STAR-BULLETIN FILE Aloha and Hawaiian airlines will be permitted to coordinate interisland capacity, under an antitrust exemption granted yesterday by the U.S. Department of Transportation.

Isle airlines win
antitrust exemption

Aloha and Hawaiian can coordinate
seat capacity on routes

---

By David Briscoe
Associated Press

The U.S. Transportation Department yesterday approved a plan by Aloha and Hawaiian airlines to jointly set the number of passenger seats available on key interisland routes, saying it will allow the carriers to "increase efficiency and reduce costs."

Critics, including Maui commuter airline Pacific Wings and the U.S. Justice Department, had said the plan would reduce options for travelers. The agreement would lead to fewer flights for both airlines, but would not allow them to coordinate fares or schedules.

The department, in a 12-page order, granted the two airlines' joint application for antitrust immunity for one year -- to be closely monitored by the department and the state's next governor.

"We find that the agreement's approval is consistent with the public interest, because approval will give the applicants the opportunity to adjust their interisland services in ways that will increase efficiency and reduce costs," the decision said.

The order also allows the airlines to compensate each other on a sliding scale if one carrier schedules more than 50 percent of the capacity on the affected routes, which include flights to and from Honolulu; Kahului, Maui; Lihue, Kauai, and Kona and Hilo on the Big Island of Hawaii.

As part of the agreement, the carriers have pledged not to leave any current route among the cities without service by at least one airline.

Aloha Airlines said it was pleased with the decision on the agreement, which also had the support of Hawaii's congressional delegation.

"It will provide the flexibility needed to respond to a changing interisland market while protecting the interest of the traveling public," said Glenn R. Zander, Aloha president.

Hawaiian President and Chief Executive Officer John W. Adams added: "We are pleased that the department has recognized Hawaii's unique circumstances and agrees that this is in the public interest."

The Justice Department had opposed the temporary antitrust exemption because of the effect it could have on fares and service.

Noting this, the order requires the airlines each to submit a monthly report stating the carriers' traffic, average fares, load factors and yields for each of the inter-island markets covered by the agreement.

"We remind the carriers that the department at any time has the discretion to amend, modify, or revoke its approval of all, or any portion of the (agreement) if we determine that the carriers have acted in a manner that no longer is in the public interest," the order said.

It notes that the governor also will be monitoring impact of the agreement, with the option of withdrawing his or her declaration of support. Both airlines will have to report any schedule changes to the governor and the Department of Transportation.

Gov. Ben Cayetano had sent the department a declaration stating that the agreement was necessary "to ensure the continuing availability of air transportation within Hawaii."

That followed the collapse in March of a plan to merge the two airlines.

The order notes that both carriers claim to have been operating below a capacity that would enable them to break even, partly because of the decline in Japanese tourism since the Sept. 11, 2001, terrorism attacks and the increasing number of flights operating directly from the U.S. mainland to various island destinations.

"We find that approval of the proposed Aloha/Hawaiian agreement, subject to our conditions, meets the standards of the statute, and that approval of the agreement for the short-term period ... will facilitate the recovery of inter-island services in the aftermath of September 11 and promote the viability of an effective inter-island network in Hawaii," the order said.

The order disagreed with concerns raised by Maui-based commuter airline Pacific Wings, which argued that the agreement is not necessary to ensure adequate service to the islands since it also has 50 daily departures.

It also rejected American Airlines' request for an order to ensure against a lack of connecting flights, but urged American and other airlines to provide any information on actions by the Hawaii airlines that may affect connecting passengers.