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Airlines' tactics won't fly
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March 13, 1998: 11:16 a.m. ET
Concerned that smaller carriers may be getting squeezed, DOT mulls new rules
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NEW YORK (CNNfn) - U.S. officials are reportedly close to announcing a crackdown against what are seen as unfair tactics by the major airlines against smaller, no-frills carriers.
According to the Wall Street Journal, the Department of Transportation will soon unveil new policies that define what the department deems as unfair competitive practices.
At issue is whether the biggest U.S. carriers improperly tried to squeeze out new competitors at "hub" airports -- where the big airlines shuffle passengers to and from their connecting flights.
Often when a low-cost carrier begins service to one of the hub airports, a bigger airline will open routes there as well -- matching the fares of the smaller carrier.
Officials are looking into whether those big airlines do so at a loss in the short term, and whether they are putting more seats on the market than the start-up offers.
Flooding the hub market with seats can drive under the start-up carrier -- which leaves only the big airline standing and then able to jack up its fares to recoup earlier losses.
Officials liken such predatory practices to the illegal practice of "dumping" by manufacturers hoping to grab market share.
The department is also looking into whether the four biggest airlines -- United, American, Northwest, and Delta - are monopolizing the nation's busiest airports.
The department has never used its legal authority, based on congressional acts in 1938 and 1978, to clamp down on any unfair exclusionary practices by airlines
Analysts said the genesis for the new rules dates back to the crash of ValuJet flight 592 in the Florida Everglades in May 1996.
At that time, with public suspicion mounting about the safety of no-frills carriers, the major airlines saw an the opportunity to re-capture market share lost to the new competitors.
With the connection between low-cost and safety blurred nowadays, consumer groups are voicing support of smaller airlines, which have helped drive fares lower in recent years.
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