Aloha, Hawaiian Hawaiian Airlines and Aloha Airlines, claiming the U.S. Justice Department is applying more stringent standards than it would for a merger, took the offensive yesterday in a 32-page defense of its request for an antitrust exemption to coordinate interisland seating capacity.
rebut opposition
to coordination
Justice Department used
overly strict standards, they sayBy Dave Segal
dsegal@starbulletin.comThe response also said the Justice Department applied erroneous seat-capacity numbers in opposing the exemption, Maui-based commuter Pacific Wings might benefit from the arrangement, and that air fares would go up minimally if at all.
Additionally, it said the two opposing parties, the DOJ and Pacific Wings, as well as American Airlines -- which expressed concern about the availability of seats for connecting passengers but didn't actually oppose the exemption -- demonstrated a lack of understanding of the interisland market.
"The fact that the Justice Department opposed this didn't come as a surprise to us," an Aloha attorney said yesterday in a telephone interview from Washington, D.C. "The DOJ has a long-standing antipathy toward antitrust immunity. When someone is granted immunity from antitrust, it, in effect, takes them away from the DOJ's jurisdiction."
Hawaiian and Aloha, both losing money, are seeking antitrust immunity to avoid nearly empty flights at certain times of day on the five most trafficked interisland routes. They hope to get an answer from Transportation Secretary Norman Mineta by the end of the month. The airlines have asked for the immunity to run until Oct. 1, 2003.
In the filing, Hawaiian and Aloha said the DOJ misinterpreted recent legislation that authorizes the Transportation Department to provide short-term relief from antitrust laws, when in the public interest, for financially ailing airlines providing service within a state. The filing said the DOJ's argument that both carriers need to be failing and be likely to exit the market is too extreme.
The filing also said Hawaiian's seat-capacity numbers the Justice Department obtained from the Transportation Department were incorrect and understate the true market conditions. The filing said the DOJ determined Hawaiian's interisland traffic load factor -- the percentage of passengers occupying available seats on an aircraft -- based on 106 seats on Hawaiian's Boeing 717 instead of the actual capacity of 123 seats. The filing said that although the carriers' interisland traffic has improved since Sept. 11, it is significantly below pre-Sept. 11 levels and their load factor still is 10 percent below break-even.
The filing, noting that Hawaiian lost $31 million in the second quarter, also revealed for the first time that the carrier lost about $26 million on its interisland service from September 2001 through May 2002, of which $9.9 million was lost January through May of this year.
Aloha Airlines' financial losses of $6.8 million in the second quarter and $13.9 million through the first six months weren't specified in yesterday's public filing. A confidential filing also was submitted yesterday that contained proprietary financial information.
Meanwhile, the airlines said in yesterday's filing there would be no significant increase in air fares because of the highly discretionary nature of the traffic and because the governor would rescind approval of the agreement if Hawaii residents were adversely affected to a significant degree.
Aloha's counsel pointed out in the phone interview that Hawaii's interisland market is the lowest fare market of comparable size in the United States and 20 percent lower than the next lowest fare market.
The filing also said Pacific Wings wrongly claimed it will be harmed by the arrangement. It said Pacific Wings is the only carrier serving several of the smaller markets and that passengers traveling to and from these points will have to travel on Pacific Wings regardless of the Aloha-Hawaiian reductions.
Also, the filing said Pacific Wings had approached both airlines prior to filing its objection and said it would withhold opposition if one or both of the carriers would enter into a code-sharing relationship, which allows a carrier to market service on another airline and offer its customers easier access to any given point. Both airlines rejected the offer.