RESOLUTION

WHEREAS, the events of September 11, 2001, weakened the State’s economy and in particular hurt the State’s air travel industry; and

WHEREAS, in the wake of the September 11th tragedy, the President signed into law the Aviation and Transportation Security Act of 2001, P.L. 107-71, which included a provision, Section 116, which authorized the Secretary of Transportation to approve and grant antitrust immunity to agreements between air carriers providing air transportation within a single state, and provided that the antitrust immunity could extend beyond October 1, 2002, until October 1, 2003, upon a determination by the Secretary that the extension was in the public interest; and

WHEREAS, Hawaiian Airlines, Inc. (Hawaiian), and Aloha Airlines, Inc. (Aloha) provide daily regularly scheduled air transportation service between all inhabited islands in the State of Hawaii, as well as scheduled service to and from certain cities on the U.S. Mainland, and certain cities in the Pacific Region; and

WHEREAS, Hawaiian and Aloha are the largest carriers operating within the State of Hawaii that provide daily inter-island services, i.e., regularly scheduled air transportation services originating and ending within the State of Hawaii; and

WHEREAS, in 2002, Hawaiian and Aloha represented that neither carrier’s inter-island operations were profitable due to reduced traffic and yields caused by factors such as a marked reduction in the number of Asian visitors primarily as a result of the recession in Japan, a substantial reduction in the number of mainland visitors due to the more recent recession in the United States, the availability of flights which bypass Honolulu and directly serve the neighbor islands, and the impact of the tragic events of September 11, 2001, on air traffic; and

WHEREAS, in 2002, Hawaiian and Aloha further represented that if they were permitted to address the foregoing profitability problem cooperatively, that the carriers could conform capacity more closely to consumer demand, thereby generating substantial cost savings for both carriers, without reducing output in terms of the number of passengers carried, that costs can be reduced and load factors raised simply by eliminating excess capacity without causing any service deterioration, and that this type of capacity rationalization would not represent a meaningful reduction in output, but simply a reduction in the existing excess capacity on certain inter-island routes; and

WHEREAS, in an effort to avail themselves of the opportunity presented by Section 116, Hawaiian and Aloha sought the Governor’s support for a "Inter-Island Cooperation Agreement -- Hawaiian Airlines and Aloha Airlines" (Cooperation Agreement) relating to flights which both originate and terminate at points within the State of Hawaii; and

WHEREAS, in seeking the Governor’s support, Hawaiian and Aloha represented, inter alia, as follows:

WHEREAS, in seeking the Governor’s support, Hawaiian and Aloha issued a letter confirming that each company believed the Cooperation Agreement was necessary to ensure the continuing availability of air transportation service within the State of Hawaii, and confirmed that their representations should be relied upon by the Governor in determining whether to issue a declaration pursuant to Section 116; and

WHEREAS, based on the representations of Hawaiian and Aloha, the Governor issued a declaration supporting the Cooperation Agreement; and

WHEREAS, Hawaiian and Aloha thereafter successfully petitioned the Secretary of Transportation to approve and accord antitrust immunity to the Cooperation Agreement, which thereby enabled the carriers to jointly set the level of capacity that both carriers would collectively offer in the major inter-island markets in the State of Hawaii; and

WHEREAS, commencing in December 2002, Hawaiian and Aloha began to jointly set the level of capacity in the major inter-island markets, and reduced the number of flights; and

WHEREAS, since December 2002, Hawaiian and Aloha have also eliminated a long-standing sales and marketing approach of allowing passengers to purchase travel coupons usable at the traveler’s discretion, instituted initiatives to reduce double booking, increased fares, and imposed ancillary charges and surcharges; and

WHEREAS, the efforts undertaken by Hawaiian and Aloha since the Cooperation Agreement was implemented have, at least in part, resulted in many commuters and other business travelers finding it difficult to secure inter-island flights, particularly during the morning and evening commuter hours; and

WHEREAS, the efforts of Hawaiian and Aloha to cut costs for their respective inter-island flight operations have not only resulted in less flights and greater inconvenience to tourists and residents of the State of Hawaii, but higher prices for inter-island travel; and

WHEREAS, despite their efforts to cut costs and reduce flights using the avenue provided by the Cooperation Agreement, as well as their efforts to increase fares, Hawaiian and Aloha have represented that such efforts have not been effective in allowing the carriers to be profitable in their respective inter-island operations; and

WHEREAS, the threat of war as well as a concomitant blow to the local and national economies is now upon the State; now, therefore,

BE IT RESOLVED by the Senate of the Twenty-Second Legislature of the State of Hawaii, Regular Session of 2003, the House of Representatives concurring, that Hawaii’s congressional delegation is requested to ask the U.S. Department of Justice to look into and report to the congressional delegation and the Governor, whether, in a way not antithetical to the antitrust laws and their purposes, Hawaiian and Aloha can discuss flight scheduling to better accommodate travelers, especially during the morning and evening commute hours; and

BE IT FURTHER RESOLVED that certified copies of this Concurrent Resolution be transmitted to the U.S. Departments of Justice and Transportation, the Governor, and each member of Hawaii’s congressional delegation.

Report Title:

Inter-island Airlines; Antitrust Exemption; Expansion; Flight Schedule Sharing