Airline Competition: Cargo Airline Has Enhanced Competition in Hawaii but Faces an Uncertain Future

摘要

Because Hawaii comprises eight major islands remote from the U.S. mainland, many cargo customers must rely on air service as the only way to transport their goods in a timely fashion. Historically, two airlines have provided service to meet this need. Under an exemption from provisions of the Airport Noise and Capacity Act, these two airlines are permitted to operate an interisland 'turnaround' service (i.e., flights within Hawaii) with relatively noisy 'Stage 2' aircraft, which are being phased out on the mainland. Specifically, airlines that were providing turnaround service with Stage 2 aircraft when the act was passed in November 1990 are allowed to continue to do so. In May 1995, the Federal Aviation Administration (FAA) determined that American International Cargo (AIC) also qualified on the basis of its November 1990 operations, in which it provided what FAA deemed turnaround service in Hawaii - and 'onward' service to the U.S. mainland - with a McDonnell-Douglas DC-5 Stage 2 aircraft. In November 1995, this airline began to conduct scheduled interisland cargo service consistent with FAA's decision. Shortly thereafter, in a reinterpretation of its 1995 decision, FAA concluded that AIC did not qualifv to continue providing such service. FAA's revised interpretation required AIC either to begin operating quieter, Stage 3, aircraft on interisland routes or to exit these markets entirely. Converting an aircraft for Stage 3 operations typically costs an airline $1.5 million per engine. Legislation enacted in Oct 1996 allowed AIC to continue serving Hawaii's interisland markets with one Stage 2 aircraft through September 30,1998. To help prepare the Congress to reexamine the issue as the deadline approaches, you asked us to determine on what basis FAA revised its interpretation of turnaround service.