
| Many of you had to fly, and we know how burdensome that can be. | ||
| So I want to thank everybody for being here. | ||
| And I will try not to get very upset at Professor Sitariman because he's an extraordinary guy. | ||
| I've read his bio, but that hair is very obnoxious to me. | ||
| To me and the chairman of this committee, sir, I should hold him in contempt of Congress, but I would. | ||
| It almost feels like a war crime. | ||
| Yes, sir. | ||
| There was a day that we looked that good. | ||
| It's a great point. | ||
| We really do appreciate you coming here and knowing how busy you all are. | ||
| It's important to remember that while much of what we've said and what we may explore may sound like a complaint, there's not any one person or one business that has developed the status quo. | ||
| This has been an iterative process made over multiple decades under multiple administrations and different antitrust regulators over many years. | ||
| The question before us is what the state of competition is in the industry and what, if anything, do we need to know as a subcommittee charged with periodically reviewing our antitrust and competition policy laws and also the enforcement of those through our oversight capacity, whether things are going in the right direction. | ||
| So with that, I'll introduce our witnesses. | ||
| We've got Gregory Anderson here as the President and CEO of Allegiant Allegiant Airlines. | ||
| Sharon Pinkerton, who is the Senior Vice President of Legislative and Regulatory Policy at Airlines for America. | ||
| Barry Biffle, who is the president and CEO of Frontier Airlines. | ||
| We have Professor Ganesh Sidaraman here. | ||
| He's a professor at Vanderbilt University School of Law. | ||
| And last but not least, William McGee, who was here as a senior fellow for aviation and travel at American Economic Liberties Project. | ||
| Thanks to all of you for being here. | ||
| If you'll each stand, I'll swear you in and then we'll begin. | ||
| Do each of you swear or please raise your right hand swear or affirm that the testimony you're about to provide to the subcommittee will be the truth, though? | ||
| The truth and nothing but the truth, so hope you got. | ||
| Thank you. | ||
| The record will reflect that they each answered in the affirmative. | ||
| All right, let's begin with you, Mr. Anderson, and then we'll move from your end of the table one by one down. | ||
| So we'll hear from Mr. Biffle, Mr. McGee, Ms. Pinkerton, and then we'll finish with Mr. Sitteraman before opening it up for questions. | ||
| Go ahead, Mr. Anderson. | ||
|
unidentified
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Chairman Lee, Ranking Member Booker, and members of the subcommittee, thank you for the opportunity to appear before you today. | |
| My name is Greg Anderson, and I serve as the CEO of Allegiant Travel Company. | ||
| At Allegiant, we offer safe, reliable, convenient travel at unbeatable value. | ||
| All of our flights are nonstop and focused on the leisure traveler. | ||
| Without Allegiant, many people who live outside major cities wouldn't have access to affordable air travel. | ||
| By offering unbundled pricing and low fares, we make it possible for a broader spectrum of Americans to travel to high-priority vacation destinations. | ||
| Roughly 70% of the routes we serve have no other non-stop flight options. | ||
| The convenience and value we provide adds competition to the market, expanding the range of options available to these small and medium-sized communities. | ||
| I am here to talk about potential ways to make air travel more accessible for everyone and to share my concern that if trends continue, American travelers may have fewer options and face higher prices. | ||
| We believe that there are a few key actions that can help strengthen the sector. | ||
| First, the advancement and modernization of air traffic control systems across all communities, big and small. | ||
| Inefficiencies and delays within the air travel industry are often attributable to outdated technology and insufficient staffing. | ||
| We are encouraged by the administration's plan to modernize ATC and Congress's support and funding. | ||
| Second, improving gate access for value airlines. | ||
| The current gate allocation process tends to reinforce the existing advantages of legacy carriers. | ||
| To address these discrepancies, we supported the bipartisan Airport Gate Competition Act introduced last Congress and would welcome such legislation. | ||
| Third, international market access through joint ventures. | ||
| Large legacy carriers have been allowed to enter into broad alliances for decades. | ||
| These ventures give them marketing power, scheduling power, and pricing power that small carriers cannot match. | ||
| Allegiant sought to pursue a similar joint venture, but tailored that to the value airline model. | ||
| In 2021, in partnership with Viva Aerobus in Mexico, we filed for a first-of-its-kind value airline alliance. | ||
| Together, we proposed 92 non-stop routes between the U.S. and Mexico. | ||
| This alliance would introduce low-fare competition into the market. | ||
| It could increase the total number of direct U.S. to Mexico routes by 50% and give nearly 5 million more Americans access to affordable international travel. | ||
| However, this venture has yet to receive approval from the Department of Transportation despite these clear pro-competitive benefits. | ||
| Last, I would like to discuss regulation of the industry. | ||
| Let me be clear, safety is and always must be the top priority. | ||
| But rules that go beyond safety and interregulation of consumer choice will inevitably lead to pricing out the most fair cost conscious customers. | ||
| Customers that we are proud to serve. | ||
| Full fare advertising rules intended to increase transparency actually conceal the impact that government fees and taxes have on the consumer. | ||
| Allegiant offers clear pricing, letting customers see and select only the options they want, prioritizing transparency and choice. | ||
| We also go beyond what regulation requires when it comes to standing behind our product. | ||
| For example, Allegiant compensates passengers up to $300 in addition to a ticket refund if we cancel a flight within our control. | ||
| Air travel innovation is driven by competition. | ||
| When value airlines like Allegiant enter new markets, the average fare drop by 19% across all airlines. | ||
| We believe that a healthy airline industry benefits everyone. | ||
| Value airlines such as Allegiant make it possible for a family of four to take their dream vacation for hundreds of dollars less than they would otherwise pay. | ||
| Allegiant is proof that competition and deregulation works. | ||
| I am proud of the 70% of customers who choose to fly with us again. | ||
| We provide otherwise ignored communities with safe, reliable, and non-stop service at prices that are affordable for everyday Americans. | ||
| In my visits to our bases and through conversations with customers, I can tell you that what we provide is necessary and important to the industry. | ||
| Thank you, and I look forward to your questions. | ||
| Mr. Chairman, can I just put into the record that Barry Biffle is an awesome name? | ||
|
unidentified
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Yes, yes. | |
| Does anyone object? | ||
| No. | ||
| Okay. | ||
| Without objection, it will be duly noted in the record. | ||
| Thank you very much. | ||
| Go ahead, Mr. Pilfer. | ||
| Thank you. | ||
| I don't have the hair he does, and it's too late in life, I guess, for that. | ||
| But thank you. | ||
| So, Chairman, Ranking Member, and members of the subcommittee, I thank you for the opportunity to appear before you today. | ||
| Airline CEOs like myself usually get invited to Capitol Hill when something's gone wrong, a snowstorm, a canceled flight, or an angry customer on the evening news. | ||
| So let me start by thanking you for inviting me under better circumstances. | ||
| Again, I'm Barry Biffle. | ||
| I'm the CEO of Frontier Airlines. | ||
| At Frontier, we have a simple mission, make flying affordable, greener, and more accessible for the average traveler. | ||
| We're a low-cost carrier, which means we don't rely on fancy lounges or first-class suites. | ||
| What we offer is safe, reliable, and affordable way for Americans to travel. | ||
| Today I want to speak very seriously about a few issues and the first one I want to talk about is gate access and how that impacts competition. | ||
| Air travel is not just about getting from point A to point B, it's about opportunity. | ||
| The ability for a family in a small town to take their kids to Disney or for a student to jump on a trip home for the holidays. | ||
| Competition makes all that possible. | ||
| History shows us that when low-cost carriers like Frontier enter market, fares go down, sometimes 20, 30, even 40%. | ||
| Customers win. | ||
| The legacy airlines, United, Delta, American, have grown traffic just 6% since 2000, while raising fares over 40%. | ||
| By contrast, low-cost carriers have grown traffic by 152% with only a 10% increase in fares. | ||
| That's competition at work. | ||
| So the question before us is not whether competition works, it's whether new competitors are allowed to compete at all. | ||
| And that's what brings me back to gates. | ||
| In our industry, the gate is the front door. | ||
| You can have the planes, pilots, fuel, and crews, but if you don't have the gate, you don't get to play. | ||
| Right now, too many of those gates are locked up by a handful of big airlines. | ||
| Across the country, we see fortress hubs, airports with a single airline controlling 60, 70, 80% of the gates. | ||
| This kind of dominance doesn't give carriers pricing power. | ||
| It gives them control of who gets in and out of the market. | ||
| Here's the kicker. | ||
| Many of these gates are not even fully used. | ||
| Dominant carriers hold them. | ||
| They sit on them and block competitors from coming in. | ||
| Meanwhile, customers in these cities pay higher airfares and have fewer choices as a result. | ||
| To put in everyday terms, if McDonald's leased every street corner in a town, set up one restaurant and left the other corners empty, then told Burger King and Wendy's they weren't allowed to open shop, that's not a free market. | ||
| That's protectionism with fries on the side, supersized. | ||
| And that's what we have in the United States airline industry. | ||
| The results are predictable and harmful. | ||
| Fortress hub cities, fares, and higher competition is limited. | ||
| Travelers in Atlanta, Newark, Dallas, and other concentrated airports routinely pay more than their counterparts in competitive markets. | ||
| So when gates are locked up, it isn't just a headache for the airlines like mine. | ||
| It's a tax on the traveling public. | ||
| Moreover, the single largest disruption to our airline beyond weather and air traffic control is gate holds caused by obtaining gate, not getting gate access. | ||
| Our daily flights per gate can be double that of most big airlines. | ||
| However, the inefficient of allocation of gates often results in our diminished on-time reliability and otherwise preventable cancellations. | ||
| The subcommittee has an opportunity to fix this. | ||
| I want to suggest a few practical steps. | ||
| We need to use it or lose it rules. | ||
| Airlines should not be allowed to hold preferential gates indefinitely without using them. | ||
| If you don't use the gate efficiently, you should be required to give it up to another carrier who can. | ||
| Should be measured monthly and held to account. | ||
| Common use requirements. | ||
| When you build a new gate, at least a third of those gates should be available for common use. | ||
| That means anyone could come in, not just the incumbent, and provide competition. | ||
| And we also need DOT enforcement authority. | ||
| The DOT should be empowered to step in when dominant carriers hoard all the gates and block competition. | ||
| They already play a role in slot allocation. | ||
| They should do the same thing with gates. | ||
| And again, it should be done monthly. | ||
| And there should be transparency in lease arrangements. | ||
| Right now, gate leases can stretch decades, locking out new entrants. | ||
| We should require clear reporting and accountability. | ||
| These changes wouldn't cost taxpayers a dime, and they don't require subsidies or bailouts. | ||
| They just open the door literally for competition. | ||
| I know some may say, well, fortress hubs bring benefits, more flights, destinations, but the evidence is the opposite. | ||
| Once one airline dominates, there's nothing there. | ||
| But look, I think there's more to this than just gate access. | ||
| There's loyalty programs that are subsidizing their basic economy, which enables them to dump low prices out there. | ||
| Even you had the CEO of United Airlines saying recently that he allows carriers like us to carry traffic. | ||
| That's an interesting comment that we get what they allow us to carry. | ||
| So they should look into that. | ||
| And then the same thing on REACOM agreements. | ||
| We should look into those because those are also harmful. | ||
| I want to thank everybody for having us, and we look forward to discussing things we can do to help with competition. | ||
| Thank you very much. | ||
| Mr. McKee. | ||
|
unidentified
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Chair Lee, Ranking Member Booker, Ranking Member Durbin, and members of this subcommittee, thank you for hosting this hearing today. | |
| My name is William J. McGee, and I'm the Senior Fellow for Aviation and Travel at the American Economic Liberties Project, a nonprofit organization dedicated to addressing the problems of concentrated economic power. | ||
| Over the past 40 years, I've worked in airline flight operations as an FAA licensed aircraft dispatcher and then as an aviation journalist and author. | ||
| Since 2000, I've been an airline passenger advocate. | ||
| The industry I entered 40 years ago no longer exists. | ||
| It has been destroyed by deregulation and a lack of competition. | ||
| When Congress passed the Airline Deregulation Act of 1978, it did so with the intention of, quote, placing maximum reliance on competition, quote, avoidance of unreasonable concentration, and, quote, encouragement of entry by new air carriers. | ||
| By its own aims, deregulation has failed. | ||
| U.S. carriers are more concentrated than ever due to decades of lax antitrust enforcement and the failed experiment of deregulation. | ||
| Consolidation is rampant. | ||
| Competition has all but disappeared. | ||
| What was once a vibrant industry is now led by an oligopoly of four airlines, American, Delta, Southwest, and United, controlling 80% of the market. | ||
| They have immense pricing power, with a smattering of smaller low-fare airlines offering only limited alternatives. | ||
| Neither size carrier has a long-term sustainable business model. | ||
| How do we know? | ||
| Mergers and bankruptcies have both been commonplace since 1978. | ||
| Numerous airlines have had to merge, go bankrupt, or get American taxpayer-funded bailouts to survive. | ||
| Across nine hubs nationwide, the three biggest airlines control 70% or more of all flights, including in Newark, Minneapolis, and Salt Lake City. | ||
| In Charlotte, American dominates 88% of departures. | ||
| Since 2007, only two new entrants have emerged, marking the longest dry spell in history. | ||
| Despite claims from the industry that there's competition between carriers, the DOT's quarterly airfare reports suggest the three largest airlines, American, Delta, and United, have virtually ceased to compete against each other on price. | ||
| The few remaining low-fare airlines, Allegiant, Avello, Breeze, Frontier, and Spirit, are the only meaningful source of pricing discipline, keeping fares on average 21% lower on the routes where they compete. | ||
| The big four thwart competition through myriad means, including fortress hubs, global alliances, devalued frequent flyer programs, branded credit cards, predatory pricing, and more. | ||
| Consumers and entire communities nationwide are worse off due to airline consolidation. | ||
| Passengers are left with higher fares, fewer non-stop destinations, and fewer flights. | ||
| And workers have fewer rights and have lost jobs. | ||
| Airlines abuse their customers without consequence, whether it's inflicting physical violence on passengers after overbooking seats or charging them to sit next to toddlers. | ||
| Major hubs were closed in cities as large as St. Louis and Raleigh-Durham. | ||
| These closures hit smaller and rural communities particularly hard. | ||
| While committing these harms, airlines do whatever they can to avoid oversight and regulation. | ||
| For example, they often ignore DOT tarmac limitations, which can leave passengers stranded for hours. | ||
| Today, the largest airlines want even more deregulation at the expense of passengers. | ||
| In May, Airlines for America, representing the largest carriers, filed a 93-page comment requesting that DOT weaken or eliminate most passenger protections, including fee transparency, cash refunds, flight disruption compensation, and family seating policies for kids under 13. | ||
| Two days later, DOT issued a deregulatory agenda that looked copy-pasted from Airlines for America's wishlist. | ||
| Given this regulatory peril, it's imperative Congress step in. | ||
| This subcommittee should consider the following proposals, which would directly address the concerns of passengers, workers, and local economies. | ||
| First, we applaud Senator Hawley for co-sponsoring the Airport Gate Competition Act. | ||
| This is common sense legislation. | ||
| It would promote competition by ensuring access to critical airport infrastructure for smaller airlines. | ||
| Second, Congress should eliminate federal preemption, which has blocked state courts, legislatures, and attorneys general from any airline oversight since 1978. | ||
| Third, large institutional investors often pursue stakes in all four of the big four carriers, reducing their incentives to compete. | ||
| It's time to restrict common ownership in more than one domestic airline. | ||
| Fourth, Congress should require the FAA to prevent the majors from thwarting low-fare competition at congested airports. | ||
| Takeoff and landing slots shouldn't be bought, sold, or traded by carriers. | ||
| In conclusion, the failures of deregulation and consolidation have made it clear that new and sensible approaches to regulation are long overdue to protect consumers, enhance competition, and ensure access for smaller airlines. | ||
| Your constituents will tell you the truth. | ||
| Flying today is a miserable experience. | ||
| It wasn't always this way. | ||
| It doesn't have to be this way. | ||
| We're at an inflection point. | ||
| Congress needs to investigate the failures of deregulation and, just as it did 50 years ago, hear from the public, not just airline executives and their lobbyists. | ||
| Thank you, and I look forward to your questions. | ||
| Thanks so much. | ||
| Ms. Pinkerton. | ||
|
unidentified
|
Thank you so much for the invitation to testify today. | |
| Today, more people are flying than ever, and for good reason. | ||
| Fierce competition between airlines has brought us bargain airfares and a vast array of flight options. | ||
| But it hasn't always been like this. | ||
| Before the 1978 Deregulation Act, fewer than one in four Americans had been on a plane. | ||
| And that's because the government controlled prices, schedules, and routes. | ||
| That government one-size-fits-all approach resulted in flying being a luxury that only the wealthy could afford. | ||
| In contrast, today, 90% of the American public has flown. | ||
| That is competition in action. | ||
| Freeing the marketplace from government command and control has literally democratized air travel in this country. | ||
| We can measure the state of competition in our industry using three metrics. | ||
| Price, diversity of options, and customer service. | ||
| First price. | ||
| Affordable airfares are ubiquitous. | ||
| Just yesterday, I got an email from one of our carriers offering a $39 fare. | ||
| All airfares, including ancillaries, are at historic lows. | ||
| That's the data. | ||
| The price of an average domestic ticket back in 1977 was about $800. | ||
| Today, it's 450% less. | ||
| Now, we all know, in contrast, what's been happening with the Consumer Price Index. | ||
| You mentioned it, Senator Booker. | ||
| The Consumer Price Index over the last year has been up 23% in all categories except one, airfare, that's gone down. | ||
| In a world where inflation is hitting food, housing, medical expenses, and other essentials, the low cost of air travel is a noticeable and positive outlier. | ||
| And frankly, much of that is due to the lower cost carriers. | ||
| That gets me to my second metric, the availability of diverse options. | ||
| Over the last few decades, the lower-cost carriers have indeed been a major engine of growth in our industry. | ||
| They have taken market share away from the global network carriers. | ||
| And as a result, today, the lower-cost carriers carry almost 50% of domestic traffic in this country. | ||
| It's important to know that the data show that the number of competitors per origin and destination city pair in this country has increased since deregulation. | ||
| Increased. | ||
| Now, part of that is due to the fact that we've had new entrants join the fray. | ||
| Breeze Avello joined in 2021. | ||
| And in fact, Breeze just announced last week that they're going to be providing international service next year, which is an indication that just like the way the domestic market has transformed, the international market has been transformed through the pursuit of open skies agreements that open up foreign markets. | ||
| The third metric is customer service. | ||
| Our carriers have been investing record-breaking amounts in innovations in order to elevate the customer service that they provide. | ||
| They're investing in tech and physical infrastructure. | ||
| They're improving their IT systems, mobile apps, lounges, loyalty programs, bigger overhead bins, and faster Wi-Fi on planes, just to name a few things. | ||
| And it's working. | ||
| Again, back to the data, independent survey after survey shows that customer satisfaction is high. | ||
| Not perfect, but good. | ||
| Given the incredible logistical complexity of carrying 2.7 million people every day safely on 27,000 flights, we are proud of the fact that the vast majority of Americans continue to give high marks to airlines in their airline travel experience. | ||
| Given the robust state of competition, we do have a threat to competition. | ||
| The biggest threat is our short staffing and our antiquated air traffic control system. | ||
| You don't need to look any further than the tragedy at DCA, the outages in the northeast of the FAA equipment, and at DFW last week as evidence of the pitiful condition of our air traffic control system. | ||
| That's why we are deeply appreciative that Congress has approved the $12.5 billion down payment on Secretary Duffy's air traffic control plan. | ||
| But frankly, it can't come soon enough. | ||
| As you know, we are flying 10% fewer flights and have been for two years out of the major New York and New Jersey airports. | ||
| Now, flying less is bad for big airlines, it's bad for small airplanes, airlines, but it's the worst for customers because it robs them of options. | ||
| So while the state of competition is strong, demand is also strong, by the way. | ||
| TSA has had eight of their 10 busiest days this year. | ||
| We do think Congress needs to take action. | ||
| We urge you to support a new air traffic control system that will be safer, will allow for increased flying, and give customers even more choice. | ||
| Thank you. | ||
| Thank you. | ||
|
unidentified
|
Professor, Senator Robin, you Chairman Lee, Ranking Member Booker, and members of the subcommittee, thank you for the opportunity to testify on the state of competition in the airline industry. | |
| My name is Ganesh Sitaraman. | ||
| I'm a professor at Vanderbilt University and the New York Alumni Chancellor's Chair in Law. | ||
| I also direct the Vanderbilt Policy Accelerator. | ||
| I'm the author of a textbook, Networks, Platforms, and Utilities, which covers the transportation sector, among others, and a popular book called Why Flying is Miserable and How to Fix It, which offers a history of airline regulation and deregulation. | ||
| I've also co-authored some white papers on this topic as well. | ||
| My testimony today draws on this scholarship, and it represents my personal opinions, not the views of Vanderbilt University. | ||
| Air travel is one of humanity's extraordinary achievements, and it has become essential to modern life and commerce. | ||
| The people who work in the industry, from baggage handlers and customer service representatives to air traffic controllers, flight attendants, and pilots, do us all a great service in making air travel possible. | ||
| I believe it is essential that we have an air transportation system that is stable and resilient, that is competitive, that provides access across the country, and that treats passengers fairly. | ||
| Regrettably, I do not think we are meeting that standard today. | ||
| First, stability and resilience. | ||
| The airline industry suffers from cycles of boom and bust with dozens of bankruptcies and repeated taxpayer bailouts. | ||
| Second, competition. | ||
| The airline industry is less competitive and more consolidated than in the past. | ||
| At some hub airports, a single carrier can now have 60%, 70%, 80% market share. | ||
| More broadly, the four biggest airlines today have a larger market share than they did in 1977. | ||
| This is an astonishing fact. | ||
| We have more competition, sorry, less competition today than we did during regulation. | ||
| Third, geographic access. | ||
| Smaller communities and mid-sized cities are losing service. | ||
| Big carriers abandoned dozens of cities during and after COVID-19. | ||
| Airports that once had multiple airlines and daily flights now struggle. | ||
| Some places like Cheyenne, Wyoming, have been forced to agree to subsidize highly profitable airlines to ensure they get even a minimum level of service. | ||
| And fourth and finally, there's a thing everyone knows, and that is that the passenger experience is often miserable. | ||
| Seats are smaller, fees have proliferated, pricing is getting more complicated and less transparent, connections to giant hubs are stressful, and of course, less competition and limited service make it all worse. | ||
| So my message to the subcommittee is this. | ||
| The airline industry is not resilient enough. | ||
| It is not competitive enough. | ||
| It is not serving the public or national interest well enough. | ||
| Addressing the problems in this sector requires understanding how we got here. | ||
| And in my written testimony, I describe the history of this sector and some of the dynamics that create a tendency toward consolidation and concentration. | ||
| The key lesson from this history is that without pro-competitive, pro-resilience, pro-growth, and pro-passenger rules, this industry will never meet the high standard our country needs for this critical infrastructure. | ||
| But I come with good news too, and that is that you have it in your power to fix flying. | ||
| On stability and resilience, you could require airlines to develop resilience plans or rainy day funds. | ||
| On competition, you could expand access to gates and reduce hub concentration. | ||
| On geographic access, you could adopt a draft pick plan as the one I've proposed so bigger airlines will serve small cities at affordable prices. | ||
| And you can improve the passenger experience by setting minimum seat sizes, making it cheaper for parents to fly with infants, preventing AI-enhanced personalized and dynamic pricing, and giving passengers the ability to sue airlines when they engage in abusive practices. | ||
| In short, flying might be miserable today, but it doesn't have to stay that way. | ||
| Thank you for holding this important hearing. | ||
| I welcome your questions, and I look forward to working with you to ensure the United States has an airline industry that meets our national needs and that is thriving, stable, and competitive. | ||
| Thank you very much. | ||
| Mr. Anderson, let's start with you. | ||
| We're now going to go through five-minute rounds alternating between Republicans and Democrats in order of seniority subject to the early bird rule. | ||
| Allegiant frequently operates in a way that connects smaller airports to, among other things, vacation destinations. | ||
| I know a lot of your routes pretty well because you're courteous enough to fly out of Provo Airport, and that's where I live, and it's fantastic. | ||
| And you happen to fly to a couple of cities where my adult children live, and so that's very helpful. | ||
| But very often, you're connecting these smaller airports to vacation destinations or places where they otherwise need to travel. | ||
| What headwinds have you had as a smaller, more low-cost carrier in trying to gain scale within that market? | ||
|
unidentified
|
Senator Lee, thank you for the question. | |
| We're really proud of Allegiant and the model that we've developed and invented over the years. | ||
| As you mentioned, we provide small and medium-sized communities service. | ||
| We serve more cities than nearly any other carrier in the United States, and that's at low fares and nonstop. | ||
| That's the value that we provide. | ||
| And we feel we have the opportunity to continue to grow our model and expand our service to other like communities. | ||
| And to your specifically your question, some of the barriers that we have faced, I mean, when you think about just typical costs and are we able to stimulate demand in a particular market, but outside of that, we're looking for ways to be more efficient, and we're really excited about some of the measures that we've seen from like the ATC modernization program. | ||
| We think that will help for Allegiant to continue to expand its service. | ||
| We also think the gate access bill, items like that, where we can go into these destination airports and have more of an opportunity to connect smaller and medium-sized communities into those larger airports. | ||
| Right. | ||
| And gate limitations often impose burdens for an up-and-coming, you know, a new market entrant. | ||
| By the way, Laura, on that topic, during the COVID pandemic, the U.S. government Congress doled out, I think it was about $54 billion to the industry as a whole. | ||
| Did that, how did that impact market share or your ability to break into the market? | ||
| Did that have an impact on your ability to gain market share or did it diminish it? | ||
| No effect? | ||
|
unidentified
|
Thanks for the question, Senator. | |
| I would say I was the CFO at Allegiant during the time of the pandemic, and it was a challenging time and very appreciative of the CARES Act funds that were provided to airlines during such time. | ||
| Given Allegiant's unique model and the communities that we serve, actually during the pandemic, there was a period of time where we were the fourth largest carrier in the United States. | ||
| I want to say it was May of 2020. | ||
| But overall, we We're able to navigate the pandemic, I think, relatively as well as anybody. | ||
| And we appreciate the support that the government and leadership that the government played at that time. | ||
| Great. | ||
| Mr. Biffle, some more questions. | ||
| What headwinds have you faced at Frontier as you've tried to gain scale within the market? | ||
| Yeah, thanks. | ||
| Thanks. | ||
| Look, we've faced all types of issues with scale. | ||
| I mean, obviously, the gates that I mentioned is a major factor. | ||
| Also, and I mentioned to REACOM, you know, prior to all the consolidation, it was common practice, as it is most parts of the world, until consolidation of the United States, where, you know, if I cancel a flight or someone else cancels a flight, we would take those customers at whatever they paid if their seats left last minute so that people aren't convenienced. | ||
| It was kind of an inconvenience. | ||
| So it helps. | ||
| So that hurts experience. | ||
| But one of the big things on scale beyond the gates is actually just the loyalty programs. | ||
| When you look at the subsidization that is going on of the big credit card companies to the big airlines, it's massive. | ||
| And it exceeds in almost every case of the big airlines all their profits. | ||
| And they're using those profits to actually subsidize basic economy. | ||
| So you're taking credit card interchange and interest rates, subsidizing basic economy, allowing them to dump cheap prices and compete for the loyalty programs and the credit card programs. | ||
| Yeah, I mean, if they didn't have this massive subsidy that they're getting from that, they wouldn't be able to flood the market and dump prices like that. | ||
| I mean, you're creating an economic situation that is completely driven by their size and scale. | ||
| And once you get to a dominance, I mean, he mentioned, I guess it was Charlotte, 88%. | ||
| Your problem is if you're in Charlotte, you're kind of beholden to them. | ||
| You have to play the game. | ||
| But it's the biggest dupe on those people, too. | ||
| I mean, the odds of them getting upgraded, when they look on their upgrade list, they're probably number 76 on the upgrade list. | ||
| They're never going to get upgraded to first class. | ||
| So a carrier like us, I mean, our elite customers, 80% get upgraded, 80% get upgraded to our European business class upfront plus product compared to the big guys. | ||
| I offer better value, but I just don't get the scale because they're able to subsidize it with these credit card programs. | ||
| Right. | ||
| And that is one of the inevitable realities of this industry or any other industry where there is a network effect. | ||
| Bigger your network, the bigger the draw, the more capable you are of having a credit card program or a rewards program that allows you to do that. | ||
| Yeah, and so when you get into the position, you control the gates, you control the REACOM, you control the ability to be on time. | ||
| I mean, you control the ecosystem with the loyalty. | ||
| I mean, it's pretty rigged. | ||
| Okay. | ||
| I see my time is expired. | ||
| I've got a lot more questions. | ||
| We'll hope to do multiple rounds today. | ||
| We'll turn next to Senator Booker. | ||
| I'm going to do the prudent thing and defer to the ranking member of this committee who has a lot of power and authority over me. | ||
| Oh, the power of this committee. | ||
| Thank you very much, Corey. | ||
| It's great to be with you all. | ||
| And I was just sitting here jotting down. | ||
| I've been in Congress for 43 years, 50 round trips a year, 2,000 flights, millions and millions of miles. | ||
| Maybe this is my subspecialty that I've developed over the years. | ||
| But I do find a couple things interesting. | ||
| First, I want to shout out to Northwest Orient Airlines, long gone, the only airline that publicly supported my effort to ban smoking on airplanes. | ||
| Air Canada had already done it, but the majors would not. | ||
| They were afraid to take the heat. | ||
| And they were glad when it finally passed. | ||
| But the thing that I found interesting, Mr. Biffle just referred to it in his answer to Senator Lee's question, is one element that I'd like to discuss for a moment. | ||
| When they've got us in our seats with all the safety warnings and God bless the flight attendants, I love them all, and they got you buckled up and things have quieted down in the cabin. | ||
| What do you hear over the microphone? | ||
| A pitch for a credit card. | ||
| And then next thing you know, the flight attendants who are focused on safety are walking the aisles trying to pass out brochures. | ||
| Why? | ||
| You've said it. | ||
| For many airlines, there's more money made on the rewards and loyalty program than on air operations. | ||
| In fact, these planes are flying banks with fees and mastercards in them. | ||
| And the airlines make their money off of the loyalty programs. | ||
| What percentage of airline travelers participate in a loyalty program? | ||
| Any idea, Mr. Biffle? | ||
| I don't know the national average, but I can tell you that dollars per passenger. | ||
| I mean, we have a program ourselves, but it's a few dollars a passenger. | ||
| The big airlines are $25 to $40 a passenger is generated from credit card revenue. | ||
| It's massive. | ||
| 82%. | ||
| Airline passengers participate in a loyalty program. | ||
| Oh, sure. | ||
| What kind of regulation, kind of law is there that regulates the frequent flyer programs so that the airlines can't just dump your miles that you accumulated over years and years? | ||
| That's a trick question. | ||
| There is none. | ||
| Yeah. | ||
| So I introduced a bill called the Protect Your Points Act, which just answers the basic questions. | ||
| I'm going out of my way to save up all these frequent flyer miles. | ||
| Are they worth anything? | ||
| Can they cancel them all tomorrow? | ||
| Do they owe me anything? | ||
| Are they having any value to them? | ||
| For a lot of people, this is a big investment. | ||
| They make a decision on when and whether they're going to travel based on whether they can use miles or win miles in the process. | ||
| What does it do to your competition with Frontier? | ||
| Well, it helps us to a degree, but it harms us in that we just don't have the scale, right? | ||
| So if I had access to the big airlines' networks, the same credit card someone used would get them more places they could fly, as an example. | ||
| We are doing things to innovate, like we're introducing a first-class seat so people can get upgrades and so forth. | ||
| But again, I just don't have the scale. | ||
| So I don't get that benefit. | ||
| Again, having I made the comment a while ago, people will get much more value from my card, but I'm small, so it's hard to convince people and market it. | ||
| Once you get into that behemoth status, it's hard to stop that kind of momentum. | ||
| I've learned the hard way what it takes to get your name and lights at DCA just to introduce a bill that addresses the interchange fee and the swipe fee on credit cards. | ||
| And they'll have a sign that says stop the Durban-Marshall Amendment. | ||
| Do you have any idea what the interchange fee is that you are collecting or paying? | ||
| It depends upon the network, but we pay as little as 200 basis points as high as 300, depending upon who it is. | ||
| American Express is one of the highest. | ||
| Obviously, the major airlines look at my bill with Senator Marshall like the devil hates Holy Water. | ||
| The idea that there would be some competition on the swipe fee or interchange fee, and that's to the benefit of consumers, ultimately, if we can do it. | ||
| I'd like to ask you as well: when you look back over time, you've been involved with a number of airlines on this safety issue. | ||
| Can you make any comment on the pilots and the availability of them and the shortages in pilots that we're running into with many airlines? | ||
|
unidentified
|
Sure. | |
| So fortunately, the pilot shortage that we had a few years ago has now kind of dissipated. | ||
| It could come back at some point. | ||
| I think the main concern we should have with pilots is the availability of quality training and so forth. | ||
| And there's a lot of data-driven things that we can do and simulations that can get them there. | ||
| And I think we should spend time looking at the data we have even once they're on the line. | ||
| And because you've got FOCWA data as an example, where you can monitor bad habits of some versus others. | ||
| I mean, we can, in every one of these incidents, take the Colgan incident and many of the others, there were plenty of predictors. | ||
| Had you been following those pilots before, you would have seen that these habits were there before. | ||
| And so a simple 1,500 arbitrary rule is not how you get it. | ||
| There are data-driven approaches that you could do to improve safety with pilots. | ||
| Thank you. | ||
| Thanks, Senator Brooks. | ||
| Senator Hawley will be up next. | ||
| We've had a couple of question rounds in there. | ||
| We've had some focus by the smaller companies. | ||
| Ms. Pinkerton, if you wanted to respond to the smaller carriers before we turn to Senator Hawley, I'd be happy to let you fill in here. | ||
| If not, we'll catch you in subsequent rounds. | ||
|
unidentified
|
No, I'm happy to address the gate access issue. | |
| For example, that is certainly something, you know, A4A represents large carriers and some smaller ones, and we've heard from smaller carriers about gate access issues. | ||
| I think, though, it's important to remember, number one, it's the law that airports must provide access to new entrants. | ||
| And there are a number of mechanisms that enable that to happen. | ||
| So if you're going to take a federal grant, you have to provide access. | ||
| Many airports are required to file a competition plan where they have to spell out exactly how they are going to provide access. | ||
| And then Mr. Biffle mentioned the lease agreements. | ||
| Lease agreements are another tool that airports have to ensure that new entrants have access. | ||
| In fact, there are already use requirements so that carriers cannot sit on gates that aren't utilized. | ||
| If they do that, the airport is well within their rights to take that gate back. | ||
| I think what's important here is that the FAA should be providing oversight to airports to make sure that they're enforcing the law that exists. | ||
| And then if the FAA isn't providing that oversight to airports, I would say Congress needs to provide some oversight to FAA. | ||
| Senator Hawley. | ||
| Thank you very much, Mr. Chairman. | ||
| Thanks to all the witnesses for being here. | ||
| Mr. Biffle, if I could just start with you. | ||
| About nine months ago, your chief commercial officer testified to me that Frontier pays its gate agents bounties to stop paying customers from carrying bags onto the plane. | ||
| Is this still happening? | ||
| Not at the rate it was. | ||
| We changed. | ||
| Oh, wait, wait, wait, wait. | ||
| What does that mean? | ||
| So are you still paying your gate agents to stop your customers from carrying bags on? | ||
| You were paying them at least 10 bucks every time you'd stop a paying customer from carrying on a bag, your gate agents to get paid for it. | ||
| Is that still happening? | ||
| We do offer incentives and commissions to stop people who didn't pay, not who paid, who didn't pay. | ||
| No, you are paying your gate agents, so it sounds like you're still doing it. | ||
| You're still paying them money to harass customers from bringing bags onto the airline by saying it's too big or it doesn't fit in a little box or whatever the case may be. | ||
| You're still doing it. | ||
| That's your testimony today. | ||
| Why? | ||
| I don't know that I would describe it that way, but we do provide incentives. | ||
| Why would you pay your own employees to harass your customers? | ||
|
unidentified
|
Why is this good business practice? | |
| Unbundling enables us to offer low fares. | ||
| And the lower fares, many people could not afford to fly if they didn't have the lower fare option. | ||
| But in order for the system to work, everyone has to be treated fairly. | ||
| And when people then, a small percentage. | ||
| Wait a minute. | ||
| Why are you paying your agents? | ||
| This is going to be the only business in the world I have heard of that pays your people to harass your own customers. | ||
| These are customers who have purchased a ticket. | ||
| They have a carry-on bag and you're paying your people at the gate to stop them and say, your bag is not quite right. | ||
| It doesn't fit in this. | ||
| We heard testimony. | ||
| The Permanent Select Committee in the Senate has done a thorough investigation of this. | ||
| We heard testimony from numerous of your customers saying they were wrongly stopped and harassed. | ||
| There's no appeals process. | ||
| There's nothing. | ||
| You're making gobs of money on it. | ||
| You generated $40 million in fees on this according to your own data. | ||
| That's amazing. | ||
| And you're still doing it. | ||
| I mean, in what world is this defensible? | ||
| It's fair. | ||
| It's fair to whom? | ||
| Well, you continue to insinuate that they paid for their bag and they did not pay for it. | ||
| They paid for a ticket that allows them to have a carry-on bag and you're paying your agents to harass them to stop them from carrying it on. | ||
| You know, only other one other airline I know of, Spirit, was doing this, and they stopped because they said it was a terrible experience for the customers. | ||
| Your customers hate it. | ||
| This is one of the reasons they hate to fly. | ||
| I can't believe you're still doing it. | ||
| How much money have you made on it this year so far? | ||
| Considerably less, if you'll let me speak. | ||
| What we did is we introduced the new frontier. | ||
| We have very simple branded choices, complete transparency. | ||
| Wait a minute. | ||
| Wait a minute. | ||
| How much, first of all, you're not a victim here, Mr. Biffle, okay? | ||
| You are making billions of dollars and you are treating your customers appallingly badly. | ||
| And the fact that you are still paying your employees to harass your own customers, I think, frankly, is unconscionable. | ||
| I said this nine months ago. | ||
| I thought for sure it would have stopped by now, but I can't believe you're still doing it. | ||
| So I don't feel sorry for you one little bit. | ||
| In fact, I think you should apologize right now to all of your customers for what you're doing to them. | ||
| And I think you should turn around and give them back the money that you've taken by forcing them to surrender their bags and pay extra fees after they've already paid a price. | ||
| I mean, I just, I don't get it. | ||
| You seem to be totally baffled by this. | ||
| You think that this is just fine? | ||
| I'm not baffled. | ||
| I think it's you're you're insinuating that they paid for a bag that they didn't pay for. | ||
| No, I'm insinuating anything. | ||
| I'm accusing you, actually, of doing something that I think is wrong, of incentivizing your own employees to treat your customers badly. | ||
| And the money you're making on it is astounding. | ||
| Just astounding. | ||
| $40 million in fees. | ||
| 62% of your revenues come from these ancillary fees, of which these additional baggage fees are part of it. | ||
| And you just seem to see nothing wrong with this. | ||
| I mean, do you not understand that? | ||
| This is why people hate to fly. | ||
| They hate that they are treated terribly when they go to the airport by airlines. | ||
| And you're paying your own people to do it. | ||
| Do you want to say anything to your customers or to the flying public? | ||
| I think we've made huge progress in this area this year. | ||
| We have introduced, as I started to say, we've introduced an economy product. | ||
| That product is for $20 to $30, gives you free change fees, free seat assignment, carry-on bag. | ||
| The persons that you're discussing are the people who bought a basic product, not that product, and they didn't pay for it. | ||
| Will you commit to quit paying to quit giving incentives to your employees to stop customers and take their bags away? | ||
| Will you stop that? | ||
| Your other airlines have done it. | ||
| Your competitor airlines, your peer airlines. | ||
| Will you commit here today to stop paying your employees to harass customers? | ||
| Can I ask a question? | ||
| I'd like an answer to mine first. | ||
| We will look at that, but I don't. | ||
| That doesn't sound like a yes or a no. | ||
| Can you just say, yes, we will stop paying our gate agents to harass our own customers over their bags. | ||
| We are not harassing customers. | ||
| Yes, you are. | ||
| And I invite you to read the report by the permanent select committee of this body that investigated this and took testimony from your customers. | ||
| Indeed, we took testimony from your own executives on this. | ||
| This is a reality. | ||
| Or, alternatively, you could go out to DCA here and go and ask some of your customers how they feel about it. | ||
| I know what they'll tell you. | ||
| They'll tell you what they told us. | ||
| They hate it. | ||
| They feel badly treated. | ||
| They feel like they're treated like cattle. | ||
| And you're making tens of millions of dollars off of it. | ||
| And I just think that's wrong. | ||
| I just think it's ridiculous. | ||
| I've got a lot more questions for you, but I know other people want to ask questions. | ||
| Thank you. | ||
| Senator Booker. | ||
| Mr. Professor Sitter Raman, first of all, my tone will be different than Senator Hawley's, but the same energy. | ||
| I want to bring that to you for that hair, the same negative energy there, sir. | ||
| I just want to stipulate that for the record. | ||
| Okay, are you ready for me? | ||
|
unidentified
|
I'll trade you an inch of hair for an inch of height if we can make that deal. | |
| We might have a deal. | ||
| We might have a deal, sir. | ||
| Okay, now I see I'd like permission to treat the witnesses hostile. | ||
| Sir, I'm really concerned about Americans who don't have access to air travel because of where they live. | ||
| And I want to know how can we ensure that millions of Americans who don't live around major cities can have access to reliable, efficient flights and that the airlines themselves stay flow. | ||
| Can you give me your perspective on that? | ||
|
unidentified
|
Well, thanks, Senator. | |
| I agree. | ||
| This is a big problem. | ||
| And I think the core thing to start by understanding is why this happens. | ||
| Why are small cities, why are mid-sized cities losing air service? | ||
| And I think there's really two reasons behind it. | ||
| The first is that in some places, it is uneconomical to serve. | ||
| The volume of passengers is very small, and it's costly to fly. | ||
| And in those places, it's not going to make sense for an airline to serve unless they get a subsidy or unless there's a requirement, a kind of duty to serve, like we have in other areas of law. | ||
| The second reason is because of consolidation. | ||
| As a number of people have mentioned already up on this witness stand, and as has been mentioned by Senator Lee, this is an industry in which there are network effects, there's economies of scale, and there are barriers to entry. | ||
| And those things create tendencies towards consolidation and concentration. | ||
| And when you have that, there's an incentive for airlines to focus their operations in bigger and bigger cities. | ||
| That's why we have the hubs that we have. | ||
| And that often means de-hubbing certain places or reducing service to others. | ||
| And I think this is a serious problem because we have an airline system that is essential infrastructure for our country. | ||
| And you and your testimony go into that a lot. | ||
| And you speak, actually, I think quite persuasively about the economic benefit to our country as a whole when you ease transportation. | ||
| Roads, we don't not pave roads to areas. | ||
| And you almost say that it should be almost like a utility and that kind of obligation. | ||
| Is that correct? | ||
|
unidentified
|
Yes, that's right. | |
| And if you think about it this way, would you ever start a Fortune 500 company in a city with no air service? | ||
| You wouldn't do it. | ||
| If you were an entrepreneur with a great idea, a kid growing up. | ||
| But we've even seen VC dollars far more. | ||
| If you have a direct from Silicon Valley, VC dollars more. | ||
| That's how vital it is that people won't even necessarily even invest in businesses that don't have that. | ||
| There's a correlation, I should say, maybe not a causation. | ||
|
unidentified
|
And that's why this is basic infrastructure. | |
| And I think that what we want as a country is for people who grow up anywhere to have opportunities. | ||
| But your solution to that is for Congress to act. | ||
|
unidentified
|
Yes, I think that's right. | |
| So the current solution that we have right now I don't think is working, and that's the Essential Air Service Program. | ||
| It provides a subsidy to a number of very small cities. | ||
| But these are very, very small cities. | ||
| And they don't include a number of other places that have lost service in recent years. | ||
| I think one proposal that I've put forward, and these are ideas that I think should be debated, is what I call the NFL draft pick model. | ||
| And the idea is that the biggest airlines would be like the teams. | ||
| There'd be a bunch of cities that would be like the players, and the airlines would have to pick cities that they want to serve and go in order until all the cities are covered and they would have to have affordable access. | ||
| Right, and I'm just going to interrupt you because I want to get one more question before my time, but it is this concern I have about the hollowing out of certain communities because of consolidation. | ||
| We've talked about in the agricultural sector. | ||
| We've seen entire businesses being killed in towns that are the connective tissue of our country. | ||
| And I think this should be one of the things we should be looking at when these towns and communities lose air traffic, they lose economic investment, they lose opportunity, and many times they lose out on what adds, how should I say it, add vibrancy to a community. | ||
| I just want to shift, Mr. McGee, to you really quickly in the remaining time that I have. | ||
| Can you speak to me about an idea that I really believe in, which is this idea of passengers have fundamental rights and what Congress could do to better protect passengers who still often report very bad experiences? | ||
| I think that Senator Holly was scratching at that as well. | ||
| Well, maybe not scratching, but pounding at that as well. | ||
|
unidentified
|
Yes, thank you, Senator. | |
| The fact is the United States lags much of the world in terms of passenger rights. | ||
| This is the standard operating system in the European Union, United Kingdom, Canada, India, countries all over the world, that there are mandatory rights in terms of how you will be compensated when there is a flight delay, a cancellation, mishandled baggage. | ||
| Here in the United States, we greatly allow airlines to police themselves. | ||
| They write contracts of carriage written for and by themselves, and we adhere to them every time we swipe a credit card and buy a ticket. | ||
| Now, the fact is that the irony is the largest U.S. airlines, Delta American United, if you're flying on them and you encounter a problem, a canceled flight or a delay on foreign soil, you will be treated much better than on American soil. | ||
| So if you're on Delta and your flight is coming, you want to be in Brussels, not Atlanta. | ||
| I want to just be respectful of Senator Moody, but I just want to say, because there's so much bipartisan space and I'm not trying to be partisan, but the Trump administration has rolled back some rules that would have given passengers transparency. | ||
| Can you talk about the actual impact for American consumers of that? | ||
|
unidentified
|
It would be devastating. | |
| As I said, we already lagged much of the world. | ||
| But the few existing protections that we have, as I said, Airlines for America issued a 93-page suggestion to the DOT, and unfortunately, it seems like this DOT is adhering to it. | ||
| It would be devastating. | ||
| Right now, they're doing it in a request for further information. | ||
| We and others will be weighing in. | ||
| But we should all be on guard that if you think air travel is problematic now, it will be absolutely awful a year from now if the DOT rolls back the provisions that we already have. | ||
| Thank you, sir. | ||
| Thank you, Mr. Chairman. | ||
| Senator Booty. | ||
| Microphone, and I will say he has more, I'm sure he spends more money on product than you do. | ||
|
unidentified
|
For sure. | |
| You can give me your tips later. | ||
| Thank you for being here today. | ||
| Very important hearing. | ||
| Very important hearing. | ||
| One of the things that we struggle with, I think specifically in the airline industry, is the understanding, as I come at other industries, coming from as Attorney General, one of our big challenges was we had consumer protection laws. | ||
| Many of us had antitrust divisions. | ||
| And when you're approaching mergers, acquisitions, you're always trying to make sure that there is meaningful, true competition, while at the same time, making sure you're never, as a government, selecting the winners in a market. | ||
| Because that in of itself negates meaningful competition. | ||
| And I was very frustrated with a particular case in the sense that we have, for those that don't know, and the American people that may be watching, we have legacy airlines, we have low-cost airlines, and then we have ultra-low-cost airlines. | ||
|
unidentified
|
We have two of our ultra-low-cost airlines with us today. | |
| Is that how you would describe yourself? | ||
|
unidentified
|
Is that your sorry, Senator? | |
| We like to refer to ourselves as value airlines. | ||
| Value airlines. | ||
|
unidentified
|
It is a common term that is used, ultra-low-cost carrier. | |
| So my concern is, once you come into the market as a new player, and you, let's say you come in as a value airline or even a low-cost airline, do you think that you have to stay there for the duration of the existence of your company? | ||
| Just answer either one of you. | ||
| Well, it is not uncommon for airlines to evolve. | ||
| Probably the best example today is Southwest, started out as low-cost, and they're now evolving to offering and suggesting that they may have either other legacy or big network attributes, if that makes sense. | ||
| Yeah, so I was very frustrated under the Biden administration when the Spirit and JetBlue announced that merger. | ||
| And by the next March, Florida came in and looked at that and said very clearly, we can make sure we have better capacity, better flights, ensure competition. | ||
| We announced a settlement. | ||
| This was only probably about six months after the announcement. | ||
| And the next day, DOJ announced they were going to fight and they were going to block that. | ||
| The next day, it showed very differing philosophies on how to ensure competition and ensure that government was not picking winners and losers. | ||
| Very different philosophies. | ||
| And the reason we worked so hard on that settlement and announced that settlement was because we knew that one of those players was in financial jeopardy and this was going to be a way to make sure that consumers could still take advantage of that capacity and it might even present more competition for legacy airlines. | ||
|
unidentified
|
I mean, that would be new, right? | |
| And something we would all want to see. | ||
| And within a year, because the DOJ under Biden fought that, that was blocked. | ||
| And then, of course, what we expected, Spirit filed bankruptcy. | ||
| I think now they're on their second bankruptcy. | ||
| I think I would like to out-ask Ms. Pinkerton, How can we ensure that government is not placing a finger on who wins and loses in competition among airlines? | ||
|
unidentified
|
Well, without addressing, I can't address your specific situation that you're talking about there, but I believe that something that is definitely an issue for all airlines are certainly what we're calling cost convergence. | |
| So we're seeing increased airport costs, we're seeing increased labor costs because we're paying our employees more, and we're seeing increased regulatory costs. | ||
| So I think it certainly wouldn't be tipping scales to say we shouldn't be imposing additional costs on the industry. | ||
| And also, what can we do for the entire industry? | ||
| As I have said in my testimony, I really think a broken air traffic control system and an air traffic controller shortage is the most significant threat to competition because we're flying 10% less today because we don't have adequate controllers and adequate infrastructure. | ||
| So that's our policy suggestion. | ||
| If I had more time. | ||
|
unidentified
|
I have no complaints about the credit. | |
| I do. | ||
| Thank you. | ||
| Since it's so specifically related to antitrust, can I ask our value-based airlines, if in fact you were facing a situation where you were dealing with the financial health of your company and the only way to continue to provide service and capacity was to evaluate merging, | ||
| Do you believe government should work with the stakeholders in order to ensure that you can continue in existence or do you think that they should block you out of some sort of well? | ||
|
unidentified
|
I would say that protection of? | |
| Let's go back to the spirit example. | ||
| Let's go back to the Spirit Jet Blue example. | ||
| Having been around the industry for three decades, I was shocked. | ||
| I mean, we created a system of the big four controlling over 80% of the market and then two of the small players were tried to get together. | ||
| I mean, I found it laughable that anyone would would think that was something that should be stopped. | ||
| In fact, I would argue that all of the other small carriers and just stop and think about this, all of the Non-Big four all together are not as big as one of the big four. | ||
| You should give all of us antitrust immunity like it, like your job should be to say, if I really Want to fix these things. | ||
| What should I go do? | ||
| You should give us all antitrust immunity. | ||
| You should give us not lip service about the gates. | ||
| I'll give you real examples about gates. | ||
| I should tell you about some horror stories about things that have happened this summer in Atlanta. | ||
| I take real exception to being that the answers are that I should be fined or do things when the reality is the system's rigged against us. | ||
| You fix the gates, and I think you need to look for scale things that you could do on the mileage programs. | ||
| Example being, you know, one of the things you could do is give value carriers like us, our mileage programs, access to the big airlines networks at the cost that they charge themselves for miles. | ||
| I mean, there's some real remedies that the government should do to correct what we now all recognize has been bad for consumers, and that's allowing the big four to control the market. | ||
| We had a low-cost airline trying to merge with a value-cost airline so that one could stay in existence. | ||
| And the government said, Nope, we're the government, we're going to block that, and then one had to file bankruptcy. | ||
| I just don't know that that's very resonated with our policymakers or our lawmakers. | ||
| Hopefully, this administration takes a new approach to ensuring true, meaningful competition. | ||
| That's my hope. | ||
| I'm seeing very good signs out of this new administration, but I do think we need to not lose sight of the fact that exactly what I knew was going to happen happened. | ||
| And we can't keep this up if, in fact, we're trying to keep costs low and travel possible for all Americans. | ||
| So, thank you so much. | ||
| So, you could have taken more time. | ||
| The chairman was distracted for a moment by his incredible staffer behind him. | ||
| We were just commenting on how outstanding your questions are. | ||
| All right. | ||
| Ms. Pinkerton, let's go back to you for a minute. | ||
| You noted that air traffic control systems cost the economy about $25 billion annually in delays. | ||
| That's every single year. | ||
| That's nothing to sneeze at. | ||
| That is a significant thing. | ||
| That's, I assume, taking into account the economic cost of people sitting where they would be moving. | ||
| So, what impact do you think the modernization of air traffic control might have on that problem and on the market as a whole? | ||
|
unidentified
|
In fact, I heard Administrator Bedford at the U.S. Chamber a couple of weeks ago say that he thinks the economic benefit-I'm going to get his numbers wrong, | |
| but could be anywhere from almost a trillion dollars over time because you're not just stopping the delays and cancellations, you're building the system and allowing for more growth. | ||
| And as you know, we drive 5% of the GDP, et cetera. | ||
| So, it's, I'll get back to you in his exact numbers, but it is an enormous potential for economic benefit. | ||
| Okay. | ||
| Because otherwise, you're just talking about delays, just delays because of administrative limitations on our ability to interact with PI we're limited or even a shrinking pie. | ||
| Correct. | ||
| We've been forced into that. | ||
| Okay, thank you. | ||
| That's very helpful. | ||
| Mr. Anderson, I want to go back to you for a second. | ||
| In your opening testimony, you talked about some of the benefits of international joint ventures. | ||
| Talk to us about that. | ||
| And, you know, do you see Caribbean, Canada, or Europe as additional markets that could benefit from Value ultra low cost, whatever you want to call this niche of the market, joint ventures going on in that area. | ||
|
unidentified
|
Senator, thank you for the question. | |
| We applied about 1,400 days ago for antitrust immunity with Viva Aeraboos down in Mexico. | ||
| And Mexico is the largest transporter international market. | ||
| And what we were asking for is the ability to scale and size and compete with some of the larger carriers, the international carriers such as the legacy carriers that have these antitrust immunities. | ||
| And so by the immunities in connection with the co-chair, the international co-chairs. | ||
|
unidentified
|
Right, with partners. | |
| For example, well, there's several examples, I think, dozens of them that exist today, international being a very important part of obviously the travel ecosystem. | ||
| What we were looking to do is provide direct non-stop service from those communities that we serve that currently do not have it into some of those Mexican beaches such as Cancún, Cabo, or Puerto Vallarta, and to do it at lower fares. | ||
| And is the biggest impediment, what is the biggest impediment to that? | ||
| Is it regulatory or is it something in the market itself? | ||
| In other words, is there a regulatory reason why it's harder for them to do it or is it just less attractive for them to go to all the work to do it with a smaller carrier? | ||
|
unidentified
|
I think for us, our view is partnering, entering in the international markets such as Mexico for Allegiant, partnering with somebody like Viva who has the know-how and experience in that market, we think will allow us to scale in size and be more successful when we go up against some of the larger legacy carriers in the similar markets. | |
| Is there also a part of the limitation that has to do with the airports that you fly? | ||
| A lot of the airports that you service are not currently international airports. | ||
| Does that contribute to the problem? | ||
| In other words, do you have to have a bigger, do you have to have a presence from, I guess it would be CBP at that airport? | ||
|
unidentified
|
Yeah, not all of our airports, given some of the communities we serve, have FIS clearance, which would allow for clearing customs, but there is a significant number of our airports that do, that we could fly or add direct nonstop service into those Mexican beach destinations. | |
| Okay. | ||
| But that will typically, in order for that to occur on the U.S. end, you'd have to have the involvement of both CBP and DOT. | ||
| Is that right? | ||
| Do both entities have to approve designating something for international flights? | ||
|
unidentified
|
My understanding, and I apologize if I'm incorrect on this, but we are just waiting, or it's for the DOT that would approve. | |
| DOT is the one that improves it. | ||
| Okay. | ||
| Got one other question, and then we'll turn to Senator Plumenthal. | ||
| Mr. Biffle, a moment ago, you took me off guard when you said maybe we should have all airlines, regardless of size, legacy, value, ultra-value, or whatever you call yourselves, should have full antitrust immunity. | ||
| I did not expect that. | ||
| That was not on my bingo card for today's hearing, particularly from a smaller carrier. | ||
| Tell me why you say that and why you think that would enhance the state of competition in the industry. | ||
| Well, I took this hearing very seriously. | ||
| I was flying out last night and I thought about how do you get it where the small carriers can compete with the big four. | ||
| And I came up with a couple of solutions, and I think that's one that would be very powerful. | ||
| I'm not saying antitrust with the big four, I'm saying everybody else should work together to provide a real forcing mechanism to provide competition to the big four, and that would be a great way to do it. | ||
| But if nobody is subject to the antitrust laws at that point, the skeptic would say that's going to foster collusion. | ||
| Well, help me out with it. | ||
| I mean, so a quarter of the market is controlled by one. | ||
| There's three other carriers that are around the 20% mark. | ||
| You've already got 20% being controlled by one entity. | ||
| What's your problem with the small guys controlling 20%? | ||
| I mean, one could argue that moving forward, what that would do with respect to future proposed mergers and acquisitions, I mean, particularly if you're talking about full antitrust immunity from the full panoply of antitrust laws, there's no reason why you wouldn't see even more consolidation than we've had up until this point. | ||
| I don't know if you'd see more consolidation, but you'd see us work together better in airports. | ||
| And you've got, let's take gates. | ||
| You've got finite resources. | ||
| If Greg and I were able to work together, our teams work together on coordinating schedules so that we better mash up our schedules so that we both run a better, reliable operation and fill-in-the-blank city. | ||
| The big airlines get to do that. | ||
| So I'm saying you've got a massive problem in this country where the big four scale is pushing down competition. | ||
| If you want to give us a level playing field, give us a level playing field on the gates, give us a level playing field on competition, give us some kind of remedy to solve against the loyalty in the credit card. | ||
| I mean, that was my other suggestion, is give our credit card customers access to the big networks at the same cost that they book for themselves in their accounting. | ||
| So I'm just giving you real solutions. | ||
| Look, I took it serious. | ||
| You want more competition in the country, and I'm telling you, these are things that are big issues. | ||
| And I would throw you one more that's very low cost, much cheaper than the modernization of ATC and not well understood. | ||
| When you have, look, we're going to have weather, especially in Florida, right? | ||
| And so there's limited corridors and we can modernize, but I don't think a lot of people realize that general aviation can manipulate the ATC capacity. | ||
| So a private jet can actually go in, and when we have a scheduled flight at, say, 11 a.m., I can't file a flight plan for a different time. | ||
| I have to file the flight plan for my scheduled time, right? | ||
| So let's say Mr. Blumenthal has a private jet. | ||
| He wants to fly at 11 o'clock. | ||
| Maybe he does. | ||
| he doesn't but i'm just saying say he did as an example um well what his pilots to somebody's ears Maybe that's someone else. | ||
| But I'm just using an example. | ||
| So his pilots know he wants to go at 11. | ||
| They know there's a three-hour ground delay program. | ||
| Well, his pilots will just file for 8 a.m. | ||
| He shows up at the 11, never knows the wiser. | ||
| They go take off. | ||
| Meanwhile, I have to go through this airspace a couple times a day, and I blow up my crew, and then I have to cancel two flights with a couple hundred people on each. | ||
| 400 people get inconvenienced, so three people could take a private jet. | ||
| And this is happening every day in every major storm event for the Northeast and Florida, and this is what contributes to thousands of customers being canceled. | ||
| And this is why I take real exception to people saying, oh, I should compensate them. | ||
| No, I think the government should step in and look at all the places that I have to cancel a flight. | ||
| Neither one of us ever want to cancel a flight. | ||
| I don't want to harass customers. | ||
| I don't want to cancel a flight, but I want to operate safely. | ||
| There's never a time I'm going to want to inconvenience someone. | ||
| There's generally a reason, and I think what you should look into is why. | ||
| Why would we have to cancel at a higher rate? | ||
| Take Atlanta. | ||
| Let's talk about gates. | ||
| So this summer, true story, I personally got involved. | ||
| We had over 10 flights that had over three-hour tarmac delays, over three, one, five hours. | ||
| I got on the phone personally with the airport control towers in the middle of this event because I was so upset about why we can have this delay. | ||
| I'm on the phone with them. | ||
| We had a medical emergency on a five-hour delay, medical emergency, someone who had a heart issue. | ||
| We got cleared by the tower to go. | ||
| Our plane starts moving towards the gate, and an Alaska plane pulled in front of us and parked at the gate. | ||
| We found out that Delta controls the ramp there, and they had cleared them. | ||
| While we're trying to figure that out, Delta goes and takes another plane at another common use gate. | ||
| This was just happening, and no one else experienced this kind of event. | ||
| But we had a couple thousand customers that experienced over three hours, all because we don't have the same gate access. | ||
| And while all this was going on, and I took real exception to her comment earlier about those rules, Southwest Airlines has four flights per day. | ||
| And during that event, during that event, Southwest gates were open. | ||
| I had customers and employees taking pictures, so I've got people, even including a medical owner. | ||
| They're an area where they have exclusive ownership of the exclusive ownership of the gate, and their minimum use is only four flights a day in Atlanta. | ||
| They can control a gate with four flights. | ||
| And yet, I'm using the equivalent of 10 to 12 flights. | ||
| Anyway. | ||
| Okay, I apologize to Senator Blumenthal. | ||
| I didn't intend to eat up that much time. | ||
| You're off the bat. | ||
| Thank you. | ||
| And I'm going to be, I'll give you all the time you want now, both because I feel bad and I want to ride on your plane someday. | ||
| You know, I always knew I disliked those private planes, and now I know why. | ||
| And just anecdotally, I fly from Hartford to Washington, D.C. pretty regularly, and I fly in the regular, whatever it's called now, class. | ||
| And every other flight, someone will say to me, I thought you guys had private planes. | ||
| And I know that my colleagues from places a lot more difficult to get to than Connecticut wish they had private planes, but we experience the same kinds of travails that your customers do. | ||
| And plainly, we have a lot to learn about how we can improve this system because it sounds like we're often to me dealing with a system that is decades old and we've failed to use the more modern technology on air traffic control, on the gate system, kind of an archaic rubber bands and glue kind of system that we have right now. | ||
| But I want to focus on an area that Senator Hawley, I think, introduced, which seems really top of mind for a lot of flying customers. | ||
| First of all, you know, for a long time, I have fought the consolidation of the airline industry. | ||
| So I'm with you on the level playing field. | ||
| 80% of the market for air travel in the United States is controlled by four giant airlines and the mergers over the last 20 years and having produced this consolidation mean fewer choices for many people, a worse travel experience, and more nickel and dime fees. | ||
| One of them being this bounty system. | ||
| I know Senator Hawley has asked you about it. | ||
| I'm not sure that he had time to finish. | ||
| Last year, the Permanent Subcommittee on Investigations, which I chaired, conducted a year-long investigation of all of the airlines' approaches to these fees and charges. | ||
| And we found that five airlines generated $12.4 billion, well, $0.4 billion in seed fee revenue alone between 2018 and 2023. | ||
| Billions dollars more are collected in the bag fees. | ||
| The subcommittee revealed for the first time the extent that your airline and Spirit had a bag bounty scheme where those airlines, as you know, pay so-called bounty to their employees for collecting bag fees at the boarding gate. | ||
| So first I'd like to know, and I think you answered this, that the practice is continuing. | ||
| What the justification would be, what explanation you would have, but also what can be done about those other fees, the charges for sitting together, family members, | ||
| the charges for the other kinds of services that are provided when the cost for them to the airline is way below what is charged and therefore it is used as a profit or revenue center. | ||
| I'll begin with you and maybe others can answer. | ||
| I'm sorry, so there was a lot there. | ||
| What are the main questions? | ||
| The main question is, why do you continue with a bounty fee? | ||
| Well, so at Frontier, we want to enable the most people to fly. | ||
| We have the lowest costs in the country. | ||
| We actually generate the lowest amount of revenue per passenger. | ||
| So we're giving more consumers the ability to fly than other. | ||
| Unbundling had proven to be very successful in enabling a lower entry price. | ||
| And just like you sell a car, there's cars that you can buy a Tercel that's stripped down or you could buy a fully loaded Cadillac Escalade. | ||
| And so it has been common practice in the world to offer a base model and bundle them back up. | ||
| And so what has happened is that if you have a system like this, if people cheat, it's no different than somebody shoplifting. | ||
| I mean, if they go through, take a product and the other person is charged for it, that's just not fair to consumers. | ||
| But just to stop you there for a moment, I understand the business model, but it seems to me that if you were to raise your prices just ever so slightly, you could compensate for the fees that you charge on the bags. | ||
| And most important, people would know before they got to the gate what the charges would be, because right now they arrive and some agent at the gate figures they can be rewarded, so then someone is charged. | ||
| Well, let me go back. | ||
| So look, I want to be the most friendly. | ||
| We believe we've tried to be the most friendly. | ||
| And I hope we could agree that that would be right. | ||
| So before I answer the question about unintended consequences, so Southwest Airlines earlier this year announced they're going to start charging for bags. | ||
| And we saw this as a major opportunity. | ||
| We thought, my gosh, they've spent billions of dollars to build this brand. | ||
| And, well, gosh, if it was so important, these are things people complain about and so forth. | ||
| Let's do it. | ||
| So we announced that we would adopt free bags, right? | ||
| And quite honestly, I was really hoping it would work for all these reasons. | ||
| I wish they would. | ||
| But you know what we found? | ||
| It worked for a few days and we got a lot of publicity, but ultimately people didn't want to pay us more. | ||
| There's what people say and then there's what they actually do. | ||
| And so I'd love to be as friendly as possible. | ||
| So what we've done, I don't want to pay anyone a bounty. | ||
| And we've cut it way, way down because I've introduced an economy product for as little as $20. | ||
| People are getting a bag, free change fees, and free seat assignments. | ||
| And so with that low price, there's very little cheating going on. | ||
| But the problem is, if you don't have some kind of, I'd love to figure out a way to do it. | ||
| The challenge is that everybody will flood them and not comply. | ||
| And it's not fair to other people. | ||
| It's just like insurance fraud. | ||
| I mean, it's not a victimless crime. | ||
| So I'd love to figure out how to do it and have the best experience possible because I think we are on the side of the consumer. | ||
| People can afford to fly by flying Frontier. | ||
| So having said that, we haven't figured out a better solution just yet. | ||
| And I even tried to raise the prices a little more, but it just hadn't worked. | ||
| I don't want to dwell on you, but I understand your answer. | ||
| Let me ask Mr. McGee. | ||
| My impression is the three largest airlines raise their bag fees pretty much in lockstep. | ||
| Is that a sign of lack of meaningful competitive pressure to charge lower fees or other ancillary fees? | ||
|
unidentified
|
Thank you, Senator. | |
| And yes, I think the answer is absolutely. | ||
| I mean, what we see with the big three in particular, American, Delta, and United, not just on fees, but even on fares, there's no need to signal pricing in this industry. | ||
| Everybody sees them in ATPico, in the reservation systems, et cetera. | ||
| They see the prices. | ||
| They don't have to have a clandestine meeting somewhere to talk about it. | ||
| And there's no question that they're in lockstep. | ||
| That's not our opinion. | ||
| That is stated every four times a year in the DOT's quarterly airfare reports. | ||
| We were pouring over the last year's worth over the weekend, and you see that en routes in which the only competition is any combination of the big three, American and or Delta and or United, three, two, or one of them, you're paying the highest fares in the country, all across the country. | ||
| And I spoke about the effects of the low fare carriers, but that doesn't mean there still isn't a lot of consumer anger and confusion over fees, and particularly the transparency of fees. | ||
| And when you get to the gate, that's not the time you want to know that suddenly you can't bring your carry-on bag with you because that was the deal that you agreed to. | ||
| As I said before, these contracts of carriage, they are written by and for the airlines. | ||
| We don't get to say, well, wait a minute, what about our rights? | ||
| And so when you swipe the credit card, you're adhering to it. | ||
| Senator. | ||
| I was going to say, I'll give you a chance to answer. | ||
|
unidentified
|
Thank you so much. | |
| From airlines, for America's perspective, none of our carriers charge a bounty. | ||
| None of our carriers charge a fee for families sitting together. | ||
| And none of our carriers are colluding on price. | ||
| We are incredibly transparent. | ||
| That is called competition. | ||
| Absolutely. | ||
| Passengers today have more access to fares and the fee information than they've ever had before. | ||
| It's ubiquitous. | ||
| It's all over the internet. | ||
| It's not collusion. | ||
| It is transparency. | ||
| Let me ask you, because we've had some evidence that AI is being used to target fees to individuals based on information as to their past travel and their ability to afford higher prices and their need to travel for certain reasons. | ||
| Can you commit that none of the airlines that are members of Airlines for America use AI in that way? | ||
|
unidentified
|
In fact, to prepare for this hearing, I asked the carriers exactly that, and all of them, two, a carrier, said no, they do not use personal information to do pricing. | |
| So if I wrote to them and I intend to do it, you can guarantee that they would be willing to tell me that They never use personal information in artificial intelligence systems to change prices, bury them. | ||
|
unidentified
|
To target a price toward you and using personal information to target a price toward a person, they do not. | |
| Now, as I think Mr. Johnson from American told you, if you want a free bag, you need to put in the fact that you're a frequent flyer at American. | ||
| So they do use that kind of information, but absolutely they do not use personal information like, did you have a death in the family or anything like that with AI? | ||
| Well, I don't mean only a death in the family. | ||
| I mean, have you traveled first class on an Okay, well, I don't want to prolong this questioning, but thanks, Mr. Chairman. | ||
| Thank you. | ||
| Senator Britt. | ||
| Yes, Mr. McGee, you were shaking your head. | ||
| Do you mind responding to that? | ||
|
unidentified
|
Yes, thanks very much, Senator. | |
| I think the devil is in the details and in the language, and we really need to clarify once and for all, bring in all the airline CEOs and ask them, please define personal information. | ||
| It may not say that Senator Britt or Senator Hawley that we are targeting pricing on that, but what it will say is there are algorithms built into these systems that track how you shop, when you shop, why you shop, how often you book, how long you're on there. | ||
| I think if we all knew, excuse me, I think if we all knew what the airlines knew about us, it would blow our minds. | ||
| And I can tell you at Consumer Reports in 2001, almost 25 years ago, we first stumbled upon this odd thing where we were doing testing just to see which were the best websites. | ||
| And we suddenly found, well, wait a minute, in real time, doing very precise testing with identical itineraries, we were getting different results on different browsers and different computers. | ||
| That's 24 years ago. | ||
| I can't imagine how much the technology has improved since then. | ||
| So we need to clarify what is it about your shopping habits? | ||
| They may not know personal information about you per se, but we need to clarify that. | ||
| Thank you very much. | ||
| Mr. I mean, Mrs. Peakerton, I'd like to just talk to you real quick. | ||
| Alabama's four largest airports are predominantly served by carriers within your organization there. | ||
| Look, we depend on that, the reliability, the accessibility to these various different markets. | ||
| I mean, it determines whether or not I get home for my daughter's volleyball game on Thursday night or I am there back in home in time for parent dinner with my son and his team. | ||
|
unidentified
|
And so, you know, that just scratches the surface. | |
| Every working parent or people that are traveling around have things that they're depending on. | ||
|
unidentified
|
I have a question for you in just the sustainability to those markets. | |
| What are you looking for? | ||
| And just very quickly, what keeps those routes open and reliable? | ||
|
unidentified
|
Yes, so you've identified small community and medium community service as being absolutely essential. | |
| And I will say that this network system that the carriers have developed, Hub and Spoke, is what enables them to efficiently, with fewer planes and fewer people, serve those markets. | ||
| I talked earlier about the increasing costs, whether it be regulatory costs, our labor costs, our fuel costs are all increasing. | ||
| So, to the extent that we can help keep costs down, we'll help continue to see airfares be at all-time lows. | ||
| There are some structural issues, like and I'm running out of time, so just quickly, what are those structural issues? | ||
| Structural issues, no one's making a 50-seat plane anymore. | ||
| And so you may see less frequencies in small communities, but you're seeing more seats because they're flying bigger planes. | ||
| That's good. | ||
| And certainly for small communities, the pilot supply and mechanic supply has been a problem. | ||
| What we've seen is the regionals increase wages for pilots and that's the same thing. | ||
| And so I think about somewhere like Dothan that is the hub and spoke and obviously services our military community too right there. | ||
| And we obviously want to see that continue to grow. | ||
| I'd like, you know, Mr. Anderson, when we're looking at that, and I know Allegiant is the only airline that actually services Gulf Shores International Airport. | ||
| And I would like to do a little invitation here for everyone to come to Alabama's beautiful white sand beaches. | ||
| I think you will be pleasantly surprised. | ||
| We're talking about other destinations here. | ||
|
unidentified
|
I think you could just come right down to Alabama's Gulf Shores. | |
| But that has proven to be wildly successful. | ||
| When you look at that, I think you've seen over 40,000 travelers coming down back and forth to Alabama's beautiful beaches. | ||
| Talk to me, and I think you also service Huntsville as well, about how you added those routes to underserved or new markets. | ||
| What were the challenges or the barriers that you faced to expanding, and what is the decision point for continuing those? | ||
|
unidentified
|
Thank you for the question, Senator. | |
| We, as we evaluate markets, we have hundreds of markets that we look at regularly. | ||
| 90% of those currently do not have non-stop service. | ||
| So it fits our model beautifully. | ||
| We focus 100% on the leisure customer, which is a price-sensitive customer, and the value we offer is low fares with convenience. | ||
| And when we entered into the Gulf Shores and the Huntsville markets in Alabama, those fit our model beautifully, and they've been successful. | ||
| And we're excited about what we're seeing. | ||
| We have service from Kansas City into Gulf Shores and other communities throughout the Midwest. | ||
| But when we see the ability to stimulate demand and keep costs low, that's good. | ||
| And that allows us to continue to grow our unique model. | ||
| Mr. Biffle, I'd like for you to answer that same question as well. | ||
| But before I do that, Roll Tide, it's a big win on Saturday. | ||
| That was huge, right? | ||
| It really was. | ||
|
unidentified
|
My favorite play was the Caden Proctor to the side, number 74, getting the ball. | |
| I don't know if you all watch this, but you should Google it right now. | ||
| Oh, well, my favorite was the look on Kirby's face when he was walking off the field. | ||
| That was something. | ||
|
unidentified
|
So tell me, how do you decide about new markets and how do you expand those? | |
| So look, we, unlike Allegiant, we're more in competitive. | ||
| I forget it's less than a few percent of our routes have no competition. | ||
| So we tend to focus on giving consumers a choice in established markets. | ||
| And so, and our smallest aircraft is 186 seats. | ||
| So I have a difficult time, even though I'm extremely familiar with Alabama and all the markets there, even Gulf Shores. | ||
| Some of them are smaller for us, and so it's more of a challenge for us to serve. | ||
| So we typically look at markets that we could fly at least twice a week. | ||
| So the minimum market size, if we look at stimulation and so forth, we're going to be looking for a few hundred passengers that we think could go per week. | ||
| And what would create an incentive structure for you to come there? | ||
| What do you look for in that market? | ||
| Sort of looking, you know, is the demand there from A to B? | ||
| We do do some limited connections in some of our bases, but we're typically looking at that local market. | ||
| And so, you know, how many people want to go there? | ||
| The next thing is what is the season? | ||
| Is the season long? | ||
| You know, for example, some of these small communities that have difficulty, I mean, I really feel for these. | ||
| I'm from rural Texas, so I understand how a lot of this works too. | ||
| And so I know that a lot of communities, they're very seasonal, too. | ||
| So small, seasonal, it makes it difficult. | ||
| And so I have a soft spot for these places, but the economic realities oftentimes are challenging for them. | ||
| This is where I do and would support some type of EIS and possibly needs to be looked at for the size. | ||
| I think, yeah, yeah, EAS needs to be moved up, I think. | ||
| And also not just size, but just how hard is it to get there, right? | ||
| So you've got places. | ||
| Let's take the Northwest United States. | ||
| I mean, you get into the Dakotas and over. | ||
| I mean, it can get really hard to get somewhere. | ||
| I mean, not only do they not have service, it may be 500 miles to drive to the next place that might have service, and it's not even great service there. | ||
| So I do think there needs to be a more holistic approach there. | ||
| But yeah, we look at the market size and the potential. | ||
| Can it stimulate? | ||
| And in general, we look at where, in many cases, where the legacies charge a lot of money. | ||
| And we're attracted to that. | ||
|
unidentified
|
Thank you. | |
| Okay. | ||
| I have another matter I've got to attend to. | ||
| So I'm going to hand the cattle off to Senator Hawley as I recognize Senator Booker, who will be up next. | ||
| It is unlikely that I will be able to return before you've adjourned. | ||
| I will come back if you're still in session after then, but I will leave that in the hands of he who holds the gavel. | ||
| And Senator Klobuchar, you're recognized. | ||
| Before you leave, Senator Lee, can I clarify something earlier? | ||
| Sure. | ||
| And just to make sure I understood you and you understood me, when I suggested that we should have antitrust for the carriers, I mean just the small carriers, not with the big four. | ||
| Okay, yeah, that makes sense. | ||
| I'm saying that port. | ||
| That would be a lot of news. | ||
| I'm saying the small, the small carriers that represent the 20% could work together to be a force to compete with the big four, not across them. | ||
| They don't need any more help. | ||
| I thought maybe you were setting yourself up for an acquisition or something. | ||
| No, no, no, no. | ||
| I apologize. | ||
| Maybe I spoke too fast, but I just wanted to clarify. | ||
| I was just saying, I think, again, looking for practical solutions to fix this situation. | ||
| Okay, that makes sense. | ||
| Thank you. | ||
| Okay. | ||
| Thank you. | ||
| I want to thank Chairman Lee and Ranking Member Booker for this really important hearing. | ||
| And I will say that with everything going on, that's a little bit of a euphemism, today, the fact that we've had so many senators here and that they as leaders had so many senators here show How important this is to people. | ||
| So, our airport was once again named best in the country. | ||
| Yeah, you're welcome. | ||
| But we hosted more than 340,000 planes carrying 37 million passengers last year at Minneapolis St. Paul Airport and, of course, major hub. | ||
| But it's also really important for us, being this hub, that we also have competitive carriers. | ||
| We are the home of Sun Country, as you know, Mr. Beffel, and appreciate all of the competitive carriers we can get. | ||
| And one of the things that I've focused on with funding is to make sure we get gates in what we call our Terminal 2, right, so that we have more infrastructure for competitive carriers, especially some of these big hub airports. | ||
| Everyone's gravitating there, and it makes it more important than ever that we have competitive carriers. | ||
| Could you talk about, I know you've been an advocate for this, but for just the infrastructure and the gates and how important that is in this marketplace of competition? | ||
| Sure. | ||
| I mean, look, I mentioned in the beginning, and we talked a little bit, the gates are the big thing. | ||
| And it's not just having access, but having them access at the same rules as the big guys. | ||
| I mean, you know, we've had situations, I'll go back to Atlanta, you know, we've operated on 25, 30 different gates in a week. | ||
| I mean, like, I could put my entire operation on seven gates. | ||
| I mean, so, and that's across four different terminals. | ||
| I mean, and you're putting our people and our employees, our customers, all having to move around like gypsies. | ||
| And so it disrupts our operation. | ||
| We don't provide as good on time. | ||
| It ends up causing cancellations of flights. | ||
| And people miss their flights because we have these constant gate changes. | ||
| And so, you know, the distinction of PREF gates and having, you know, our fair share of PREF gates and the ability to use them. | ||
| I know in Las Vegas we've had challenges. | ||
| I know Allegiant has too with common use gates. | ||
| But it's a major factor. | ||
| And I think that it really needs to be looked into. | ||
| It's just not a fair system. | ||
| There are airlines hoarding gates over and over again. | ||
| There's examples of gates given back to the airport. | ||
| Airlines like us trying to get them and all of a sudden the legacy carrier in fill in the blank city all of a sudden just happens to get those gates. | ||
| And nobody seems to care. | ||
| I think who cares is when you look at the numbers, right, when low-cost carriers serve a route is 20% lower. | ||
| Well, I think it has to get to the level it's gotten for people. | ||
| Thank you for having this hearing that we're finally going to get some attention drawn to this and getting some fair access to gates. | ||
| It's a major issue and it impacts us dramatically. | ||
| I would say it was the number one, after weather in ATC, it was the number one cause of cancellations for our airline this summer was gate access. | ||
| Wow. | ||
| Mr. McGee, do you want to add anything, by the way? | ||
| Congratulations on hiring Phil, our former staffer, back there. | ||
|
unidentified
|
Yes, we're very lucky to get him. | |
| Thank you, Senator. | ||
| Yes, as I said earlier in my opening remarks, we praise Senator Holly for co-sponsoring the Gate Competition Act. | ||
| We think it's one of the single best pieces of airline competition legislation we've ever seen. | ||
| But I think, you know, we need to give some context too, and that is that a lot of times when you walk into an airport in the United States, you'll see a big sign saying we welcome to our customers. | ||
| Let's be clear, we are not, we, the traveling public, are not the airport's customers. | ||
| Airlines are their customers. | ||
| And so if you have a situation like you have in Charlotte, where American Airlines controls 88% of all flight departures, it's hard to believe that the airport authorities are going to equally treat their customers when one of them is nine out of ten of all flights. | ||
| And so this really speaks to the larger systemic problems that we've had with deregulation. | ||
| We have a commercial aviation system that has the best of both worlds. | ||
| When times are good, they make money and they keep it. | ||
| And they use it for stock buybacks and they use it for executive compensation. | ||
| And then when times are bad, they come right here and they ask all of us taxpayers to bail them out. | ||
| And so we need to have a bigger discussion. | ||
| We're talking about a lot of really important issues today. | ||
| But we need to have a bigger discussion about the systemic problems with deregulation and ways of fixing aviation once and for all. | ||
| Just one, I know Senator Booker asked some good questions about that Passenger Bill of Rights and how we got that passed a while ago out of the Commerce Committee. | ||
| And that was a while ago. | ||
| And so that's why I think you see us working on some of these other issues like families sitting together. | ||
| Could you comment on that one? | ||
|
unidentified
|
Absolutely. | |
| And we are very grateful to you for all your work in this area. | ||
| The bottom line is that it seems we can never gain any traction. | ||
| Every time we make any sort of progress on passenger rights in this country, after I already noted, we lag much of the world. | ||
| Immediately, airline lobbyists are trying to roll it back, to weaken it or just eliminate it. | ||
| And we saw it with the Airlines for America 93-page comments that they filed a few weeks ago. | ||
| And we're very, very worried about the current DOT rolling back all of that hard work that has taken, in some cases, not years, but decades. | ||
| Look, as soon as we got fee transparency become a regulation, Airlines for America and other big carriers immediately sued the DOT. | ||
| Really think about that a moment. | ||
| They're suing the DOT, spending God knows how many millions of dollars on that to do what? | ||
| To prevent all of us from knowing the full price of a product before we swipe our credit card and buy it. | ||
| There's something wrong with the inherent system here. | ||
| Thank you very much. | ||
|
unidentified
|
Thank you. | |
| Senator Booker. | ||
| Great. | ||
| Three quick questions. | ||
| Mr. Anderson, just really quickly, we talked a little bit earlier, you did, about the joint venture with Viva Airbus, Mexican-based low-cost carrier. | ||
| The proposed deal, which was reviewed this past April, has faced opposition from labor unions, including the Teamsters, which represent 1,400 Allegiant pilots through Teamsters Local 2118. | ||
| They're concerned, understandably, that this partnership could lead to U.S. jobs being outsourced to Mexican crews that are undercutting their wages. | ||
| And so, Mr. Anderson, is Allegiant still pursuing this deal? | ||
| And if so, can you provide us any insurances that American jobs will be secured? | ||
| And then do you really commit here that American pilots will not face job losses if the deal is successful? | ||
|
unidentified
|
Thank you, Senator Booker, for the very important question. | |
| We are continuing to pursue this deal. | ||
| We believe that through this joint venture, we will grow jobs, including pilot jobs Allegiant for American pilots. | ||
| And we will commit to that within our application. | ||
| I believe that is laid out as well. | ||
| I appreciate it. | ||
| I'm hoping we can have more of a dialogue on this as this goes forward. | ||
| Is that okay? | ||
|
unidentified
|
We would welcome that. | |
| Thank you very much. | ||
| Mr. McGee, my penultimate question goes to you. | ||
| Could you just be a little bit more specific, because I actually think we can get bipartisan support on this, about what the Trump administration is doing when it comes to rolling back these efforts of the previous administration and what the specific impact it will have on Americans from all across our country. | ||
|
unidentified
|
Absolutely. | |
| Thank you, Senator. | ||
| I'm happy to do that. | ||
| The bottom line is we don't yet know because the Trump administration is asking for public comments, et cetera, as part of the rulemaking process. | ||
| But just the mere fact that these would even be put on the chopping block is extremely disturbing. | ||
| As you know, we had a very successful FAA reauthorization last year. | ||
| It was bipartisan support. | ||
| It was both houses. | ||
| It was both parties. | ||
| And we got protections that we had never seen before, including for the first time automatic cash refunds. | ||
| And yet on the DOT list are things like fee transparency, on compensation, on all kinds of things. | ||
| And so we don't yet know, but it is not a good sign that they're even asked to consider this. | ||
| It's part of their larger deregulatory effort. | ||
| And it's just heartbreaking to think what travel will be like. | ||
| We are talking about not being able to know the full price of your fare. | ||
| We are talking about not being compensated when there are disruptive flight delays, lengthy flight delays, and flight cancellations. | ||
| As I keep saying, the contracts are written by and for the airlines. | ||
| When do we get our say? | ||
| If we don't have federal protection, and particularly with federal preemption that does not allow the states to get involved, who's going to protect the consumers? | ||
| If we have a DOT secretary who is indifferent to the concerns of passengers, you're pretty much out of luck other than with Congress. | ||
| Senator, if I can just interject, I want to say for the record, Airlines for America supports every provision in the FAA reauthorization bill, whether it was family seating, whether it was reimbursement, automatic refunds. | ||
| We are in support of those provisions. | ||
| But Senator, at the same time, they are saying that Secretary Buttigej overstepped and expanded on some of these ideas. | ||
| As one example, the language in FAA reauthorization was flight cancellations. | ||
| He expanded it to lengthy flight delays. | ||
| So we are in the same spirit of what Congress asked for. | ||
| Okay. | ||
| I just really want to end with you, Professor. | ||
| Things have gotten a little hairy between us. | ||
| But I want you to hit us with some bald-faced facts before we go. | ||
| Could you do me a favor? | ||
| Like, you have written so extensively. | ||
| This is such an area of research expertise for you. | ||
| If you were advising this committee, and you have some great ideas, I just don't know to the realm of what they're possible, but you can see that this is a committee that has a lot of bipartisan feelings about our airlines. | ||
| If you wanted to give us as a takeaway some specific achievable advice perhaps in this Congress of what this committee can do together around these issues of airline concentration, what would you say? | ||
|
unidentified
|
Well, thank you, Senator. | |
| Let me pick a few very specific topics for you. | ||
| One is, I think, gate competition and hub concentration. | ||
| I think we've heard a lot about that today, and there's room for action on that. | ||
| And I think Senator Hawley and Senator Warren's bill on this would go a great deal in that direction. | ||
| Second, on the passenger side, the one that you opened with, which I think seat sizes are a thing that people find extremely frustrating all around the country. | ||
| And I think setting a minimum floor could be a helpful step forward for passengers. | ||
| And then third, on stability and resilience. | ||
| I think everyone is frustrated when you have an industry that does extremely well in the good years and then comes running to Congress for taxpayer bailouts and support when times get tough. | ||
| And so I think requiring airlines to think about planning and being prepared for the crises that are likely to come is something that would be a reasonable thing to do. | ||
| And the one thing I often hear in my conversations with some of the airlines is that on the global scale, they're competing against state-sponsored airlines. | ||
| Do you have any thoughts about that competition that we have globally now as the world becomes a smaller place? | ||
|
unidentified
|
Well, thanks, Senator. | |
| I think there's two parts to it. | ||
| You know, one is sometimes you hear from people that the way to increase competition is to open up for foreign carriers to operate within points in the United States. | ||
| And I think that's potentially a mistake because they are state-sponsored and might be able to predatory price airlines here. | ||
| I think the second thing is we need to think about the competition side as well. | ||
| And a number of people have touched on this as well. | ||
| But I think there are real questions around partnerships and loyalty programs there too that could have an effect on competition. | ||
| Yeah, I really appreciate your work. | ||
| I appreciate all the witnesses and to our stand-in chairman. | ||
| I thank you very much for the latitude. | ||
| Absolutely. | ||
| Thank you. | ||
| Let me just ask a question about the FAA reauthorization or tied to it. | ||
| And thank you for mentioning it a couple of times, though, Mr. McGee, and particularly the automatic refunds portion. | ||
| That was my amendment with Senator Warren. | ||
|
unidentified
|
We're well aware of it, Senator, and we appreciate it. | |
| I'm glad that we were able to get it passed. | ||
| Something else that the FAA did on a bipartisan basis, that reauthorization bill, was direct or authorize the Department of Transportation to issue rules making sure that families can sit with their children. | ||
| And I can say as a father of three young children, you know, this is something that's very important to families. | ||
| Now, a lot of times passengers feel like they should be paid to sit next to my children. | ||
| And maybe there's something to that. | ||
| But I just want to ask, Mr. Anderson, DOT maintains a list of airlines that are currently complying with this and allow families to sit with their children next to them. | ||
| The children are ticketed passengers. | ||
| I just want to clarify. | ||
| This isn't free tickets. | ||
| But they allow the children to sit next to the parents at no additional seat charge. | ||
| Now, according to the dashboard that DOT has, your airline is not one of them, meaning there's a legion right there with a big red X, meaning that you are charging families additional money over and above the child's ticket in order to sit next to a parent. | ||
| I'm hoping maybe you'll tell me this is wrong. | ||
| Is this accurate? | ||
|
unidentified
|
Senator Hawley is a father of four young children. | |
| It's a very important issue to me as well. | ||
| We, in practice, nearly always accommodate our families. | ||
| Our gate agents are trained and empowered to make sure it happens. | ||
| And over the past few years, I think there's only been a handful of times in which we haven't been able to accommodate families to sit together. | ||
| Am I hearing you to say, though, that doesn't sound like a yes, am I hearing you to say that your policy is not to provide seating for families, that if they may have to pay a fee, depending on the circumstances. | ||
| Is that right? | ||
| Is that why you have an X? | ||
| Or is this wrong? | ||
| I'd love to hear you say that this is just incorrect. | ||
| Like all of these other airlines that have green checks, we do not charge additional fees for children who have already paid. | ||
| They already have a ticket. | ||
| They're ticketed. | ||
| But your airline apparently is charging additional fees. | ||
| I just want to know, are you still doing that? | ||
| It sounds to me like you are, but please tell me that I'm wrong. | ||
|
unidentified
|
You're not wrong in the fact that we do have a red X on the DOT tracker there. | |
| Why do you do that? | ||
| Can you change that? | ||
| I mean, can you tell us today that you're going to do what your other peer airlines do? | ||
| And you're going to quit charging families extra to sit next to their parents? | ||
| I mean, we're talking about kids who are 13 years of age and younger. | ||
| This isn't like the 18-year-old who probably doesn't want to sit next to his parents anyway. | ||
| I mean, these are a little, it's like my four-year-old little girl. | ||
| I mean, I'd kind of like to have her next to me and not, I've already paid for her and not have to pay again. | ||
| So I just, I guess I don't understand. | ||
| I know it's money, but don't you think that keeping families together is kind of important? | ||
| The kids have already paid. | ||
|
unidentified
|
Very important. | |
| Okay, good. | ||
| Will you commit then to ending this policy of charging additional fees? | ||
|
unidentified
|
Senator, in practice, we accommodate our families to sit together without paying additional fees. | |
| Our gate agents are trained and empowered to. | ||
| Well, you do it when you can, but your policy is you can charge them if it comes down to it. | ||
| So will you just say here today, we're going to stop doing that. | ||
| We're not going to charge additional fees for families with young kids. | ||
| This could be a big moment. | ||
| This could be news. | ||
|
unidentified
|
Yes. | |
| There were some technology issues that we're working through. | ||
| We transformed our system, but we will look into this and explore the Red X. | ||
| Okay, well, it would maybe what we need to do is we just need to make it law. | ||
| I mean, maybe Congress is just going to have to outright mandate it. | ||
| You know, we hear all the time, you guys come up here and you say, don't regulate us, don't tell us what to do. | ||
| Well, I mean, there's a reason that sometimes we have to, and this is the reason. | ||
| Let me ask you about something else. | ||
| Can I just say for the record, I think it's ridiculous that anybody is charging families who've already paid for tickets with small children, charging them extra in order to have the kids next to them making profit off of it. | ||
| I mean, I just think that's kind of predatory. | ||
| I think it's really predatory, actually. | ||
| But let me ask you this: dynamic seat pricing, which I think both Frontier and Allegiant engage in. | ||
| Don't me if I'm wrong, but this is where you may charge me one fee and Katie Britt a different fee and Corey Booker yet a third fee for the same seat on the airline. | ||
| It just depends. | ||
| It's dynamic. | ||
| There's no set fee. | ||
| Why are you shaking your head? | ||
| No, Mr. Biffle. | ||
| So you don't do dynamic seat pricing? | ||
| So let's clarify dynamic seat pricing. | ||
| Price changes. | ||
| It's not set. | ||
| Yeah, but it's set by route, not by individual customer. | ||
| Okay, so you don't collect personal information before people can see a price? | ||
| No, we don't use personal information. | ||
| You collect it, though. | ||
| We collect it, but we don't charge you differently. | ||
| Well, how do I know that? | ||
| You collect zip code, you use browser cookies, location information, search history, you collect date of birth, you collect gods of stuff. | ||
| I got to enter all of that before I can see a seat price. | ||
| And my seat price may well be different than what Corey gets, depending on what he enters. | ||
| Well, I will tell you, we've been changing that. | ||
| I have to have your date of birth to buy the ticket. | ||
| That is actually a clunky, back to technology things. | ||
| We're changing that so you won't have to do hardly anything. | ||
| I want you to be able to search and click quickly. | ||
| But why are you collecting all of this personal information? | ||
| What guarantee do I have that you're not using this to set my price? | ||
| I have no idea how you're setting the price. | ||
| I just guarantee you we're not. | ||
|
unidentified
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Right. | |
| Just like you guarantee me your agents won't harass me, but you're paying them to do it. | ||
| So, I mean, don't you think that you owe us some evidence? | ||
| I mean, you're forcing your customers to enter all of this stuff before they can even see a price. | ||
| I will say it again. | ||
| We are in the process of eliminating that. | ||
| It's actually. | ||
| Meaning you're not going to, I won't have to enter in this personal information to see a price. | ||
| You're just going to use a seat price. | ||
| Do you use AI in your dynamic seat pricing at all? | ||
| No. | ||
| Any advanced algorithms? | ||
| Do you, Mr. Anderson? | ||
|
unidentified
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No, not for you. | |
| Will you both agree not to do so? | ||
| Going forward? | ||
|
unidentified
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Okay. | |
| I don't know that I can agree to not use AI. | ||
| We use AI and all types of things. | ||
| We will never use AI to use personal information. | ||
| So the insinuation that we're using your zip code, your gender, or any of those things to actually change the prices, I find appalling. | ||
| Personally, I know there's another travel business, not an airline, that I changed my credit card, and when they figured out that I was using my business credit card, the price changed. | ||
| I was appalled. | ||
| I was appalled. | ||
| dynamic pricing well yeah well that's well dynamic when you said dynamic we what we mean by that is actually a one hour flight versus a five hour flight might have a different price just like the fare might be different No, it means that the consumer has no idea. | ||
| I have no idea what the price is going to be for a given seat on a given flight until I give you all of my personal information. | ||
| It also means I have no idea if my price will be the same as Katie's price or the same as Corey's. | ||
| As I said, we are eliminating all of that information from being gathered. | ||
| We will still have to get your date of birth before you buy because we're required for security reasons, but we're going to stop collecting it up front. | ||
| Mr. Anderson, what about you? | ||
| Will you not commit to not using personal information of any kind to set prices? | ||
|
unidentified
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Yeah, we have no intention of using personal information to set prices. | |
| Do you collect personal information before you allow customers to see a price? | ||
|
unidentified
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We do before the seat selection, but that's to accommodate SSRs and who's able to sit in exit row seats. | |
| Mr. McGee, do you want to speak to this? | ||
| You've mentioned this earlier. | ||
| I mean, the consumer here, we're told, you know, trust us, trust us. | ||
| But then the consumer is also told, but give us all of your stuff. | ||
| Give us all your information. | ||
| Put it all in here. | ||
| I can't go so much as check to see what's available to flight home to Springfield, Missouri, unless I enter all of this junk. | ||
| And I have no idea what's being done with it. | ||
|
unidentified
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Yes, Senator, thank you very much. | |
| I was recently on the privacy statement of one of the big three carriers, and it was this long, if you printed it out. | ||
| And it basically said that as soon as you go on their site for the very first time, they're going to monitor what you do, how long you're there, how long you stay on each page, presumably also the sites that you're on before and after it. | ||
| Again, as I said, I think it would blow our minds to know exactly what they're collecting. | ||
| That's before we get into the definition that most people would accept as personal information. | ||
| That's why I was warning that I think we need to be much clearer about the language here. | ||
| I would argue that that is private information. | ||
| If I'm a shopper that goes on and is more impulsive and maybe books a flight after five minutes of shopping, why should I be at a disadvantage than someone that goes on three days in a row and spends an hour? | ||
| That is the definition of surveillance pricing, personalized pricing, customized pricing, more synonyms than we can even count on this. | ||
| But it is unfair. | ||
| It is un-American. | ||
| And it's going to get much worse with AI. | ||
| Ms. Speaker, let me just finish with you. | ||
| I think it's Delta has said that they're using AI now to set prices, these customized prices. | ||
| Isn't this a terrible idea? | ||
|
unidentified
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Well, they're going to turn up the pressure. | |
| Thank you. | ||
| They've also made it very clear. | ||
| I know their general counsel and executive vice president wrote a letter to Congress clarifying that they do not use personal information. | ||
| How are we to know that? | ||
| I mean, the whole value of AI is to ingest massive amounts of personal information in order to extract as much profit as you can from every person. | ||
| Why else would they use AI? | ||
|
unidentified
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Well, again, I think it's probably worth a deeper conversation about our definitions of personal information. | |
| Maybe we should just ban it. | ||
| How about that? | ||
| Should we just ban the use of AI in settings? | ||
|
unidentified
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AI has so many potential benefits in terms of writing. | |
| Yes, absolutely. | ||
| And that's why we're committed to not using AI. | ||
| Well, let's just make it easy. | ||
| Would your organization support a ban on using AI to set individualized seat prices? | ||
|
unidentified
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No. | |
| No. | ||
| Why not? | ||
| I think AI can be used in many, many different ways to come up with rights. | ||
| Name me one that isn't about making a profit for the airline at the expense of the customer. | ||
| Why else would you need AI to do it, to charge these differentials? | ||
|
unidentified
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It's not only an efficiency tool. | |
| Efficiency means money. | ||
| It means profit for the airline. | ||
|
unidentified
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Which, by the way, we're not very good at. | |
| Oh, I disagree. | ||
| I think your customers disagree. | ||
|
unidentified
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Our profit margins are miserably low. | |
| We never even are an average profit market. | ||
| Okay. | ||
| All right. | ||
| I find that very hard to believe or a stomach. | ||
| Well, I tell you what's true, is that the flying experience for most Americans is terrible. | ||
| It's atrocious. | ||
| If you look at the surveys, customer satisfaction surveys, airlines are always look at the bottom. | ||
| People hate it. | ||
| They hate to fly. | ||
| They have to fly, but they hate to fly. | ||
| And they hate it because of the policies we've been talking about today. | ||
| You charge them for your kids, you make them enter all of this personal information, you pay your own employees to harass them, and now you're going to use AI to extract every last penny from them. | ||
| It's terrible. | ||
|
unidentified
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I would love to show you the JD Power and the American Consumer Circle. | |
| Listen, I've seen the data, and you know, not only that, I've talked to people all over my state who fly, and I've flown all the time with my small children. | ||
| It's horrible. | ||
| It's horrible. | ||
| And it needs to be better. | ||
| And I think based on what we've heard today, Congress has got a lot of work to do to make it better. | ||
| All right, with that, guys, do I need to read a script? | ||
| Anything magic here to close this hearing? | ||
| Record will be open? | ||
| Okay, questions for the record are due a week from now. | ||
| I thank all of the witnesses for being here. | ||
| All of you have traveled. | ||
| We're delighted that you've been here. | ||
| Thanks to our audience for being so polite. | ||
| And this hearing is adjourned. | ||
|
unidentified
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Sunday, Defense Secretary Pete Hegseth will be part of a celebration to mark the U.S. Navy's 250th birthday. | |
| President Trump and Navy Secretary John Phelan will also attend this event, being held at Naval Station Norfolk in Virginia. | ||
| You can watch our coverage live at 3 p.m. Eastern on C-SPAN, C-SPAN Now, our free mobile app, or online at c-span.org. | ||
| I'm Dasha Burns, host of Ceasefire, bridging the divide in American politics. | ||
|
unidentified
|
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