Speaker Emeritus Souki Testifies on Rate Regulation Bill

It was a scramble and a long shot, but House leaders are still looking at ways to help the interisland airline industry in Hawaii, and late yesterday resurrected a bill that proposes rate regulation. HB2250, Relating to Transportation, establishes a "statutory scheme for the state regulation of interisland air carriers, to the extent permissible under the Constitution and laws of the United States."

The bill was introduced this session by Rep. Bob Herkes. It was referred to the committees on Transportation and Finance. It passed the Transportation committee, chaired by Rep. Joe Souki, passed second reading, but did not get a hearing in Finance, until yesterday at around 3:30 p.m. The push for regulation, of course, has surfaced due to the Aloha Airlines bankruptcy, and the discussion at the informational briefing held on Wednesday. Chair Souki believes that if regulation had been in place, Aloha would still be flying.

So, at the end of the floor session, Rep. Marilyn Lee, Vice Chair of Finance, requested a waiver of the 48-hour notice requirement to hear HB2250, which was granted. There were two testifiers:

Speaker Emeritus Souki started with a laugh, "This is the first time I'm sitting here – now I know what it feels like to be facing the chair and the members – not knowing what my fate is going to be…"

He went on to explain that this bill is not new – it was first passed in 1993, but it needs enabling legislation by the Congress, and that was never acted upon.

He believes that Congress should give Hawaii the authority to regulate interisland air carriers because we are unique. We don't have sufficient highways that connect us to the other counties. As an island state, we need interisland transportation to survive.

"If we had this bill in place, maybe this (meaning Aloha) would not have happened. If we had this in place, we would have a fairer distribution of flights. Areas of the state would be serviced more equally. We need to consider passing this bill so that we won't be in this kind of predicament again, and not allow another predatory airline in the future. The consumer may benefit in the short term from deregulation because of the low fares, but not in the long term. Here in Hawaii, we need regulations."

Wayne Wakeman, a former pilot for Aloha Airlines also testified. Wakeman serves as a spokesman for all of Aloha's unions. Here are some of his comments:

"Ironically, I got the call from Rep. Caldwell's office to come testify on this bill as I was cleaning out my locker at Aloha. I started 30 years ago in customer service at United. At the time, Pan Am was the major airline. And then we had deregulation, and pretty soon we had other airlines coming into Hawaii, like Braniff. It was good for competition.

But for interisland carriers, regulation may be good. It will, believe it or not, stimulate competition. When fares are regulated, people will start to choose an airline based on service, not on price.

Mesa has other routes on the mainland where they can charge high prices. They can charge a low fare here because they have other mainland routes where they can charge high fares and make up for it.

Something needs to be done. Aloha is history. This will help Hawaiian and Mesa. Ironically, it will help Mesa.

Investors should not be afraid to lose money because of a fare war.

Aloha never indicated that they were going to shutdown. When they filed for bankruptcy, we thought that they needed to protect their assets, but they never came to us for concessions. It was a total surprise.

You have to realize that the difference between Aloha and Hawaiian is that Aloha is a privately owned company and Hawaiian is a public company. A private company can't just go to an investor and ask them for another $10 million to cover payroll. Whereas, if you're a public company, you can sell more stocks, and yes, the stock price may come down, but you can make it up."

There was some discussion based on the premise that Congress has already provided an exemption for Alaska, but the House has not been able to confirm that. The measure was passed unanimously with an amendment to strike the repeal date of 6/30/2015, and with Reps Belatti, Rhoads and Meyer voting with reservations.