International Aviation

This testimony discusses efforts by the Transportation Department (DOT) to increase U.S. airlines' access to foreign markets. The importance of these efforts has increased. In 1994, international operations made up 27 percent of U.S. airlines' traffic--up from 21 percent in 1980--and this share is expected to grow to 31 percent by 2006. By emphasizing the importance of economic analysis, establishing a new office dedicated to such analysis, and creating a formal system to track problems plaguing U.S. airlines doing business abroad, DOT is headed in the right direction. However, DOT negotiators will need the support of thorough analysis from the new economic office. Because of data shortcomings, the new office is limited in the extent to which it can value proposed exchange of traffic rights and code-share rights as well as factors in such related variables as antitrust immunity. By addressing these shortcomings, DOT will be in a better position to negotiate increased access for U.S. airlines to foreign markets, equitably accommodate the competing interests of U.S. airlines, and track the impact of its deal to review current agreements--as well as such trends as code-sharing--on competition and fares.