THE SENATE

S.R. NO.

14

TWENTY-FIRST LEGISLATURE, 2002

 

STATE OF HAWAII

 
   


SENATE RESOLUTION

 

opposing the proposed merger between hawaiian airlines, Inc., and aloha airlines, inc.

 

WHEREAS, as an island state where the counties are separated by many miles of open ocean, the airways serve as Hawaii's highways; and

WHEREAS, the State of Hawaii is critically and uniquely dependent upon air transportation services as the only efficient way to transport passengers, both residents and visitors alike, between islands; and

WHEREAS, today, many residents of Hawaii commute between islands by air on a daily basis to and from their jobs, and are thus highly dependent for their livelihood on convenient, reliable, safe, and affordable air transportation services; and

WHEREAS, air transportation also provides the only way to get many locally produced goods, including newspapers and produce and other perishable items, to their ultimate destinations for sale in a timely manner; and

WHEREAS, for approximately the last fifty years, interisland air transportation in Hawaii has been provided largely by two carriers that exist today as Aloha Airgroup, Inc., parent company of Aloha Airlines and Aloha Island Air ("Aloha"), and Hawaiian Airlines, Inc. ("Hawaiian"), who have maintained a healthy vigorous competition; and

WHEREAS, on December 19, 2001, Aloha and Hawaiian announced that they would be merging into a single airline to be owned under a new holding company to be called Aloha Holdings, Inc.; and

WHEREAS, the Senate is concerned that the proposed merger of Aloha and Hawaiian will eliminate competition in interisland air transportation services, allowing the merged carrier to form a monopoly and raise interisland air fares to unaffordable levels and interisland cargo fares to a level that will adversely affect Hawaii's already high cost of living; and

WHEREAS, the Senate has long recognized the critical importance of safe, reliable, and affordable interisland air service to the State of Hawaii, and in 1993 enacted Act 332, Session Laws of Hawaii 1993 ("Act 332") to address this issue; and

WHEREAS, concern over the ability of a single air carrier to dominate intrastate air traffic prompted the Legislature to enact Act 332, which established an air carrier commission to regulate inter-island air travel, contingent upon federal enabling legislation permitting such a scheme; and

WHEREAS, the Senate finds that the proposed merger between Aloha and Hawaiian may violate the intent of Act 332 and therefore may not be in the best interest of the public safety and welfare; and

WHEREAS, the Senate is further concerned that the merged carrier will reduce the frequency of service, or may eliminate some services and routes altogether, particularly less traveled routes to certain smaller communities in Hawaii; and

WHEREAS, the Senate is concerned that with a single new merged carrier, the quality of interisland air service will deteriorate in other important ways due to lack of competition and lack of outside market disciplinary forces; and

WHEREAS, the Senate recognizes that the nature of interisland air transportation has changed as a result of an increased number of direct flights between neighbor islands and mainland and foreign destinations; and

WHEREAS, the Senate further acknowledges the testimony of Aloha and Hawaiian representatives, in which they have stated that they have lost money on the interisland portion of their businesses and may not be able to maintain the same level of interisland flights as they have in the past, and that the merged carrier may be able to offer more direct routes between Hawaii and additional mainland and foreign destinations than the separate entities are presently able to offer; and

WHEREAS, the airline companies expect the merger to generate savings of approximately $90,000,000, from consolidation of operations, elimination of excess aircraft, and coordination of flight schedules, ticket distribution, and other functions; and

WHEREAS, the Senate further recognizes that the merged carrier has indicated its willingness to limit, to the extent feasible, the number of layoffs and furloughs which will result from the merger; and

WHEREAS, the supposed justification for the proposed merger is that, in light of the airlines' combined net losses of approximately $63,000,000, the dramatic downturn in travel following the tragic events of September 11, the subsequent global economic slowdown, and the increase in direct flights from the mainland and Asia to neighbor islands, it was unlikely that both airlines could remain in business; and

WHEREAS, the arguments provided by the airlines notwithstanding, it has not been adequately demonstrated that a merger is necessary to prevent either Aloha or Hawaiian from going out of business; now, therefore,

BE IT RESOLVED by the Senate of the Twenty-First Legislature of the State of Hawaii, Regular Session of 2002, that this body finds that the proposed merger between Hawaiian Airlines, Inc., and Aloha Airlines, Inc., will have an anticompetitive impact on Hawaii's interisland air transportation market and therefore is not in the best interest of the public; and

BE IT FURTHER RESOLVED that this body formally opposes the merger between Hawaiian Airlines, Inc., and Aloha Airlines, Inc.; and

BE IT FURTHER RESOLVED that certified copies of this Resolution be transmitted to the members of Hawaii's Congressional delegation, the United States Attorney General, the United States Secretary of Transportation, the Chairperson

of the Federal Trade Commission, the Governor of the State of Hawaii, the State Attorney General, and to the Presidents of Aloha Airlines, Inc., and Hawaiian Airlines, Inc.

 

 

 

OFFERED BY:

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Report Title:

Aloha and Hawaiian Airlines Merger; Legislative Opposition