Dear Mr. Transportation Secretary ...

The Hon. Rodney E. Slater

Dear Mr. Secretary:

Last week major airlines announced a $10 per segment fuel surcharge for travel beginning Feb. 1, 2000. There are numerous customer concerns regarding how the surcharge was conceived and implemented.

However, I want to bring to your attention just those issues that relate to the proposed U.S. DOT competition guidelines and the need for their urgent adoption.

The corporate buyers of air transportation services, which the Business Travel Coalition (BTC) represents, can understand the disruptive impact that an upward spike in the cost of jet fuel can have on airline earnings -- especially when airlines seriously miscalculate in their fuel-hedging strategies.

However, most airline-corporation contracts do not contain provisions for adjusting prices when fuel costs increase. Still, airlines have the opportunity to negotiate an adjustment in prices with customers when fuel prices rise significantly. It is an outright abuse of market power to force a multimillion-dollar fuel surcharge on a customer when contracts are silent on the issue.

Consider that for BTC members the annualized impact of this surcharge ranges from $400,000 to $3 million per company. In what other industry can a supplier increase a buyer's prices by $3 million dollars without even a single phone call, a meeting, a negotiation?

If corporations with large purchasing volumes are being handled this way, how are the other 9 million smaller U.S. businesses being treated?

Airlines malign customers in this imperious manner simply because they can. One major airline purchased sufficient forward fuel contracts so as to render current fuel price increases virtually immaterial to its earnings. Yet it, too, is imposing the surcharge to remain "competitive".

This greedy grab for windfall profits should be as much an affront to aviation officials in government as it is to the customers of the air transportation system.

Passenger rights concerns, record-level business air fares, onerous terms and conditions and disrespect for corporate customers are serious issues. However, a systemic cause of these problems that can be addressed is a lack of true competition to discipline major airlines' policies -- especially from innovative, low-fare new entrants.

Mr. Secretary, as I mentioned to you during the recent U.S. DOT Ministerial in Chicago, customers of the air transportation system are depending on your stewardship and leadership in implementing the department's proposed competition guidelines.

To reach required levels of new entry, investors need to be assured that DOT has the will -- and the tools -- to ensure a level playing field exists in air transport for all competitors.

Sincerely,
Kevin P. Mitchell
BTC chairman