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MS. WARNER: Good evening. I'm Margaret Warner in New York.
MR. LEHRER: And I'm Jim Lehrer in Washington. After our summary of the news this Friday, we have a Newsmaker interview with Sec. of State Warren Christopher, a Tom Bearden report on the state of the airline industry, and political analysis by Mark Shields joined tonight by Wall Street Journal Columnist Paul Gigot.NEWS SUMMARY
MR. LEHRER: The terrible winter got more so today. A storm brought freezing rain and ice to the beach south. It cut electricity to more than a million customers in Mississippi and Tennessee. Other power failures were reported from Texas to Maryland. Snow fell from the Mid-Atlantic states up into New England. The federal government in Washington closed down, as did local governments, schools, and businesses throughout the region. New York City was expecting more than a foot of snow before the end of the day on top of the nine inches which fell Tuesday and Wednesday. The three big New York City airports were closed. Continental Airlines and USAir suspended service to most East Coast Cities. Bad weather also closed airports in Chicago, Houston, Memphis, and Salt Lake City. In Florida, cloudy skies and strong winds caused a landing delay for the space shuttle "Discovery" after an eight-day mission, but it eventually touched down safely at Cape Canaveral this afternoon. The crew included five U.S. astronauts and one Russian cosmonaut. The joint mission was expected to be the first of many cooperative efforts in space. Margaret.
MS. WARNER: Severe winter weather apparently kept many Americans from shopping in January. Retail sells fell 1/2 of a percent last month, and the Commerce Department is blaming the weather and the California earthquake for the drop. It was the first decline in retail sales in 10 months. The news is better on the inflation front. Wholesale prices rose just .2 percent in January. Lower food costs offset a big jump in gasoline prices, and gas prices are now declining again.
MR. LEHRER: The effort to reach a trade agreement with Japan fell apart today. President Clinton and Japanese Prime Minister Hosokawa delivered the news after a White House meeting. Mr. Clinton said Japan had not budged in its refusal to open new markets to U.S. products. Hosokawa accused the United States of seeking quotas which he said would lead to managed trade. Mr. Clinton denied that, saying the United States was seeking fairness, not quotas. They talked about the deadlock at a White House news conference.
PRESIDENT CLINTON: Today we could have disguised our difference with cosmetic agreements, but the issues between us are so important for our own nations and for the rest of the world that it is better to have reached no agreement than to have reached an empty agreement. Of course, Japan has further proposals. Our door remains open, but ultimately, Japan's market must be open.
MORIHIRO HOSOKAWA, Prime Minister, Japan: [speaking through interpreter] In the past, Japan and the U.S. have sometimes reached ambiguous agreements which then glossed over the problems of the time only to find them become sources of later misunderstandings between our two countries from time to time. Now I firmly believe that our relationship in this new era is maturing to an extent each of us respects and has confidence in the judgments of the other. Each of us makes utmost efforts to tackle the issues that each side responsibly understands and identifies but at the same time frankly admit what we can and what we cannot do despite such best efforts.
MR. LEHRER: Hosokawa suggested the two sides needed a cooling off period. Mr. Clinton said he had no idea what will happen next.
MS. WARNER: Several developments on the Bosnia front. The United Nations Secretary General today gave his envoy in Bosnia the power to authorize air strikes on Serb guns around Sarajevo. The move will permit a quicker response if U.N. commanders on the ground ask for air strikes or close air support for their troops elsewhere in Bosnia. In Sarajevo today, the commander of U.N. forces said that a day-old cease-fire seemed to be holding. Both Bosnian and Serb forces surrendered some heavy weapons to U.N. forces. Robin White of Independent Television News reports from Sarajevo.
ROBIN WHITE, ITN: The first tangible evidence that the U.N.- brokered cease-fire in Sarajevo is working, heavy mortars arriving at the Muslim barracks in the center of the city where they will be monitored by U.N. observers, and likewise at a Serbian barracks across the city, rocket launchers, artillery, and tanks being held under U.N. eyes. In the mountains high above Sarajevo, French U.N. soldiers spent the day moving into positions where they can monitor Serbian artillery. The city is ringed with guns and men reluctant to give ground to anyone.
UNIDENTIFIED MAN: [speaking through interpreter] Our guns should stay in place. If they must move, then so must the Muslim guns.
MR. WHITE: Teams of United Nations observers are hoping to visit all the tanks and artillery positions like this one above Sarajevo, guns which are capable of firing shells right into the heart of the city. And this is what the Serbians can see, U.N. troops well aware that moving guns away from the front line will only be a start. Ensuring that they're not redeployed elsewhere will require careful monitoring. Today, the U.N. has been making the most of the cease-fire, clearing mines from the former showpiece Olympic village Dobrinja. There have been few respites in this war. Everyone is making the most of this one.
MS. WARNER: In Geneva, Serb, Muslim, and Croat leaders returned to the negotiating table, but they reported little progress with settling their nearly two-year-old conflict. The U.S. is taking a higher profile at this round of talks, returning Special Envoy Charles Redman to work with the Muslims. In Washington, Clinton officials insisted they are not trying to force a deal on the Muslim-led government. Undersecretary of State Peter Tarnoff said any agreement "must satisfy the Bosnian government's responsible requirements." He also said that Serbs and Croats have to facewhat he called a new reality, a higher level of determination on the part of the NATO allies. President Clinton today denied reports that the U.S. was considering lifting sanctions against Serbia on a piecemeal basis. A New York Times report said the administration was considering easing sanctions against Serbia step by step in return for Bosnian Serb cooperation at the peace talks. The Europeans proposed such a strategy last November, but Washington rejected the approach then. The President was questioned about it during his news conference this afternoon.
PRESIDENT CLINTON: I have never even partial lifting of the Serbian embargo. No one has brought it to me. It has never been discussed in my presence. If it is an option being considered, it's being considered by somebody other than me. It's just not been a part of our discussions.
MS. WARNER: After two days of trying, President Clinton finally reached Russian President Boris Yeltsin to talk about Bosnian. Mr. Clinton was trying to ease Yeltsin's concerns about the fret of NATO air strikes. The President said their talk was positive, but Russian media reports said Yeltsin was still insisting the matter must go to the U.N. Security Council for a vote.
MR. LEHRER: The ethics trial of Texas Republican Senator Kay Bailey Hutchison ended today in less than an hour. A Ft. Worth judge ordered a "not guilty" verdict when prosecutors refused to go ahead with their case. They did so because the judge would not rule on the admissibility of evidence they planned to use. Hutchison was accused of using state funds and employees for campaign purposes when she was state treasurer. She denied it and said the charges were part of a Democratic plot to ruin her re- election chances. And that's it for the News Summary tonight. Now it's on to the Secretary of State, troubled skies, and Shields & Gigot. NEWSMAKER
MR. LEHRER: We begin tonight with the Secretary of State, Warren Christopher, who is with us now for a Newsmaker interview about Bosnia and other international matters of concern. Mr. Secretary, welcome.
SEC. CHRISTOPHER: Jim, it's nice to be here.
MR. LEHRER: On Bosnia, the cease-fire continues to hold tonight, is that correct?
SEC. CHRISTOPHER: That's our information.
MR. LEHRER: And is there -- are there signs that it's -- that it may be real this time?
SEC. CHRISTOPHER: Jim, we shouldn't expect too much from actions taken by NATO. It's a limited very important step that was taken. We hope it'll limit the shelling and hence limit the killing. We hope they'll move the heavy weapons out of the 20-kilometer zone. But I think that to expect a perfect cease-fire there probably is not in the cards. That will have to await an ultimate settlement. And that's why the United States has been so determined to marry these very important steps, i.e., to marry the step by NATO together with an accelerated or invigorated peace process.
MR. LEHRER: You were watching the News Summary with me just now and the report from Sarajevo about the turning in or the monitoring of these weapons from the both the Muslims and the Serbs. Is there more to that? Is there anything you can add to that that we should know?
SEC. CHRISTOPHER: Well, the NATO understanding of the NATO decision basically gives the Serbs two options. They can either put their heavy weapons under U.N. control, or move them outside of the 20-kilometer range. I suppose winter being as difficult as it is there and heavy weapons being hard to move, they'll try to turn them in, rather than move them, but one or the other has to be done, because at the end of 10 days if they have not been moved, then those heavy weapons will be targets for the action by air power under NATO's control.
MR. LEHRER: Should we be cheering over this development, I guess is what I'm really asking? Is this something terrific that happened today, these two sides beginning to make some movement with their heavy weaponry?
SEC. CHRISTOPHER: I think that it's an important step forward. What we should be encouraged about is the action by NATO, of the United States and French leadership. NATO has pulled itself together and has given an ultimatum. And I think that NATO is determined to carry out that ultimatum. Either the weapons will be moved, or NATO will take action, but perhaps more important, if there's continued shelling, then NATO will have a basis for striking the artillery that's doing the shelling.
MR. LEHRER: So even if they've moved some of it, or turned some of it in, the ones they haven't turned in, if they continue to shell over this next 10-day period, there could be air strikes, is that right?
SEC. CHRISTOPHER: Jim, the continued shelling is not limited to the 10 days. Any shelling starting from right now could be subject to NATO air power. And you're absolutely right, that's not just shelling for more than the 20-kilometer zone. Any shelling of Sarajevo from any distance means that NATO can go into action.
MR. LEHRER: But what I was trying to get as is if they continue to do what they did today, all right, which is to turn these weapons over and yet tomorrow, another weapon off on another side actually fires into Sarajevo and the Serbs say, hey, wait a minute, we're going to get to that one in a minute or whatever, what would be the NATO reaction to that under the present situation?
SEC. CHRISTOPHER: Well, I think the NATO reaction would be that under the decision taken NATO has got a right and will take action with respect to that area within the 20-kilometer zone.
MR. LEHRER: So they could pop 'em?
SEC. CHRISTOPHER: They could pop 'em. Absolutely.
MR. LEHRER: Okay. Is it -- but it is possible, is it not, sitting here on this Friday night, keeping in mind that things can change very quickly, it is possible that air strikes might not be necessary, is that right?
SEC. CHRISTOPHER: Well, certainly we all prefer that air strikes not have to be taken. I think that the Serbs in the past have responded pretty rapidly when there was a serious threat to do something with respect to them. And they may do that here as well. None of us would like to see air strikes unless they're necessary, but I think we now have a new resolve, a firm NATO decision, to take this action. It will have to be done in coordination with the UNPROFOR commander, i.e., the United Nations commander in the area, as well as the NATO commander, who are working very closely together, cooperating very well. And so I think they will take a decision as to when and how to bomb if there is a continued shelling of Sarajevo.
MR. LEHRER: There is not a feeling then among you all in the U.S. government and elsewhere on the NATO side that hey, look, maybe we need to at least do one air strike just to show that this meant business one way or another?
SEC. CHRISTOPHER: Jim, that really is up to the Serbs. The Serbs have it within their hands to prevent the air strikes if they move the heavy artillery or if they discontinue the shelling. And I think that will be the determining factor, not whether we would prefer it or not prefer it.
MR. LEHRER: Okay. Now, the other, the other part of this, which are the peace talks.
SEC. CHRISTOPHER: Yes.
MR. LEHRER: Now, the United States is going to take a more active role. What exactly does that mean?
SEC. CHRISTOPHER: Well, it means that we'll be meeting with the parties directly, i.e., all three parties, the Serbs, the Croats, and the Muslims. Our intention is to start meeting with the Muslims to try to find out what their reasonable requirements are, to try to determine what it is that they feel is necessary in order to reach a settlement. Once we determine that, then I think we'll go to the other parties and try to persuade them with all the means we have to respond. The Serbs will have to make the principal concessions here. There's no doubt about that. But there's also a need for the Croats to be cooperative. And we came to conclude after talking with our allies that the role of the United States here is probably indispensable. And so we decided that we would take a much more active role in negotiations than we have in the past.
MR. LEHRER: Do we have influence with the Muslims?
SEC. CHRISTOPHER: Well, we certainly have an opportunity to talk with the Muslims, but I want to emphasize that it's not our intention to put pressure on the Muslims. What we want to do is to find out what is their reasonable bottom line to help them formulate it in a way that may be acceptable and then to go to the other parties. But I think we've retained a good relationship with the Muslim leaders that will enable us to have a good candid talk with them about what it is they want to achieve and then go about trying to help them achieve it. I can't be certain that we'll be successful. As I say, it's clear to me that the Serbs are the ones who have to make the principal concessions, but there's also a need for some movement on the Croats' part so as to give the Bosnians some access to the sea.
MR. LEHRER: Well, now the Muslims have said that they don't feel like they should have to give up. I mean, after all, they're the victims here, and their complaint has been that they don't want to give up their, their sovereignty; they don't want to give up their land. How do you budge them off of that?
SEC. CHRISTOPHER: Well, as you know, for some time I think they've been talking about a constitutional union. They've agreed in principle to a constitutional union of the three entities there. If that's still their position, and we think it probably is, then we'll proceed from that point. We'll take the negotiations where they stood in Geneva and see if can't move them to conclusion. But we'll try to make sure that the Bosnians are respected in what I would describe as their reasonable requirements for the future.
MR. LEHRER: Is there an American plan, Mr. Secretary, that Redman and Tarnoff brought over there?
SEC. CHRISTOPHER: No, Jim, there is not an American plan. As I say, we'll be talking to the Muslims about what they want to try to achieve, and we'll be acting really as an intermediary here, seeing if our influence on the various parties will not be such that we can help get the job done. Of course, I want to emphasize we're not doing this alone. Redman and Tarnoff went to Europe to talk with three of our principal allies. They're going to be consulting with the other members of the European Union. Different countries have different kinds of influence, different kinds of leverage. And of course, we're talking with the Russians about this situation. President Clinton had a good talk with President Yeltsin today. I think they agreed that they have common ground, a feeling that the settlement was the highest priority, ending the killing the highest priority. So we hope that we'll be able to enlist them in this effort as well.
MR. LEHRER: Why did it take two days for President Clinton to get President Yeltsin on the telephone?
SEC. CHRISTOPHER: Jim, first let me say something that I think may be reassuring to the American people. The telephone is not the only way we can communicate with the Russians. There is a hotline which is a teletype with which we can reach the Russians any time we need to. So if there was some need for us to reach them in short order, we could. Now there's the natural preference, I think, for all of us to talk on the telephone, and the President began trying to reach President Yeltsin with the time difference and the schedules that each President had just didn't turn out to be necessary until they talked today. I understand when they talked, they joked a little bit about here with modern communications, they hadn't reached each other, but, as I say, I wanted to reassure the American people that we have very good communications with the Russians when we need it. It's just that they didn't get together on the telephone. I suppose we can all remember, ourselves, times that we played telephone tag with somebody, and that's what the President and President Yeltsin have been playing, telephone tag, for twenty-four or forty-eight hours.
MR. LEHRER: But the suggestion was not so much a communications thing as a political thing, that Yeltsin said, forget it, I don't want to talk to you about this right now. That's not true?
SEC. CHRISTOPHER: I don't have any reason to think that's true. When they talked together, they had a very cordial conversation, and no, I don't have any reason to think that's true.
MR. LEHRER: Now, President Yeltsin has not backed off the Russian position, has he, that Russia very much opposes NATO air strikes, Russia very much supports the Serb position in this conflict?
SEC. CHRISTOPHER: I wouldn't say that that's his position. I think he'd like to try to find a solution to this problem. He'll cooperate with us, I think, seeing if we can't bring about a solution that would be agreeable to all of the parties. And I hope that they may have some natural influence with the Serbs, and we'd like to enlist that influence. They've been working with us cooperatively in the United Nations over the last few days.
MR. LEHRER: There was an interesting wire story this afternoon, Mr. Secretary, that after this telephone conversation apparently came off between the two Presidents, President Yeltsin said, well, my position, Russian position is that NATO can't do this, can't do these air strikes on its own, they have to go back to the U.N. Security Council. President Clinton said, oh, no, no, no, that's already locked in with a prior U.N. Security Council resolution. Is that just going to remain unresolved?
SEC. CHRISTOPHER: Well, we feel quite confident of our position. Sec. General Boutros-Ghali asked me to act. He's now delegated his authority as your news said and to his associate who's on the scene there, so I don't think he feels the need for any further Security Council action. Actually, his letter was in response to actions that were taken last August. So we think there's plenty of Security Council authority for the action that NATO plans to take. It will be done in cooperation with, with the United Nations. But we're cooperating very well now. We all have a common interest in stopping the shelling and in settling the matter.
MR. LEHRER: So as a practical matter, the Russians are not going to get a U.N. Security Council meeting about this, right?
SEC. CHRISTOPHER: I don't think so.
MR. LEHRER: Okay. Another practical matter, what happened to the U.S. commitment that when there is peace, if and when there is a peace agreement in Bosnia, that the United States will send troops to help maintain that peace, to keep the peace? What's the state of that?
SEC. CHRISTOPHER: Well, that commitment is, is right there. As long as there is a viable peace agreement reached between the parties, the United States stands ready to join with its allies in Europe to implement the agreement.
MR. LEHRER: Thirty thousand troops? That's what the suggestion was earlier. Is that still on the table?
SEC. CHRISTOPHER: Jim, there's been no specific number of troops committed. You know, until we see the form of the agreement we don't know how many troops, we don't know how many troops it might take. And so the exact number of U.S. troops certainly can't be anticipated.
MR. LEHRER: But that's -- is that -- that's part of the, the negotiation, I assume, right? In other words, that's the message that your envoys have taken to Geneva, that if you guys work this out the United States will help maintain the peace accord?
SEC. CHRISTOPHER: Yes. And I think that's fundamental, Jim, to the Muslims. I doubt if the Bosnian government would be willing to enter into an agreement unless the United States was part of the implementation.
MR. LEHRER: All right. Change subjects.
SEC. CHRISTOPHER: Yes, sir.
MR. LEHRER: Another news item today we also reported a moment ago was the failure of the United States and Japan to reach -- to reach a trade agreement. It sounds like a very serious breach in the relationship between two big allies.
SEC. CHRISTOPHER: Well, I would say it's a serious development in the economic side of that relationship, but what the Prime Minister and the President made clear to each other, and I've been with them for three or four hours today, was that the strategic relationship and diplomatic relationship remains as strong as ever. We have a disagreement in the economic relationship, and the -- both the Prime Minister and the President said we weren't going to paper it over anymore; we were going to try to -- by identifying it -- see if we couldn't come closer to resolving it. I think it was a healthy step really. It was part, as both of them said, of the maturation process. We have the kind of relationship now where we can have a pretty serious disagreement without it interfering with the overall relationship.
MR. LEHRER: What is your analysis of the source of the disagreement? What is it that keeps the Japanese, from the American point of view at least, keeps the Japanese from doing what we want them to do?
SEC. CHRISTOPHER: Well, I think that they fear that we're establishing what they call numerical targets. That really is not our aim at all. But we do want to have tangible results. So we want to have some indicators. We want to know how the market is reacting, and we want to have some way to measure what, what the success will be. I think the Japanese are so worried about numerical targets that they're unwilling to agree with us on what the set of indicators would be. And that's really where the breakdown comes.
MR. LEHRER: Indicators in terms of decreasing our trade deficit with them you mean, right?
SEC. CHRISTOPHER: And various other elements of the trade relationship. How much trade is flowing back and forth? What's the effect of the exchange ratios? What's the effect on our various economies? Is there some justification for the, the very large trade imbalance that we have at the present time? What the President is committed to is changing that trade imbalance and getting it in a more normal relationship. And I believe the Japanese understand the need to do that. You know, it's not just the United States that has this imbalance. The whole world is in a very serious trade imbalance. I think it's $120 billion that the Japanese have a trade surplus, about 50 to 60 billion of that with the United States. So this is a worldwide problem. The Japanese simply must give access to their markets. They must open up their markets. And that's what the President is trying to achieve. And we need to have some tangible results looking toward open markets, looking forward to an opportunity to the United States to sell into that market.
MR. LEHRER: At the news conference this afternoon at the White House with Prime Minister Hosokawa, President Clinton said that, that on North Korea, moving to another subject he was asked about, that economic sanctions were possible, as possible -- economic sanctions might be employed against North Korea if some kind of an arrangement is not made for, for nuclear inspection. How close are we to using those kinds of things?
SEC. CHRISTOPHER: Well, the timetable is, more or less, this. The International Atomic Energy Agency will have a board meeting on the 21st of February. They may decide at that meeting, may well decide at that meeting that the safeguards regime, i.e. inspection regime, has been broken. Then they would refer the matter to the United Nations Security Council. They would take it there. We would want to take it there. And then the matter is up for decision in the United Nations Security Council. There's a series of actions that might be contemplated there, but it'll be a serious step, Jim, if that safeguard regime is broken, and then we'll want to go to the Security Council to consider some further action which could include sanctions.
MR. LEHRER: Mr. Secretary, several Republican Senators this week have, on this program and elsewhere, have drawn a connection between Bosnia and North Korea, saying that the failure of the United States to deliver on its threats on Bosnia up till now, that causes people like the leaders in North Korea to say, well, we'll do whatever we want to because the United States isn't going to do anything; the United States and its allies aren't going to do anything. What do you make of that kind of talk?
SEC. CHRISTOPHER: Well, that's really quite a different situation, Jim. With all due respect, we have a treaty relationship with South Korea. We're committed in the most serious way to defend South Korea, and so I think that if South Korea is threatened by North Korea either in a conventional way or in a nuclear way, that will invoke a powerful military response by the United States. Bosnia is a serious humanitarian problem. We need to contain that war, and we've taken just in the last two weeks some very serious steps to try to bring that conflict to an end, because it's in the interest of Europe and NATO for us to be effective there. But I would not think that one situation ought to be read to affect the other. Our commitment to South Korea, our commitment to ensure that it is not threatened by North Korea is a very deep one.
MR. LEHRER: Mr. Secretary, thank you very much.
SEC. CHRISTOPHER: Thank you, Jim.
MS. WARNER: Still ahead on the NewsHour, turbulent times in the airline industry and our Friday political analysis. FOCUS - TURBULENCE
MS. WARNER: Next tonight, what's going on in the airline business. On Tuesday, USAir slashed fares on many of its short and medium-term routes. While this may sound like the start of one more fare war, industry watchers say it's a symptom of a fundamental change in the business. Correspondent Tom Bearden reports.
MR. BEARDEN: What is it about the airline business? Why is the industry still tinkering, still experimenting, still tearing itself apart after all the upheavals and the buyouts and the bankruptcies and the shutdowns and the fare wars? Why can't it earn a steady profit? Why is United Airlines ready to sell itself to its own workers as a way out of its troubles? Those who watch the industry, like Ivan Schaeffer, justifiably wonder: Can't anybody here play this game?
IVAN SCHAEFFER, Woodside Travel Trust: They never miss an opportunity to miss an opportunity. And there has been a tremendous amount of senseless cost cutting, there's been a -- in terms of the cost of airline tickets -- there's been -- the price wars have been without rationale in many cases. The airlines have a tendency to go after gnats with atom bombs.
MR. BEARDEN: The last episode of this saga, some would say soap opera, came in 1991. The Gulf War had cut drastically into air traffic. Airports were empty; the economy was still on the down- swing. In 1991, airlines lost $2 billion. [fast forwarding of tape sound] Fast forward to 1993. Traffic is back up. Fuel prices are low. The economy is growing. But the industry probably lost another billion and a half dollars last year. In the last four years, airlines have lost more money than all the profits since the beginning of scheduled air service. What went wrong? For a clue, take a ride on the one major airline where things went right, maverick Southwest Airlines, flying nothing but short hops on its fleet of 737s, so short that it never needs to serve meals, just a quick snack and a drink, and you're there. Southwest never assigns seats either. The first passengers to arrive at the terminal are the first to board. It won't transfer baggage to another airline, and most important, it flies only point to point service, usually between pairs of cities with heavy traffic. Unlike its big competitors, it doesn't gather thousands of people at giant hub airports, and it charges drastically lower fares than anyone else, fares so low they often pull people out of cars and buses and into planes. The secret to low costs is productivity. Southwest's work force earns about average salaries for the industry, but planes can't make any money sitting on the ground, and Southwest planes spend more time in the air. Work rules are more flexible. Flight attendants help clean up the cabin at the end of each flight. Everybody hustles to meet the famously short turnaround time, often as low as 15 minutes. Most importantly, Southwest has earned profits for 22 straight years. Five years ago, despite being profitable, Southwest was considered merely an interesting footnote with no lessons to teach the rest of the industry. No more. Today other airlines with higher costs and big hubs are finding out how vulnerable they are to a carrier with costs they can't match. And a flock of new airlines are now imitating Southwest's style: Reno Air, MarkAir, Value Jet, and Kiwi Air. Donald Carty is executive vice president of American Airlines.
DONALD J. CARTY, American Airlines: It's certainly impossible for us to be profitable when prices are set by carriers with costs substantially lower than ours, because they can price at a price point where they can make money, and yet, we fail to make money, because our costs are too high, particularly the California markets, from Northern California to Southern California, which are very high volume markets with a lot of passengers. A number of the new entrants entered; Southwest, Reno, and so on. And we really had to close down our operation in San Jose for the most part.
MR. BEARDEN: Do you fear Southwest and the new entrants?
DONALD J. CARTY: I fear them in the sense that their competitiveness, particularly their cost competitiveness, threatens the viability of American Airlines. And in that sense, I do fear them, I guess.
MR. BEARDEN: The biggest airline in the world is worried about Southwest?
DONALD J. CARTY: Size is irrelevant.
MR. BEARDEN: What is relevant is the so-called "Southwest effect." A controversial report from the Department of Transportation concludes that the growth of Southwest has single- handedly called the entire hub and spoke concept into question. Hubbing arose because the majority of passengers aren't flying between New York and Miami or Los Angeles and Dallas. They want to go from Orlando to Harrisburg, or Norfolk to Atlanta, or Boston to Jacksonville, cities that don't have enough travelers to justify non-stop flights between them. Instead, airlines assemble people from dozens of outlying cities, fly them into the hub, then re-sort them into new flights in a hectic half hour. And the flights depart as quickly as they can, taking people to their final destination. Southwest doesn't do that. It flies only between a few densely traveled markets. But the report says those were the markets where the traditional airlines made most of their profits. The big airlines are left with their long haul routes through the hubs where fares tend to be lower. That hurts profits. Even those who disagree with parts of the report say hubs are vulnerable to Southwest-style low-cost competition. Randall Malin was an executive with American and USAir.
RANDALL MALIN, Air Transportation Consultant: Hubs are high cost, which everyone's known well before deregulation when you're running hubs. The issue is: Do you get enough revenue out of the hub to offset the high cost? The hub concept is the most efficient way of serving all of those smaller and medium-sized cities of the United States, and I don't think anybody disputes that. I think what you can argue is that the U.S. has become over-hubbed.
MR. BEARDEN: The well-publicized United Airlines' employee buyout effort was partly crafted to address the Southwest challenge. If it goes through, workers will trade wage and work rule concessions for part ownership of the airline. Part of those concessions will go toward setting up U-2's, a low fare, high frequency, short- turnaround service, a kind of mini-Southwest inside giant United. One major airline is already doing that today. This fall with much promotional hoopla, Continental Airlines added hundreds of new short haul point-to-point routes and dusted off an old company trademark the low prices, peanuts fares. The new service, dubbed "Continental Lite," offers flights to and from places like Greensboro, North Carolina, all day long, mostly to destinations too close to need meal service. The resemblance to Southwest is obvious. Flight attendants speed the turnaround at the end of the flight by helping clean the cabin. Continental's goal is to turn all these flights in 20 minutes. The day we visited pre-boarding announcements for one flight were being made while passengers were still exiting the plane. Don Valentine is marketing vice presidentfor Continental Airlines.
DONALD G. VALENTINE, Continental Airlines: It is a test, if you will, a novel concept in this industry, and that is to provide more frequent flights with low, simple unrestricted fares and see if we could pull people out of buses and backyards and cars.
MR. BEARDEN: How much of all this is driven by the Southwest Airlines model?
DONALD VALENTINE: A considerable amount and common sense.
MR. BEARDEN: But is common sense enough? Some say you can't be a full service airline and a Southwest lookalike at the same time. Continental can afford to experiment, because its costs fell dramatically after two bankruptcies in ten years. But Southwest's chief financial officer, Gary Kelly, says other airlines will have to change more than just cutting out meal service.
GARY C. KELLY, Southwest Airlines: The cost of offering those kinds of amenities in the airline business is not just the direct cost of the food; it's certainly all the infrastructure that's built up to provision the aircraft, the plan the menus, and just on and on and on. And so if you were to strip out a lot of those amenities, certainly you could be closer to our cost structure. But there are any number of things that the other airlines would, would do, that would have to do to get close to our cost structure that they're looking in excruciating detail at all of those questions right now.
MR. BEARDEN: As a result of Continental's new service, North Carolina has become a proving ground for the new school of airline operation versus the older "hub" concept. An hour's drive from Greensboro are two traditional hubs: USAir's in Charlotte, and American's at Raleigh-Durham. Both are close enough to Greensboro to make Continental's low fares a tempting alternative to people who don't want to pay high prices at hubs. Our informal survey showed that.
MR. BEARDEN: Why don't you fly from Raleigh-Durham? They've got a big airport there?
UNIDENTIFIED MALE PASSENGER: It's a lot more money. I think they said $160, which is twice as much as it is to fly from Greensboro.
UNIDENTIFIED FEMALE PASSENGER: I'm equidistant between Raleigh- Durham and Greensboro Airport, but I chose Greensboro because of the Continental flights that are much less expensive.
SECOND UNIDENTIFIED MALE PASSENGER: I'm just going to fly back to Atlanta. I usually drive in, but with the low rates and everything, that's why I'm flying Continental.
MR. BEARDEN: Continental's planners say they didn't intentionally target American's hub with their new service, but it's common knowledge here that the Raleigh hub has been an underperformer. American opened the hub in 1987, banking on continued growth like that which filled the famous Research Triangle Park with high-tech industries. But so far, there hasn't been enough traffic to support the hub's infrastructure which leads to a classic Catch-22. If the hub were closed, future growth could be stifled. That deeply concerns companies like pharmaceutical giant Burroughs Wellcome.
THACK BROWN, Burroughs Wellcome Co.: It gives us an economic development tool. If you were to ask an industrial recruiter what is the No. 1 thing on his list of considerations, it's: Does your community have a hub? You know, if you do, you're on the list; if you don't, you're probably not on the list.
MR. BEARDEN: A year ago, North Carolina's governor, James Hunt, made an unusual trip to American's headquarters to meet Chairman Robert Crandall. The result was an equally unusual joint public/private marketing campaign to help American Airlines at Raleigh-Durham.
GOV. JAMES HUNT, North Carolina: [February, 1993] We think that we're going to make this a place that American wants to be and will stay.
MR. BEARDEN: It was a startling example of a hub's bruising power over one community and of the economic logic that creates that power. Hubs work well when the planes are in and the passengers are changing flights, but when all the planes leave, the concourse is a ghost town. Workers are still being paid. The bonds that finance the concourse are still growing interest, but no money is coming in until the next wave arrives. The up shot is that hubs need tremendous volume in the busy time to pay for the inefficiency of the down time. American's big hub at Dallas-Ft. Worth can do that easily. The hub at Raleigh-Durham wasn't quite big enough. That's why it wound up on American's endangered species list, and why the governor and Crandall drove their brutal but mutually useful bargain.
ROBERT L. CRANDALL, Chairman, American Airlines: I don't know what OPEC might do with the price of fuel. I don't know what's going to happen in Bosnia, but I think we are certainly going to move the prospect of closing Raleigh-durham down on the list of our priorities. I very much hope that 18 months hence and we will still be there, and at that point we'll decide that we can take it off the list altogether.
MR. BEARDEN: In the weeks that followed, local businesses enlisted in various campaigns. A local car rental agency gave special rates to anyone who flies into town on American. A video store chain began giving out coupons good for a free night's rental to anyone that brought in an American ticket. Airline competition has often been compared to war. But you wonder did the architects of deregulation ever think that video stores would be one of the battlefields?
GARY H. MESSENGER, Video Store President: I compliment the governor for doing what he did. What do you do? You have a state. We have industry. We have jobs. There aren't too many times that I would think twice about saving jobs if I was in his position.
MR. BEARDEN: Do I conclude that it took American's threat to close the hub to generate this promotional campaign?
GARY H. MESSENGER: Threat's an interesting word.
MR. BEARDEN: It was a threat.
GARY H. MESSENGER: It was a threat. You might say we were moved off of center by the threat.
MR. BEARDEN: Since the bargain was struck, American says there's been a steady increase in traffic originating at the Raleigh hub. In December, USAir began cutting turnaround times in many of its short haul markets. A month earlier, Delta began studying the possibility of creating its own short-haul service. Not American. Their hub system is proudly displayed in the company's lobby. And their executives insist that despite the upheavals taking place in the industry, no other system could work as well for American.
DONALD J. CARTY: If you took our hub and spoke system and imposed Southwest's labor costs on our system, we'd be more profitable than Southwest is. In other words, our system isn't efficient in terms of garnering revenue. Our system is inefficient on the cost side, but so highly efficient on the revenue side, that it more than pays for it. The only thing it can't pay for is the labor cost disadvantage.
[DEMONSTRATION]
MR. BEARDEN: American has had a history of confrontational labor relations centering on that issue. Last fall, its flight attendants staged a five-day strike which the airline says pushed it into a $110 million loss for 1993. United has had similar labor troubles in the past. The pilots union has spent the last seven years trying to sell its buyout deal to United's work force partly as a way out of that kind of confrontational stalemate. That's one reason it's the focus of such high hopes in and out of the industry now that it seems to be close to reality. Employee buyouts are a relatively new idea in the airline business. TWA is trying to make it work, but it's in desperate financial straits. United is much bigger and stronger, but an employee buyout on that scale has never been tried before. Not everyone thinks it can work, even for a company not facing imminent disaster. But even skeptics like American's Carty don't doubt what's at stake.
DONALD J. CARTY: Now the question again of the '90s is: Are we going to find a way as we did in the 1980s to become more efficient and more competitive with these new entrants, or are the big, traditional carriers, United, Delta, and American, going to end up looking like Eastern, TWA, and Pan Am looked in the 1980s?
MR. BEARDEN: It sounds like you're talking about the difference between survival and extinction.
DONALD J. CARTY: I think over time we are.
MR. BEARDEN: Survival is why the industry is still tinkering with itself 15 years after deregulation. Survival is also what much of airline history has been about. The sense of crisis that filled the President's airline commission hearings last summer was real. But it wasn't the first time the airlines have faced extinction. Some travelers now remember the regulated era as a kind of paradise, so it's worth remembering that the same airline industry told another airline commission under another President of record deficits and low traffic and warned of an uncertain future. The President was Harry S. Truman. And that was in 1947. FOCUS - POLITICAL WRAP
MS. WARNER: Finally, some end-of-the-week political analysis. It comes from our regular syndicated columnist Mark Shields. Marks in Denver tonight. Joining him from Washington is Paul Gigot, columnist with the Wall Street Journal. Good evening, Paul, Mark. Mark, let's start with Bosnia. There's been a lot of analysis on this show and elsewhere all week of the President's decision in terms of its foreign policy implications, its military implications. What about its political implications, was this a politically smart thing for the President to do?
MR. SHIELDS: Well, I don't think the President really had much of a choice, Margaret. He had to act. I mean, this is the bloodiest siege in Europe in 50 years. It's been going for 22 months with 200,000 deaths and 2 million refugees. It -- the carnage of last weekend just forced the issue, and I don't think the President had a choice. It wasn't a question of avoiding it, evading it. That was not an option.
MS. WARNER: What do you think, Paul?
MR. GIGOT: I agree with Mark that the President really had to step up on this one. The TV cameras were dramatic. For a long time they didn't want to deal with it. Remember, this is a President who wants to deal with domestic issues. He feels most comfortable on domestic issues. But this is what they pay Presidents to do. You are commander-in-chief, and sometimes you have to demonstrate this kind of leadership. This is where he finds himself right now.
MS. WARNER: So, Mark, what do you think the risks are for the President in this venture?
MR. SHIELDS: Well, I think they're enormous any time we're talking about committing force into a hostile situation. The risks are, are large. I think that the President has to do a number of things between now and the time Americans do,in fact, whether they fly or are introduced as peacekeepers, as part of securing a settlement. He has to prepare the nation, Margaret, and I think that there has to be a demonstration of public consultation, of both parties, the leaders of both parties, of former Presidents, and I think there has to be an explanation to the country of just exactly what our objectives are, how we measure success, what the commitment is that he's asking the United States to make. And I think that that has to be done. The other thing he needs, and something that's been missing in the administration, is a single voice dealing with this, I mean, one single person who handles all the questions. I kind of thought Strobe Talbott was going to play that role at State but I don't know. They do need somebody to, to serve that purpose.
MS. WARNER: Do you agree, Paul, that the President has to do more to prepare the country for this?
MR. GIGOT: No question about it. I think he wishes maybe Colin Powell was still around right now, because Colin Powell had become the gold standard when it came to the credibility in using the U.S. military. And this President, in particular, with his own background as a governor and not serving in the military could use something like that. But he has to make the case to the people. And I think you can make a strong argument that he hasn't so far. I was looking at his State of the Union, for example, went back and looked. And the foreign policy section, itself, was a much smaller section than it usually is. And the Bosnia reference was five words. He basically called it the largest humanitarian airlift in history. That's it -- no demonstration of the U.S. national interest, no demonstration of the risks that might be involved here, and no expression of what the U.S. might be getting into if it did have to try to enforce a peace in Bosnia, which is perhaps putting twenty thousand Americans, twenty-five thousand, and this is if it succeeds.
MS. WARNER: Well, Mark --
MR. SHIELDS: Just one thing.
MS. WARNER: Please.
MR. SHIELDS: And that is Paul's absolutely right that this is part of being President, but quite frankly, campaigns do matter in our country. In the campaign of 1992, foreign policy was less discussed, less debated, and less salient than the final presidential decision in any presidential campaign since 1936. And I think Bill Clinton was essentially elected on a domestic mandate with jobs and health care and deficit, and I think that's obviously where his priorities lie. But -- so his non-interest or enthusiasm or involvement in matters of foreign policy are not -- is -- really comes as no great surprise.
MS. WARNER: Go ahead, Paul.
MR. GIGOT: But that's precisely why, I think, this President has a higher hurdle to jump over.
MR. SHIELDS: Okay. I understand.
MR. GIGOT: He has less credibility in Congress, for example, particularly after his first year, where you had the fiasco in Haiti. You had the Marines killed in Somalia. You had to run up and down the mountain on Bosnia a couple of times already. I think this time people have to -- in the United States -- have to be told that this is -- this is serious and this is why we're doing it, and keep being told why we're doing it.
MS. WARNER: Do you think it's possible that this could actually redound to the President's credit, Mark, if the Serbs actually take the bluff, i.e., if they do pull their guns back and, in fact, U.S. pilots never have to launch air strikes? Couldn't it make the President look strong then?
MR. SHIELDS: If there's a resolution. I don't think simply pulling back and withdrawing their artillery and being quiet for weeks or months is it. I think there has to be a final resolution. And I do want to say that I believe Paul is right. There has been a stop and start quality and aspect to our Bosnian policy. Whatever the President does from this point forward, it has to be not only explained to the American people, the American people involved, and understanding what the President seeks to do, but also, also, Margaret, it has to be consistent. There cannot be any more stops and starts.
MS. WARNER: And then, of course, as we've just pointed out, if there is a deal, then he has to come to the country and send U.S. peacekeepers there on the ground?
MR. SHIELDS: That's right.
MS. WARNER: Well, let's turn to a domestic issue now. Paul, the big event, I suppose this week was the Congressional Budget Office's assessment of the Clinton health care plan in which the office said, it's going to add money to the deficit, not reduce the deficit, and secondly, that all these receipts, all these employer- mandated insurance premiums ought to be counted as part of the budget. What does that do to Clinton's prospects with health care?
MR. GIGOT: Well, one good thing is we behold even in Washington an honest man. Robert Reischauer has done what a lot of people think politicians in Washington don't do very often.
MS. WARNER: Head of the CBO.
MR. GIGOT: Head of the CBO. He told the truth. He told the truth. And in doing so, I think, he made it more difficult for the President to sell his health care plan the way he was selling it. That doesn't mean he still can't sell it, but they were saying, telling us not, not that there were any taxes involved in this, but they were premiums, and that, and that there wasn't a great deal of government involvement in this when, in fact, Mr. Reischauer said there really is. And I think maybe this opens it up for us to have a more honest debate about really what the principles are that are at stake between some of the different bills. Now, the problem for the President, however, is that it probably means that his bill is not going to succeed; it may not be dead altogether. But it does open the field up for some of his principles to be joined to some of the other plan's principles and maybe they can still work something out. But if I were the President, I'd be working on thinking of a compromise strategy at this point. I think they are at the White House.
MS. WARNER: Mark, how do you see it?
MR. SHIELDS: I think the Reischauer testimony, no doubt about, just as the White House sought to hold off the Conference Board's endorsement last week of the Cooper plan, and they were also trying to discourage Robert Reischauer from making this testimony. There were parts, if Paul is going to comment Robert Reischauer as an honest man, which I think he is and I've always found him to be, there were other parts that he did say in his report that beyond it's being a tax, which I think most people have acknowledged that it probably is and does constitute, it eventually, Margaret, does, in fact, extend universal coverage according to Reischauer's judgment and report to all Americans at a cheaper price than we would be paying, so that the underlying premise of the President's plan is -- remains certainly valid in that respect. It does lower the cost eventually as well. It doesn't do as much for the deficit as the White House had boasted. I do think that the President rather adroitly in the State of the Union speech redefined victory on national health as including the universal, universal coverage. That was his standard that he expressed, and I think that's how eventually it'll be judged. I don't count out Bill Clinton. I counted him out enough times in 1992. I just came from California where Kathleen Brown, the state treasurer, announced her candidacy for governor. I'm old enough to remember 32 years ago when her father defeated Richard Nixon, who was then counted out and took himself out of politics and 10 years later, Dick Nixon won a 49-state landslide sweep. I think the Clinton idea plan is alive, and I think Paul is right, that the Clinton plan as written will never be on the statute books of the United States.
MS. WARNER: Well, gentlemen, are there any aspects of the Clinton plan we can say now are dead? Paul.
MR. GIGOT: Well, I think the one that's in the deepest trouble, frankly, is the employer mandate, which is the one that would require businesses to pay the premiums which are now called taxes, to pay for the plan. The business community is virtually unanimously against it now. Mr. Reischauer said basically they are premiums; they are taxes. And it's going to be very hard at this point to resuscitate that part of the program. And the difficulty for the Clintons is if you don't -- if business doesn't pay for them, then you have to do it through general revenues, which means taxing citizens through what the single payer people, who in some ways are the most sincere people in all this, say candidly is a tax. I mean, Jim McDermott in his single payer bill says we're going to propose an 8.4 percent payroll tax. Well, then we can fight that out.
MS. WARNER: Mark, do you agree, quickly, before we go, are employer mandates dead?
MR. SHIELDS: No, I don't think employer mandates are dead, I really don't. I don't think that we're talking obviously the magnitude that we were before. I do think that alliances are in big, big trouble right now, however, and I'm glad to hear Jim McDermott, Dr. Jim McDermott, finally had his name put on the single payer plan. We have Cooper, Chaffee, and Clinton. It's time that McDermott, which was endorsed this week by the College of Surgeons of the United States, got a little circulation and a little attention.
MS. WARNER: Well, Mark, we'll call it the McDermott plan from now on.
MR. SHIELDS: Okay.
MS. WARNER: Thank you, Mark, Paul. RECAP
MR. LEHRER: Again, the major stories of this Friday, terrible winter weather continued with an ice storm in the South and snow from the mid-Atlantic states to New England. Governments, schools, business, and airports were shut down. U.S./Japanese trade talks ended with no agreement, and in Sarajevo, the day-old cease-fire appeared to be holding. Both Bosnian and Serb forces surrendered some heavy weapons to U.N. troops. On the NewsHour tonight, Sec. of State Christopher said the United States would hold direct meetings with the Muslims, Serbs, and Croats in an attempt to reach a settlement. He said the Serbs would have to make the principal concessions. Good night, Margaret.
MS. WARNER: Good night, Jim. That's it for the NewsHour tonight. We'll be back Monday night with an interview with Japanese Prime Minister Hosokawa. I'm Margaret Warner. Good night.
Series
The MacNeil/Lehrer NewsHour
Producing Organization
NewsHour Productions
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NewsHour Productions (Washington, District of Columbia)
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cpb-aacip/507-xw47p8vf42
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Episode Description
This episode's headline: Newsmaker; Turbulence; Political Wrap. The guests include NEWSMAKER: WARREN CHRISTOPHER, Secretary of State; MARK SHIELDS, Syndicated Columnist; PAUL GIGOT, Wall Street Journal; CORRESPONDENT: TOM BEARDEN. Byline: In New York: MARGARET WARNER; In Washington: JAMES LEHRER
Date
1994-02-11
Asset type
Episode
Topics
Economics
Global Affairs
Environment
Energy
Science
Weather
Transportation
Politics and Government
Rights
Copyright NewsHour Productions, LLC. Licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International Public License (https://creativecommons.org/licenses/by-nc-nd/4.0/legalcode)
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00:59:15
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Producing Organization: NewsHour Productions
AAPB Contributor Holdings
NewsHour Productions
Identifier: 4862 (Show Code)
Format: Betacam
Generation: Master
Duration: 1:00:00;00
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Citations
Chicago: “The MacNeil/Lehrer NewsHour,” 1994-02-11, NewsHour Productions, American Archive of Public Broadcasting (GBH and the Library of Congress), Boston, MA and Washington, DC, accessed March 29, 2024, http://americanarchive.org/catalog/cpb-aacip-507-xw47p8vf42.
MLA: “The MacNeil/Lehrer NewsHour.” 1994-02-11. NewsHour Productions, American Archive of Public Broadcasting (GBH and the Library of Congress), Boston, MA and Washington, DC. Web. March 29, 2024. <http://americanarchive.org/catalog/cpb-aacip-507-xw47p8vf42>.
APA: The MacNeil/Lehrer NewsHour. Boston, MA: NewsHour Productions, American Archive of Public Broadcasting (GBH and the Library of Congress), Boston, MA and Washington, DC. Retrieved from http://americanarchive.org/catalog/cpb-aacip-507-xw47p8vf42