BTC U.S. DOT filing

October 6, 2006

The Honorable Mary Peters
Secretary
U.S. Department of Transportation
400 Seventh Street, S.W.
Washington, DC 20590

Re: Docket 2006-25275

Dear Secretary Peters,

In response to United Airlines’ filing for a new US-to-China route authority, I would like to bring to your attention important reasons why the Department should not award additional frequencies to United to serve this critically important market. Increased competition is paramount in achieving lower fares for business travelers and incentives for improved airline customer service.

United is the dominant carrier among US airlines that fly between the US and Beijing, enplaning some 35% of all passengers carried by US airlines. United’s US-to-Beijing market share is an even larger 70% when code-share partner Air China is taken into account. This market dominance took decades to build and should not be reinforced with new authorities.

Since United was first awarded China route authorities in 1986, it has grown its market presence to 28 weekly frequencies. This 20-year head start on new entrants Continental and American allowed United to build a well-fortified position serving Beijing and Shanghai from its Chicago and San Francisco hubs. Awarding United more frequencies would increase market concentration and contravene the Department’s own competition guidelines, without sufficient offsetting benefits.

The centerpiece of United’s application is a claim that its proposed new service would link the two countries’ political capitals on a non-stop basis. However, United currently has the authority and frequencies to fly from Washington Dulles to Beijing by simply redeploying services from other US-to-China markets. What’s more, out of 192 countries in the world (excluding Vatican City), there are only 17 foreign capitals to which there is non-stop service from Washington. This is a hollow, if central claim, in a decidedly weak United Airlines application.

Another meritless United assertion is that the Washington Metro area is the largest metropolitan area in the U.S. without non-stop service to China. This is simply wrong. According to the U.S. Census Bureau, its statistics would rank the Washington Metro area eighth in size with respect to no non-stop service to China and Dallas/Fort Worth fourth. Importantly, and in contradistinction to the Washington Metro area, China is Dallas-Fort Worth’s largest trading partner, with total trade valued at more than $13.6 billion in 2005.

To the Department’s great credit, it has over the years established an impressive pro-competition track record in decisions involving both the domestic and international marketplace.  For instance, the Department recently issued an order placing a priority on new entrants receiving any new air side capacity at Chicago O'Hare in order to inject competition into a market dominated by United and American.  The same fundamental principle applies in the China route case. 

Increasing airline competition in a market dominated by one or two players should remain the Department’s highest priority. In doing so, consumers will be the winners receiving lower fares, better service, and more options.  In contrast, awarding more China frequencies to United will only serve to further entrench the dominant player in the market and reduce competition. In such an inconceivable outcome, consumers and the businesses that BTC represents would be the losers. 

Madame Secretary, BTC urges the Department to see through United's "capital-to-capital" public relations campaign and focus on what both United and consumers need most in the US-to-China air service market:  more competition.

Sincerely,

Kevin Mitchell
Chairman