Justice opposes
airline deal

Hawaiian/Aloha agreement
called anticompetitive

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By Russ Lynch
rlynch@starbulletin.com

The U.S. Department of Justice said today that Aloha and Hawaiian airlines should not be allowed to coordinate capacity in the interisland market.

If the two airlines are permitted to get together to eliminate what they see as excess capacity, it would "result in serious harm to consumers through higher fares and poorer service in some of the most heavily traveled city pairs in the United States," said a 16-page objection sent to the Department of Transportation in Washington.

"There is no evidence whatsoever to support the claim that immunity (from anti-trust laws) is necessary to preserve service on the routes," the department said.

Hawaiian and Aloha filed at the end of July for an exemption that would allow them to coordinate capacity on the five most heavily trafficked interisland routes. They wanted to avoid too many flights running nearly empty at certain times of the day and said they would not discuss routes or fares with each other.

Their application, filed under emergency airline legislation following Sept. 11, was supported by Gov. Ben Cayetano.

Justice Department lawyers said the two airlines misconstrued Cayetano's approval as endorsing their claims about why the antitrust exemption is necessary.

"The governor does nothing of the kind and is in fact quite careful to indicate that many statements in the declaration are based entirely on the applicants' representations," said the objection filed by R. Hewitt Pate, a deputy assistant attorney general.

"The governor's declaration does not reflect any independent investigation by his office," the document says.

The airlines said there would be "nothing novel" in granting such an exemption, but Justice "is aware of no post-deregulation proceeding in which DOT has granted immunity to such a deeply anticompetitive agreement," the department said.

The airlines made an "incredible assertion" when they said such an agreement would be relatively benign because they would talk only about capacity, the Justice filing says.

The agreement would "create a powerful disincentive for the carriers to reduce fares or improve service in order to attract additional passengers," it says.

Neither carrier is a "failing firm" and since they share more than 96 percent of interisland passenger business on the routes covered in the application, they don't need the break, Justice said.

Neither airline had immediate comment.

Secretary of Transportation Norman Mineta has set a deadline of Tuesday for comments and must decide on the application by Oct. 1.