AIRLINES : Washington Cracks Down on Carriers : Rivalry: Transportation Department is adopting a get-tough policy of intervening when competition is threatened.
Transportation Secretary Federico Pena said Monday that an aggressive federal government will become the “equalizer” to fight big airlines that are trying to stifle competition from smaller rivals or newcomers.
Northwest Airlines’ sudden decision to drop plans to move into the key western routes of small Reno Air was just the first corporate retreat prompted by the tough new policy.
“We did not want to allow a new start-up company to be smothered by one of the giants,” Pena said in an interview, signaling an abrupt end to the hands-off policy in an era of deregulation during the Reagan and Bush administrations.
“Our philosophy is different from the past administrations,” he said.
“We went through a massive deregulatory environment, almost totally unconstrained,” Pena said. “But there are appropriate times when we have to be the equalizer because we want to foster competition.”
From the Transportation Department’s viewpoint, Northwest was on the verge of unfairly “shadowing” Reno Air by duplicating the small carrier’s route system on flights between Reno and San Diego, San Francisco and Seattle.
The department could have initiated a formal investigation to see whether this was a case of a big carrier using its market power to drive a small one out of business.
But a formal probe never started. Instead, Pena raised the issue last week with Northwest, and the carrier quickly backed away, scrapping its expansion plans for the Reno routes at week’s end. Reno Air, formed last July, flies from its Nevada base to Los Angeles, San Diego, Seattle and Portland. Starting next month, it will expand to Minneapolis.
Northwest, a major carrier based in Minneapolis, did not offer flights to Reno. But it was apparently offended at the prospect of a small, relatively new carrier operating from the heart of its territory.
“Their intent is to punish us for flying into their hub,” Reno Air President Jeff Erickson said in a recent interview. “They think they can drive us out of business because we are small.”
Northwest has denied any attempts to punish Reno. “We are doing this in an effort to remain competitive between our hub and the West Coast,” a spokesman for the big carrier said last month when the controversy erupted.
Northwest had scheduled daily flights between Reno and Los Angeles, Seattle and San Diego, the core cities for Reno Air. With the warning to Northwest, which retreated swiftly under government pressure, the Clinton Administration demonstrated its determination to take a hard line on what it views as unfair competition.
In Northwest’s move against Reno, “we felt it was appropriate for us to intervene,” Pena said. “The facts were so egregious.”
Pena and other Administration officials say they are anxious to encourage new entries into the airline business and to promote a flow of badly needed capital in an industry that has suffered major losses in recent years.