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JIM LEHRER: Good evening. I'm Jim Lehrer. On the NewsHour tonight Wall Street reacts to troubled Asian markets, a Newsmaker interview with the Chinese ambassador to the United States, a Tom Bearden report on airline prices, and some perspective on the king of basketball, Michael Jordan. It all follows our summary of the news this Monday.% ? NEWS SUMMARY
JIM LEHRER: NATO air forces conducted simulated combat exercises over Macedonia and Albania today. Secretary-General Javier Selana said the aim was to convince Yugoslavia to end its crackdown on ethnic Albanians in Kosovo. He said NATO was prepared to take further action. We have a report from Paul Davies of Independent Television News.
PAUL DAVIES, ITN: Not a shot had been fired, but as more than 80 warplanes returned to their bases on land and at sea, with their operation completed, NATO commanders were hoping Serbia's President Milosevic will have noted their not so subtle warning. From dawn planes from 13 NATO countries maintained highly visible patrols along Yugoslavia's borders with Albania and Macedonia, exercise determined Falcon intended to demonstrate just how quickly NATO could intervene if the conflict in Kosovo continues. However, with Yugoslavian army helicopters still dominating the skies over Kosovo, there's no immediate sign the warning is being heeded. These refugees claimed the helicopters attacked a village yesterday, forcing them to run towards Albania. The UN Secretary-General today talked of a program of ethnic cleansing being conducted by Serbian forces.
JIM LEHRER: On Wall Street today the Dow Jones Industrial Average had its second worst showing this year. It closed down 207 points or 2.4 percent at 8627.93. The loss was led by a plunge in financial markets throughout Asia. It was the first full day of trading there since Japan reported it was officially in a recession. The Japanese yen dropped against the dollar, and the Tokyo stock market average fell nearly 200 points or 1.3 percent. That touched off big losses in Hong Kong and elsewhere. We'll have more on the markets right after this News Summary. Goldman Sachs announced today that it was going public. The largest privately-held Wall Street company said it will sell up to 15 percent of the firm. Its executive committee said it would make the investment bank more competitive. Goldman Sachs had profits of more than $3 billion last year. The Midwest and Northeast braced for more rain and flooding today. Forecasters predicted the possibility of four inches tonight in the Northeast. Some parts of New England received 10 inches over the weekend. Boston declared a state of emergency with 9.9 inches of rain. In Southwestern Iowa a record 13 inches fell. Rising water flooded roads, houses, and damaged boats. A kayaker drowned in the rushing currents of the swollen river. Parts of Missouri, Oklahoma, Nebraska, and Kansas cleaned up today after weekend tornadoes. Iraq could be closer to having United Nations economic sanctions lifted according to Chief Weapons Inspector Richard Butler. He said today Iraq had been complying with UN demands to disarm. He and Iraqi Deputy Prime Minister Tariq Aziz agreed on a schedule for speeding up weapons inspections.
RICHARD BUTLER: We worked on the basis of the road map that we brought to Baghdad, and agreement was reached on a program of work for the next two months under which working together we will hope to bring to final account the major outstanding issues with respect to Iraq's prescribed weapons of mass destruction.
JIM LEHRER: A satisfactory report from Butler could lead to ending sanctions imposed after Iraq invaded Kuwait in 1990. They limit Iraq's exports of oil, its main commodity. Back in this country there was another school shooting today, this one in Richmond, Virginia. A 14-year-old boy was arrested after he allegedly opened fire in a hallway. A teacher and a volunteer aide were injured, neither seriously. Police said the shooting followed an argument between two students. The Chicago Bulls are the National Basketball Association Champions again. They beat the Utah Jazz in Salt Lake City last night by one point, 87 to 86. Michael Jordan led the Bulls, with 45 points, 8 of them in the last crucial minutes. We'll have more on this man, Jordan, at the end of the program tonight. Between now and then the stock market, the Chinese ambassador, and airline prices.% ? FOCUS - FALLING MARKETS
JIM LEHRER: Margaret Warner has the market story.
MARGARET WARNER: A bad day in Asian markets, a bad day on Wall Street. To tell us what's going on we're joined by David Malpass, chief international economist at the New York investment firm Bear Stearns. He's a former Treasury Department official during the Reagan administration. Welcome, Mr. Malpass. Why did the market go down 207 points today?
DAVID MALPASS, International Economist: It was concern over Japan and the spillover. Japan's yen has gone through now 146, so that's a weak level for the yen. And their GDP numbers are shrinking at a 5 percent annual rate.
MARGARET WARNER: Explain-take us through this step by step, the connection between the yen and American investors. First of all, why-how much has the yen dropped say in the past year and why?
DAVID MALPASS: Well, it's dropped from roughly 120 or 125 to the 146 level, so that's maybe 15 percent over the last year. That's a combination of factors. Let me cite three: first, fundamentals in Japan are weakening. The economy is in recession, so people don't want to own assets in Japan. That's one. Second is momentum. Once a currency starts weakening, then the tendency is to keep weakening. And then thirdly there were some comments last week by the U.S. Government and over the last month by the U.S. Government that the market may have interpreted as a bit of indifference about the yen. Treasury Secretary Rubin spoke to the Senate Finance Committee and indicated the currencies are governed by fundamentals. Well, that seemed to be saying that the U.S. didn't want to intervene or try to affect the course of the yen. That allowed the market to continue selling.
MARGARET WARNER: So why does a drop in the value of the yen and a drop in the Japanese stock market spook investors in the United States?
DAVID MALPASS: It involves corporate earnings. As we look at U.S. companies, they begin to look at a world environment that's no longer growing. Not only is Japan in recession now, Southeast Asia and South Korea are in an actual depression. And the economy in China is slowing down. The concern is that combinations will lead to lower earnings in the U.S..
MARGARET WARNER: Briefly, which sectors of the U.S. economy are most affected by that, which industries?
DAVID MALPASS: It's been rotating around. To an extent, multinationals come into concern, but those with steady earnings growth, steady sales growth, such as the pharmaceuticals, haven't been as much affected. Getting a real read on the U.S. sectors is a tough job, because there's a tendency to mis-estimate what company sales and earnings are going to be.
MARGARET WARNER: Now, the market, the U.S. market is actually down, I think, some 600 points just in the past month. Again, is this the same factors, or others?
DAVID MALPASS: I think it's largely an Asia-related factor. As the stock market and currencies in Asia have gone through a second round of weakening really since April, that's renewed this concern about how it affects the U.S. economy. Also, we should note that the U.S. market was at a big high, and so part of this is simply the natural kind of correction that comes after a big run-up.
MARGARET WARNER: And then where is this money going, the money that's leaving the U.S. stock market or the Asian stock market?
DAVID MALPASS: Actually, there may not be that much money leaving the markets. When a market goes down, sometimes it's simply a reduction in the value of the market, itself. Now in the case of Japan and Southeast Asia there is some money still coming out of those countries. That money has been going into the U.S. in the form of both the bond market and the stock market here. That was helping our markets in the first quarter, but then by now in June we're seeing weakness, some weakening in the flow there also.
MARGARET WARNER: Is there a way that the U.S. stock market can rebound if the Japanese economy remains weak?
DAVID MALPASS: Yes, actually there is. U.S. earnings can be strong even if Japan is in a recession if we have strong consumption in the U.S., strong investment levels in our own corporations, the public is patient in terms of keeping their money in the stock market and the bond market, and then we also have Europe staying strong. If those factors hold together, then you can have this polarization in the way of the world economy where the U.S. and Europe do well, Asia does poorly. One of the key issues in my mind is going to be whether more things break in Asia. We have to worry about the effect tomorrow morning in Asia of the U.S. sell-off and then what's going to happen to Asian currencies due to the weakness of the Japanese yen. I'm worried, for example, about the Korean currency.
MARGARET WARNER: All right. Well, thank you very much.
JIM LEHRER: President Clinton goes to China in 10 days, and we're going to talk about that trip and other matters now with the Chinese ambassador to the United States, Li Zhaoxing. He's a career diplomat, who served as ambassador at the United Nations and as vice minister of foreign affairs before coming to Washington earlier this year. I spoke with him this afternoon.
JIM LEHRER: Mr. Ambassador, welcome.
JIM LEHRER: First on the increasing economic problems in Asia, your government has been critical recently of Japan? What is it that you would like Japan to do?
AMBASSADOR LI ZHAOXING: Well, the recent crisis in the financial area suffered by some of China's neighbors is really a serious development, and many countries of the world have rushed to help, to help those countries to overcome the impact of the financial crisis, to help Asia to stabilize the financial situation. Japan is an economic giant, so people have every reason to hope and expect that it will do more and better.
JIM LEHRER: Is the falling value of the yen affecting China?
AMBASSADOR LI ZHAOXING: China's exports have already felt the impact, and they have suffered some slowing down of the export pace; however, China has its own strong points, and the government has taken some effective measures to address the issue--to give the whole year we believe we can still make the target they have set for development.
JIM LEHRER: But your bottom line is that Japan should be doing more than it is doing?
AMBASSADOR LI ZHAOXING: You are right. And this is also my impression I have gathered from my meetings with quite a few of your congress people on the Hill, and many of them have also some complaints about the problems of Japan.
JIM LEHRER: All right. On President Clinton's upcoming visit to your country, many questions have been raised in this country in the last several days, last few weeks, about whether or not President Clinton should go to Tiananmen Square. What do you think about that?
AMBASSADOR LI ZHAOXING: Tiananmen Square is the symbol of Beijing, capital of China. All the Chines people are proud of Tiananmen Square, and Tiananmen, itself, is also embodiment of the civilization of 5,000 years of China. And the Chinese government always receives foreign heads of government, foreign heads of state at Tiannamen, so this is a simple reason-we just want to give the due welcome, the warm welcome to President Clinton, as we should, just as we give welcoming ceremonies to all the other leaders and foreign heads of state and heads of government.
JIM LEHRER: What do you say to those who say that his presence there says it's okay what happened here nine years ago during the pro democracy uprising?
AMBASSADOR LI ZHAOXING: To begin with, what happened that long ago was entirely and still is China's internal matters, and whether the decisions made by the government in 1989 had proved to be the right option. Without what the government had done, China wouldn't be able to enjoy the stability and the economic prosperity as it is enjoying today.
JIM LEHRER: Would your government consider it inappropriate and insulting if President Clinton spoke out about that incident in 1989, when he is there later this month?
AMBASSADOR LI ZHAOXING: In China we have a high regard and respect for the President of America. The government and people are looking forward to the up coming of President and Mrs. Clinton, and your question I suppose is a hypothetical one.
JIM LEHRER: What do you make of the way Tiananmen Square veterans-in other words people who were involved in the demonstrations, the pro democracy movement in your country, who have come to the United States-they are treated as heroes-they are given great respect, interviewed widely on this television program and other television programs--does that offend you?
AMBASSADOR LI ZHAOXING: Some of the people are here, I know, and I know some of the Americans look at them from their own perspective, and about democracy, itself, we believe we have a different understanding or interpretation in China. We do attach great importance to people's political and democratic rights, however, we also believe that either personal or individual freedom of democracy should not go against law, should not go counter to the provisions of the country's constitution, and should not go against other people's basic interests.
JIM LEHRER: Many of these young leaders have said that they intend to return to China someday and to lead the pro democracy movement in a way that changes human rights and the basic rights of all Chinese citizens. Do you see that happening?
AMBASSADOR LI ZHAOXING: There is a quite shocking lack of understanding about China's position on human rights. I believe both of our governments and the peoples have at least one common ground on human rights: that is, we both attach great importance to the issue. The Chinese government attaches great importance to its people's political rights, economic rights, and social rights. Also, for China, the government, the Chinese people, themselves, have after many, many centuries' efforts realized the goal of producing, you know, to feed ourselves-to feed our 1.2 billion people. This is one of the most fundamental rights of people--and this by itself is a great contribution to the human rights cause of the whole world. At the same time we are strengthening and focusing the rule of law to make sure that all people, all citizens can have freedom in their religious beliefs and otherwise. So the issue you have raised maybe is not very much relevant.
JIM LEHRER: To the people of China?
JIM LEHRER: Even though it may seem very relevant to the people of the United States?
AMBASSADOR LI ZHAOXING: You're referring to some of the American people, not all of them. Those who know China better will have a different view.
JIM LEHRER: Another issue: China has helped Pakistan become a nuclear power. Why did you do that?
AMBASSADOR LI ZHAOXING: That is not true. That allegation has nothing true in it, and such fabricated story being spread out is not at all useful for people to know the true reality, and it is not useful to the really good understanding of all peoples.
JIM LEHRER: China provided no nuclear know-how, no nuclear technology in any way to Pakistan?
AMBASSADOR LI ZHAOXING: China is a party to the NPT.
JIM LEHRER: That's the Nonproliferation Treaty.
AMBASSADOR LI ZHAOXING: That's right And China has also signed the CBTC. China has always been serious and conscientious in making its commitment good. We have never gone back on our international commitment.
JIM LEHRER: So that's a false accusation when somebody says China helped Pakistan develop its nuclear capability?
AMBASSADOR LI ZHAOXING: That's right. It is entirely false, groundless, and maybe also a story cooked up with ulterior political motives.
JIM LEHRER: By whom? Who would have those?
AMBASSADOR LI ZHAOXING: Those story tellers.
JIM LEHRER: Story tellers. India said one of the reasons they exploded their-made their nuclear tests was because they feared China as a possible-not necessarily invader or anything like that, but in order to have some kind of parity with China, they needed to have a nuclear capability. What's your response to that?
AMBASSADOR LI ZHAOXING: I believe no other country knows better that China, the Chinese government and people, have been making great efforts in improving relations with that country, with India, and that accusation of China as constituting a threat to India is entirely groundless. And the Indians, I believe, know themselves very well that they are only trying to find a convenient pretext and excuse for the nuclear tests to be carried for five times in but two days, defining the common efforts and the common opinion of the whole world in the field of nonproliferation and in maintaining world peace and regional stability.
JIM LEHRER: Finally, Mr. Ambassador, putting all these things together, the non-proliferation issue, the human rights issue, Tiananmen Square, the President's coming there--all the other things, plus satellite technology, a lot of other things-we could be talking about an investigation going on, allegations that your government tried to put money into U.S. political campaigns. What should the average American think about China now? How should we view you and your country?
AMBASSADOR LI ZHAOXING: Well, to begin with, let me say very briefly that some of the stories you have touched upon, such as the dimension of the financing of American election-the so-called political contribution--are not only untrue but also sounding very absurd to a Chinese ear. We have never interfered with any foreign country's domestic politics, including their elections. To say that is really going too far. I really admire the founder or the teller of such a story's imagination, however, this kind of imagination has been put to a wrong use and for the wrong purpose. The same thing is true with the story of the secret passing or illegal passing of high tech to China's rocket corporations, which helped to launch American made satellites. Well, the Chinese are also feeling hurt by the arrogance of the people who spread such an accusation. The Chinese scientists and engineers--by relying on their own efforts-have developed such rockets which are capable to launch satellites. I don't think it's a good thing that people should indulge themselves in cooking up and fabricating such stories, because they are not useful, they are not true. And the other day I was kidding with some of the French here, that if we let such a trend of thinking go on and on, some day they might tell us that it was they who had passed the technology to the Chinese as how to make and use chopsticks.
JIM LEHRER: I see. What does all this add up to? Why is all this happening? If there's no truth to any of these stories about your country, whether it's Pakistan or whether it's technology or whether it's campaign financing or any of these other things, what's happening?
AMBASSADOR LI ZHAOXING: This is a very good and important question. I hope both of us-both of our peoples will spend some time to look into the matter to find the right answers. My primary impression is that first there is a lack of understanding. That's why we are welcoming our American friends to go to China to see the real thing there. We are also welcoming dialogues between the two sides, and two, I wouldn't like to say that without being asked, that is--some of the people here have very special political purpose of drawing China and drawing the Sino-American relationship into America's domestic politics. Maybe the second point is there is no basic cause for the coming up of such a number of ill-founded stories.
JIM LEHRER: Mr. Ambassador, thank you very much.
AMBASSADOR LI ZHAOXING: I thank you. It's a pleasure to talk to you. And it's a pleasure to have such a good dialogue.
JIM LEHRER: Thank you, sir.
JIM LEHRER: Still to come on the NewsHour tonight airline pricing and an athlete named Michael. Tom Bearden has the airline story.
TOM BEARDEN: A recent morning at Metro Airport in Detroit. The airline was having labor problems. Flights were being delayed or canceled. The lines were long. Tempers were short. Joseph O'Connor picked up some reading material for his one-day business trip to Milwaukee. Like many entrepreneurs hustling to build up a young business, he's on the road a lot, and like most business travelers in Detroit, he flies Northwest a lot.
JOSEPH J. O'CONNOR, Business Traveler: Frankly, it reaches points of frustration where if you had a choice, you'd jump in a minute. It's-you know-loyalty, when it's defined by a virtual oligarchy here, it's a different definition than how loyalty would be defined in the truly competitive environment.
TOM BEARDEN: But O'Connor really doesn't have much choice. Northwest dominates this airport. O'Connor lives in what airline people call a fortress hub. An airport becomes a fortress hub when one airline uses it as a major transfer point for flights from many different cities. Such an airline usually winds up controlling the bulk of the airport's traffic. Northwest has 75 percent of Detroit's business, 77 percent in the twin cities. Congress has been hearing a growing chorus of complaints that fortress hub airlines are acting like monopolies and grossly overcharging some people.
SEN. MIKE DE WINE, (R) Ohio: Whenever a new airline announces a new service, particularly into a so-called "fortress hub," it faces stiff price competition.
TOM BEARDEN: It's part of a larger debate about where airline deregulation has gone 20 years after it began.
SEN. HERBERT KOHL, (D) Wisconsin: So though consumer choices increased as a direct result of airline deregulation, the benefits have not been distributed equally or universally. This sometimes costs a walk-up passenger over 12 times as much per mile to fly from Milwaukee to Minneapolis as it does from Milwaukee to San Francisco on the same airline and connecting on the very same flight through the same Minneapolis hub.
TOM BEARDEN: Northwest's Michael Levine believes that hubs have benefits, as well as drawbacks.
MICHAEL LEVINE, Executive Vice President, Northwest Airlines: Look, at Detroit now you are non-stop to hundreds of places in the world and one stop to virtually every place in the world. Which would you rather have, lower fares and no-nonstop service, or much less nonstop service, or the fares you have and lots of nonstop service? And he says, oh, I don't like either of those choices-what I'd like is lower fares and lots of nonstop service. And then it's my education failure that he doesn't believe that choice is physically not available.
TOM BEARDEN: Nobody envisioned mega carriers and fortress hubs when the government deregulated the industry in 1978. The vision was of a dynamic marketplace with a lot of medium-sized airlines constantly at each other's throats, keeping fares low. Anybody who tried to gouge passengers would find themselves facing immediate competition. In Detroit, tiny ProAir put that theory to the test when they looked at Northwest's prices and saw an opportunity. Last year the start-up carrier began flying out of Detroit's then deserted city airport. They offered service to some heavily traveled destinations at rock bottom prices. David was slinging cheap tickets at Goliath's customers. That was supposed to bring lower fares to the market. But that was only Act 1. Act 2 came when Northwest hit back hard, illegally hard, ProAir's chairman argued before a Senate committee.
KEVIN C. STAMPER, Chairman, ProAir: They actually matched us all day long, as long as we had two flights a day in the market. So if they had eleven flights a day in the market, and we had two, they'd match us on every flight every day, basically every seat.
TOM BEARDEN: When ProAir entered the Milwaukee market, Northwest was running six flights a day at standard fares. ProAir put in two flights offering a total of a couple of hundred seats at low fares. Northwest then matched that fare on all six of their flights. ProAir believes that Northwest cut the price not only on a few seats but on thousands, flooding the market with cheap inventory.
SPOKESMAN: So, then what did you do, once they did that to you, what happened then? You would then withdraw one flight-or I want to make sure I got the facts.
KEVIN C. STAMPER: Well, in markets that we couldn't make it with that type of price competition, we withdrew from the markets ultimately. We withdrew out of Milwaukee. First we took one flight out, then we took the second flight out.
TOM BEARDEN: ProAir thinks Northwest was deliberately taking losses to drive them out of the market. That's called predatory pricing, and it's against the law.
KEVIN C. STAMPER: I think that the pricing behavior and maybe some of the other behavior has gone over the line. It's hard to totally be sure, without having access to their data and what they're doing, but the kind of price-matching we received, there doesn't seem to be a logic to it, unless you have a chance to recoup the losses later on when we would exit the market.
TOM BEARDEN: Northwest disputes some of those claims and points out that fares in Milwaukee stayed low after ProAir left. Yet, other low-fare airlines have made similar claims. In 1996, Little Spirit Airlines had one daily flight from Detroit to Boston. It dropped out after Northwest matched its low prices on every one of its eleven Boston flights. Other airlines have gone to court, accusing mega carriers of trying to drive them out of business, taking a temporary hit on profits so they can raise prices later. But Michael Levine says Northwest's behavior in these cases was nothing of the sort.
MICHAEL LEVINE: In each case we've satisfied ourselves that we would make more money or lose less money matching those fares than we would have not matching them. That didn't say that we would have made as much-doesn't say we made as much money as we would have made had they never entered the market in the first place, but we don't control that. It's a free country. You can enter those markets. We respond then they are also free to set the price the way they want to set it. We're free or should be and should remain free to respond as we see fit, trying to minimize the damage or maximize the opportunity from that entry, and that's what we did either time. What I can say very specifically is in no case did the calculations include the prospect of driving them out of business.
TOM BEARDEN: In fact, Northwest believes pricing is such a complex issue that it's almost impossible to prove a clear cut case of predatory pricing. Take fares, for example. Average fares are demonstrably lower than they were when airlines were regulated, but, as everyone knows, they're a lot more complicated. Chances are that no two people on a given flight pays exactly the same fare.
FIRST WOMAN: I'm going home to Atlanta. It was $164.
SECOND WOMAN: I'm leaving the Detroit Airport to Atlanta--$245.
FIRST MAN: I'm leaving from Detroit, going to Atlanta, returning tomorrow. My ticket price was $184 round trip.
SECOND MAN: Where we came from was Atlanta, Georgia. We're flying round trip. And it was $384 apiece.
THIRD MAN: $184.
TOM BEARDEN: Round trip?
FOURTH MAN: A few dollars less than his.
FOURTH MAN: They like me better. (laughing) I don't know.
TOM BEARDEN: Airlines track the sale of every seat on every flight. They can watch a graph that shows the plane filling up as the departure date nears. Sophisticated computer programs and long experience tell them how many seats they can sell in different discount categories-like twenty-one day or seven-day advanced purchases-and how many to hold back to accommodate the last-minute travelers who they know will be willing to pay the full fare. Levine has a simplified way of explaining it.
MICHAEL LEVINE: If you imagine that it costs $100 to take a two-seat airplane from A to B and have one customer who will pay $40 and one customer who will pay $70, the only way I can fly that flight is to charge them two different prices. If I try to charge $70, I only have one customer, and the flight doesn't go. If I try to charge $40, I have two customers, but not enough to pay for the flight. The flight doesn't go. I have to charge one $40 and one $70 in order to make that $100 trip go, pay for itself. Now, as soon as they get on the plane and start comparing notes, the guy who paid $70 will say, I don't get it; I'm being gouged.
TOM BEARDEN: So the fare structure provides discounts for most fliers, but cynics say the system is also getting better and better at knowing precisely who will pay those high last-minute fares. On this day Joe O'Connor was flying on a discount fare, but he and others don't forget the many times they've had to pay the full freight.
JOSEPH J.O'CONNOR: There are flights from Detroit to New York and to Boston and to Washington, National Airport, that are either $1,000 or close to $1,000. It seems to me to be expensive.
TOM BEARDEN: But you paid the fare.
JOSEPH J. O'CONNOR: Well, I didn't have any choice, did I? That's what's available to me, and I have to be in Washington to conduct my business.
TOM BEARDEN: Entrepreneurs like O'Connor grumble and pay. Larger firms, like Kelly Services in suburban Troy, can be less ad hoc about it, with full-time travel departments that can systematically search for bargains.
JACK REYNAERT, Travel Manager, Kelly Services: The air fares are typically 24 percent lower on trips that are planned at least seven days in advance.
TOM BEARDEN: But even they have to adapt. Traveler Manager Jack Reynaert now encourages people to hold meetings on weekends to take advantage of Saturday night stay discounts. Once that would have been unthinkable.
JACK REYNAERT: If you look at air fares coast to coast, you've seen some air fares in the two to three hundred dollar range, but if you look at an air fare on an hour and a half flight, from like Detroit to Minneapolis, it's over $900. There isn't much logic to that. There was a case the other day where we had our travel consultant was on the phone with the airline researching a problem with one of the air fares and within the 20 minutes she was on hold working with the airlines, the air fare changed three times on the same reservation.
TOM BEARDEN: But it's more than just a matter of confusion. Critics say that pricing practices are one of the things responsible for the slowdown in new airline start-ups. Some of the criticism has mushroomed in to political activism. Corporate travel managers got a chance to grill airlines and political leaders at a recent airline competition summit in Washington. Kevin Mitchell was one of the organizers.
KEVIN MITCHELL, Chairman, Business Travel Coalition: If an air fare is set truly by the give and take and the supply and demand in the market, then no one is really concerned. What concerns companies is when competition is frustrated and new entrants to airports are blocked, and the consequence of that results in higher air fares. We have gone from one new entrant applicant to the DOT every six weeks to virtually none in the past twelve months. So the discipline that was inherent in the system is no longer there. And we have a series of allegations of predatory practices against new entrants that are again giving concern that that's supporting higher prices.
TOM BEARDEN: The Department of Transportation is listening. It recently announced a plan designed to separate hardball competition from predatory pricing.
SPOKESMAN: We want to promote a pro-competitive, pro-consumer environment.
TOM BEARDEN: The agency's test will be to look at what happens when a new airline enters a market and offers low prices. Normally, the existing airlines respond by cutting prices for seats that previously cost more. The key to the analysis is who flies in those newly cheaper seats. According to the DOT's theory there are three different classes of fliers. Some would have taken the new airline until the existing airline matched the price. Some wouldn't have flown at all until they heard about the new cheap fares. And some were going to fly anyway at the high prices. They're still flying at the low price. That's a dead loss of revenue for the existing airline. The Department's general counsel, Nancy McFadden, says that's the figure they'll be watching.
NANCY E. McFADDEN, General Counsel, Department of Transportation: If a major carrier, in response to new entry, lowers its fares, increases its capacity at those low fares to such an extent that either it is clearly substantially diverting revenue that it would otherwise get at higher fares and clearly taking short-term losses that can't be explained, that don't make a lot of sense just by saying you want to compete, we believe that that is unfair competition, and we will initiate an enforcement proceeding.
MICHAEL LEVINE: The problem with distinguishing healthy vigorous competition from predation is so great that even though there may be occasional instances of predation, there's probably nothing the government can do that wouldn't do more harm than good.
NANCY E. McFADDEN: The kind of behavior that we're aiming at with this policy, the kind of behavior that we saw that gave us the most concern in our informal investigation, was behavior that really reached outrageous levels.
TOM BEARDEN: No one ever predicted the air transportation system we have today. Executives, passengers, and lawmakers all have different views about what the ideal system should look like, or whether that ideal is even reachable. After a generation of experience, airline deregulation is still an ongoing experiment, and its final form, if any, is still unknown.% ? FOCUS - KING OF THE COURT
JIM LEHRER: The Michael Jordan story and to Phil Ponce.
PHIL PONCE: Last night in Utah, another classic Michael Jordan performance.
SPOKESMAN: --Here comes Chicago-17 seconds-17 seconds from game seven or from championship number six. Jordan-open-Chicago with the lead!
PHIL PONCE: With a victory over the Utah jazz, perhaps the most famous athlete in the world had just led his team to its sixth NBA championship in eight years.
MICHAEL JORDAN: The moment starts to become the moment, you know, for me. Once you get in the moment you know when you're there, you just-things start to move slowly; you start to see the court very well. You start reading what the defense is trying to do, and I saw that. I saw that moment, and, you know, when I saw the moment, the opportunity to take advantage of it, when Russell reached, and I took advantage of that moment, and I never doubted myself, I never doubted the whole game.
PHIL PONCE: Jordan's basketball beginnings were not promising. He was actually cut from his high school basketball team in Wilmington, North Carolina, his sophomore year. He eventually made the team and led it to the state championship. Many fans got their first glimpse of Jordan's talent in 1982. That's when--as a freshman at the University of North Carolina--he scored the game winning shot against Georgetown to win the national collegiate championship. Fans loved Jordan from the start and so did advertisers. Nike signed him to a multi-year, multi-million dollar deal to promote a show inspired by Jordan called "The Air Jordan." The current model costs $150. And it's not just sneakers that have had the Jordan stamp of approval-there's Coca-Cola, Wheaties, Oakley Sunglasses, Ray-O-Vac Batteries, and Gatorade. Jordan teamed up with Bugs Bunny in 1996 in the animated feature film "Space Jam." So far it's made $439 million worldwide. His name seems to be everywhere. There's Michael Jordan Cologne, which has grossed more than $155 million-and this year, his own line of clothing. And the so-called Jordan effect rubbed off on others. He's credited with boosting TV ratings for NBA games. And NBA merchandise is selling at record levels, with Jordan's jersey the most sought after item. One study-reported recently in Fortune Magazine-estimates Jordan has generated more than $10 billion for the U.S. economy. After winning his third straight NBA title in 1993, there were troubles. Jordan's father was killed by armed robbers in North Carolina. The NBA began an investigation into allegations that Jordan had illegally bet on NBA games. He was eventually cleared. And Jordan was caught up in the controversy caused by allegations that some Nike sports shoes made in Asia were manufactured in sweatshop conditions. In 1993, Jordan surprised his fans by announcing he was hanging up his Air Jordans.
MICHAEL JORDAN: When I lose the sense of motivation and the sense of to prove something as a basketball player, it's time for me to move away from the game of basketball.
PHIL PONCE: After a brief and unsuccessful attempt at professional baseball, Jordan returned to the NBA in 1995. It was as if he'd never left. Last night's 45 point performance helped the Bulls win their third championship in a row since Jordan's return. And this year, amid speculation he'll retire for good, he was named the NBA's most valuable player for the fifth time and won his 10th scoring title.
PHIL PONCE: For more we're joined by Bill Russell, who won 11 championships as the center for the Boston Celtics. He became the first African-American head coach in the NBA when he took over as player/coach of the Celtics in the late 60's. He's been voted one of the top 50 players of all time. And Jack McCallum, a senior writer for Sports Illustrated, who has covered Jordan and the NBA beat. Gentlemen, welcome.Bill Russell, you have played against other great players. You have watched other great players. What, in your opinion, makes Michael Jordan a great player?
BILL RUSSELL, Hall of Fame Player/Coach: Well, he, first, is a very physically talented young man, extremely bright, and has complete knowledge of the game and what it takes to win.
PHIL PONCE: There are other players who have those attributes. Does he bring something extra, speaking as a player from one player observing another player?
BILL RUSSELL: Well, then he has this-it's like a computer in his head that he knows all of his multiple skills, which ones he uses, and when to use them, to win the game, because you see the thing is what makes him a great player is his sense of priority, what is important.
PHIL PONCE: And how about the attitude that he brings to the game, Mr. Russell?
BILL RUSSELL: Well, that is what makes him great is his attitude. I think that after I've watched him play I guess hundreds of times since he was a kid, and the enthusiasm and the will to win has been there all the time, and what I like about him is that even today in the regular season games he shows up to play just like he played when he was in high school or in college, just as hard, with just as much dedication, and with just as much intensity.
PHIL PONCE: Mr. McCallum, how do you see it? How do you define what makes Michael Jordan distinct from the other great players that-other great players like Mr. Russell and people he's played with?JACK McCALLUM, Sports Illustrated: Well, one of the things about Michael that Bill didn't have was that Michael has the ability as a guard to control the whole game. He can put the ball in his own hands when he wants to. Furthermore, the team has a total belief in what-in him and what they have to do. For the last 12 years in any clutch situation there was never a debate on the Chicago Bulls bench about whether we're going to throw it into the center or whether or not we're going to let Scotty Pippin shoot, we're going to give Michael Jordan clear out, let him have the shot, let him have the opportunity. More times than not Michael has been able to complete that opportunity, and that ability to seize the moment and the opportunity to seize the moment, I think, has set him apart.
PHIL PONCE: Mr. McCallum, some people speak of Michael Jordan in the same company as Babe Ruth and Mohammed Ali, as the century's great sports figures. Do you think those comparisons-do you agree with those comparisons?JACK McCALLUM: Well, I'm sitting here with a man on camera who would be one of the ones challenged as the greatest basketball player of the century. My own opinion is Michael Jordan is the best basketball player I ever saw. I don't know whether we're going to have his equal, but part of it, as I said, is his ability to be able to put himself into the center of the game. Bill Russell was actually mentioned as one of the first guys ever to completely change a game and dominate from a defensive standpoint. He certainly did that. Michael Jordan has been given the opportunity to dominate it from an offensive standpoint. He's a great defensive player also. In my opinion he stands above every player as a versatile, all-around player, anybody that's ever stepped on the court, but I'd be willing to bow if Bill has another nomination there.
PHIL PONCE: Mr. Russell, how would you respond to that, sir?
BILL RUSSELL: Well, I think that everything he said then was absolutely true. But I have, in looking and watching the great players, like last year they had the NBA 50 and they picked the 50 top players-I was fortunate to have seen every one of the players play. And at-some time some of them were late in their careers, but I had a chance to see them all play. And there are some guys-Oscar Robinson, Magic Johnson, Larry Bird-Michael Jordan-Elgin Baylor-and Bob Petit-these guys-I always called them the ties. There's no one can play any better than these guys. But these guys are as good as anyone. And so I think that Michael, what he has done from the game that he was introduced to as a kid and learned to play and what was decided what was valuable and what made a player good, he has taken that and has gone as far as you can, and he cannot-I don't think anyone can play this game any better than he plays.
PHIL PONCE: Mr. McCallum, Michael Jordan's appeal goes beyond sports, well beyond sports. How do you explain that?
JACK McCALLUM: Oh, I explain it a couple of ways. I think he came along at a time-he essentially created some of the market opportunities for himself, obviously, but he came along at a time in an economy when we were ready, we were ready to make athletes big name endorsers. The great thing about Jordan was he was always better than his hype, no matter how much you said-no matter how much you hyped him he always did better than that on the court, therefore, there was a sense of credibility about him that there weren't with other athletes. His hype was not created for him; he earned it. And finally, Michael also realized somewhere along the way that in order to be a big money endorser you had to adapt a certain persona. He always looks nice. He always presents himself nice. He does not say anything overtly controversial, which has gotten-that fact has gotten him in trouble with some people but, nevertheless, it is part of his appeal, and you can't-you can't remove that from him.
PHIL PONCE: Mr. Russell, how do you explain his appeal cross culturally, appeals to all races, why is that?
BILL RUSSELL: Well, first of all, Michael comes from a very strong family. His hero was his father. And also Michael appeals to all segments of the community. There are a lot of cases where you have a guy that's very popular with one segment, would be unpopular with the other one. Michael is popular because all the kids love him-black, white, Asian-Chicano, whatever. They all like him, because they can see one thing in him. He's a good person, a great athlete, but he's a good person, and that comes through, and kids understand and relate to that.
PHIL PONCE: Mr. McCallum, his appeal internationally, why do you think it transcends the borders of this country?
CK McCALLUM: Well, once again, it was a-once again it was a sense of timing. Bill knows better than anyone when-actually the Boston Celtics that he played for were one of the few teams that anybody knew over these shores, but really there was not the international claim for this game that there was during Michael's era. And I think Michael came along at the perfect time. The Dream Team in 1992 will still stand as a moment in cross-cultural marketing athletic synergy that will never be seen before. I mean, the acclaim for that team and the marketing opportunities it created overseas, we will never see that again, and when you saw everybody together on that court, in my opinion-I covered that team-Michael was "the" dominant player on that team. At that time Larry Bird and Magic Johnson were a little bit at the end of their careers. And you had "the" dominant team in sports, "the" all star team of all time. Michael Jordan emerged as "the" all star among all stars. And from that moment on internationally it would be hard to get anymore popular than he is outside of these shores.
PHIL PONCE: Bill Russell, there's talk that this could very well be Michael Jordan's last year. When does a great player know that it's time to call it quits?
BILL RUSSELL: It's like in females we say they have a biological clock, and the great athletes have this clock inside, I think, and they come to a decision, I think, that all the things it takes them to go out and perform at that level, there are too many of them that have deteriorated, and so they feel they would cheat themselves, their teammates, and the paying public if they go back out there, because they're not able or not willing to make the enormous sacrifice it takes. And so-and with each athlete it is different, and we're like-someone asked me if I would advise Michael. No, I would not, because I don't have-first of all, I don't have enough information, and he's the only one that knows all the questions.
PHIL PONCE: Mr. Russell, I thank you for answering my questions. And Mr. McCallum, thank you.% ? RECAP
JIM LEHRER: Again, the major stories of this Monday, NATO air forces conducted simulated combat runs over Macedonia and Albania as a warning to Serbia. The Dow Jones Industrial Average had its second worst showing this year-closing down 207 points, or 2.4 percent, at 8627.93. And residents of the Midwest and Northeast braced for more rain and floods. We'll see you on-line and again here tomorrow evening. I'm Jim Lehrer. Thank you and good night.
The NewsHour with Jim Lehrer
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Episode Description
This episode's headline: Falling Markets; Newsmaker; Air Fares; King of the Court. ANCHOR: JIM LEHRER; GUESTS: DAVID MALPASS, International Economist; AMBASSADOR LI ZHAOXING, China; BILL RUSSELL, Hall of Fame Player/Coach; JACK McCALLUM, Sports Illustrated; CORRESPONDENTS: TOM BEARDEN; MARGARET WARNER; PHIL PONCE
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Producing Organization: NewsHour Productions
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Chicago: “The NewsHour with Jim Lehrer,” 1998-06-15, NewsHour Productions, American Archive of Public Broadcasting (GBH and the Library of Congress), Boston, MA and Washington, DC, accessed October 3, 2023,
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APA: The NewsHour with Jim Lehrer. Boston, MA: NewsHour Productions, American Archive of Public Broadcasting (GBH and the Library of Congress), Boston, MA and Washington, DC. Retrieved from