Grassley told Admiral Robert Spane that he "would be happy to work with Vanguard so that Iowans can reap the benefits of more competition in the airline industry. Without a doubt, there is a demand for alternative low-cost air service in Iowa."
Grassley sent his letter following an antitrust subcommittee hearing at which Spane testified and indicated that Vanguard was exploring the possibility of re-establishing air service in Des Moines. In response to a question from Grassley, Spane described Vanguard's ill-fated attempt at establishing low-fare jet service in Des Moines in 1995, and the difficult experience Vanguard had with carriers already in the market.
Spane's comments were especially important, Grassley said, "because they highlighted the serious problems that most start-up, low-fare airlines face when they initiate service into a new market or major hub."
Grassley participated in today's hearing -- "Airline Hubs: Fair Competition or Predatory Pricing?" -- because he is a member of the Senate Judiciary Committee. According to a recent survey of the Air Service Council, the cost to business travelers last October to fly to Chicago O'Hare from Des Moines was $1.40 a mile. At the same time, flights from O'Hare from Omaha, St. Louis, Kansas City, Nashville, Indianapolis, and Columbus were just 20 to 40 cents per mile.
"I know that airfare pricing is complex. But the outrageous swings in ticket prices and the substantial difference in fares between cities just don't seem reasonable to me," Grassley said at the hearing. "It sure looks like possible predatory behavior, and not competition, when an airline charges from $500 to $700 to fly from Des Moines to Chicago when it has no competitors, then reduces its fares to under $100, or below direct operating costs, when a low-cost carrier comes in, and then hikes the ticket price back up over $800 when the competitor has left the market."
Grassley in recent months has protested the failure of the U.S. Department of Transportation (DoT) to order air carriers to stop anti-competitive behavior when it is found by agency investigators. He also has actively monitored an ongoing investigation of the Justice Department into possible violations of the anti-trust laws.
"High air fares and inconvenient connections are major impediments to economic growth, especially in smaller communities," Grassley said. "Once cities lose jet service and passengers, they also start losing jobs." During today's hearing, Grassley cited a recent Des Moines Register report about Waterloo's attempt at a bid for a $1.3 billion, 3,000 job computer chip factory. Waterloo was among 13 finalists for the factory, but was eliminated from the running because it didn't have jet service.