Congressman Faleomavaega announced today that on October 3, 2006 he met with top officials from the US Department of Transportation (DOT) including Susan McDermott, Deputy Assistant Secretary for Aviation and International Affairs, and Edward Oppler, Deputy Director of International Aviation, to discuss Hawaiian Air’s ticket pricing and the Governor’s Executive Order. The meeting was a follow-up to the Congressman’s promise to ask for a federal review of possible price gouging by Hawaiian Air.
Faleomavaega informed Secretary McDermott that on August 23, 2006 he wrote to Mr. Mark Dunkerley, President and CEO of Hawaiian Airlines, and asked for an explanation as to why Hawaiian Air’s ticket prices are more than 100% higher than roundtrip fares from Honolulu to California considering the destinations are of almost equal distance. Faleomavaega said that in response to his request, Hawaiian Air requested a meeting and Mr. Dunkerley and Faleomavaega met on August 31, 2006. Faleomavaega said he was dissatisfied that Hawaiian Air failed to provide any reasonable explanation to justify its price increases. Faleomavaega then asked Secretary McDermott if the US Department of Transportation could investigate the high fares charged by Hawaiian Air.
Secretary McDermott explained that the US Department of Transportation, by statute, has no authority to set airfare rates, or regulate them. However, she said she would be willing to present the question to the investigation staff but was uncertain if they would be able to initiate an investigation since by law the DOT cannot do anything about rates and cannot force Hawaiian Air to given them information.
On the subject of whether or not Hawaiian Air is considered a monopoly, Secretary McDermott explained that legally Hawaiian Air is not considered a monopoly because it is an open market meaning that any other airline is free to establish operations in Pago Pago if it wishes.
“On the subject of the Essential Air Service (EAS) program, she confirmed that the Pago Pago route is part of the Essential Air Service program but that DOT involvement is only triggered when the last carrier (in this case, Hawaiian Air) decides to withdraw from a market. More specifically, EAS is a program put in place by Congress to make sure that those living in rural and remote areas have access to the national transportation system. If at any time an area, like American Samoa, is only serviced by one airline carrier, EAS requires the airline carrier to file a 90-day notice with local officials, the appropriate state aviation agency, and the DOT before terminating, suspending or reducing air service below the required level.”
“This means that Hawaiian Air, being the only U.S. carrier servicing American Samoa, cannot discontinue service to the Territory without filing a 90-day notice. If Hawaiian Air were to file a notice to discontinue service, then DOT would have the option of subsidizing Hawaiian Air or replacing Hawaiian Air with a subsidy-free carrier willing to service the Territory. If no carrier is willing to service the Territory on a subsidy-free basis, then the DOT would solicit proposals for subsidized service.”
“In other words, if Hawaiian Air files for EAS assistance or requests a federal subsidy, it takes a chance that another airline will be awarded the subsidized service. Also, ASG cannot request DOT to federally subsidize Hawaiian Airline’s service. These filings are strictly between the airline carriers and the DOT and it is up to Hawaiian Airlines to determine whether or not it will file a petition and take the chance that another carrier will be awarded the subsidy.”
“While Hawaiian Air continues to say that it will lower airfares if the federal government can assist in reducing its costs, the truth is the burden is on Hawaiian Air to file for federal subsidies,” Faleomavaega said. “Also, the burden is on Hawaiian Air to convince the federal government that it is operating at a loss and to justify its ticket prices. So far, Hawaiian Air has failed to make its case to my office or the federal government.”
“While Hawaiian Air continues to say that there are six factors which are driving up their costs including higher costs associated with fuel, low occupancy/low volume travel, landing and customs fees, American Samoa’s designation as an international route, mechanical repairs incurred as a result of runway problems, and 5 percent commissions which Hawaiian Air gives to travel agents servicing the Pago Pago market which it does not do for travel agents servicing other markets, I disagree that any or all of these factors justify a more than 100% increase in ticket prices and I continue to be dissatisfied with Hawaiian Air’s position.”
“Again, while the federal government cannot require Hawaiian Air to lower its ticket prices, I was pleased to learn that on the question of discriminatory treatment on flights, Secretary McDermott said charges can be filed with the DOT and investigations would be handled by the DOT’s Enforcement Division.”
“Finally, on the issue of the Governor’s Executive Order, Secretary McDermott said that she could not speak to the specifics of the pending adjudication of Hawaiian Air’s request for relief from the Governor’s Executive Order but she did say that it was her feeling that the best case would be if the Governor and Hawaiian Air were somehow able to come to an agreement and withdraw the petition.”
“She also said that the DOT decision regarding the petition would only address the narrow question of whether or not the Executive Order was enforceable. The petition would not address the issues of price or discrimination. Again, any complaints about discrimination would need to be filed with the DOT’s Enforcement Division.”
“On a separate matter, Mr. Oppler presented DOT Orders granting foreign air carriers expanded freight services in Alaska, Hawaii and Guam and we discussed the possibility of the DOT granting foreign air carriers expanded freight services in American Samoa. We agreed that we would need to determine if expanded cargo flexibility for American Samoa would have any positive effects. If so, I am willing to draft a petition in support of the Goveror’s request.”
“For now, I thank Secretary McDermott and Mr. Oppler for meeting with me and I appreciate their guidance in what American Samoa’s recourse is and isn’t in dealing with Hawaiian Air,” Faleomavaega said. “Unfortunately, the federal government cannot make Hawaiian Air lower its fares. Our only recourse to reduce fares is to create competition in the marketplace by attracting other airlines to American Samoa in addition to Hawaiian Air.”
“I don’t believe we should drive Hawaiian Air away but I am hopeful that another airline will also compete in our Pago Pago to Honolulu market so that costs will be lowered as a result of competition. This is what a free market does. A free market system creates competition and competition means lower prices and better quality of service. This is why prices in the States are cheaper – because there are many airlines competing against each other for the same customers.”
“This is why I am also fully committed to continuing my efforts of inviting major and discount airlines to do business in American Samoa – because I believe in a free market system. While I am supportive of discount airlines which are now going international, I am not supportive of charter services because I believe safety must come first and that our people deserve to fly with reputable airlines which have a long and proven history of providing safe and reliable service.”
“Although we did experience some real difficulties with Hawaiian Air years ago with the constant breakdown of its aircrafts due to poor maintenance and an outdated fleet, along with a stream of changes in management and even recently having to file bankruptcy to stay alive, I submit Hawaiian Air services have now improved a lot with the exception of its extremely high airfares. In fairness to our people, I believe Hawaiian Air should lower its airfares or do a better job of explaining to us why its prices are so much higher,” Faleomavaega concluded.