Airline Merger Gets Mixed Reviews
Posted on: Thursday, 15 May 2008, 09:00 CDT
By John Welbes, Pioneer Press, St. Paul, Minn.
May 15--Airline executives met up with a largely skeptical group of lawmakers Wednesday as a House committee reviewed the pending merger of Northwest Airlines and Delta Air Lines.
The U.S. Department of Justice has the sole authority to gauge whether the deal violates antitrust laws. If the deal is found to be anticompetitive, the department could shoot it down, and U.S. Rep. Jim Oberstar, D-Minn., said Wednesday that's what he'll encourage.
"This should not be considered as a stand-alone, individual transaction, but rather as the trigger which will surely lead to a cascade of subsequent mergers," Oberstar said.
The hearing before the House Transportation Committee brought out concerns from representatives from several regions about the effects of the merger.
Rep. Steve Cohen, D-Tenn., noted that the combined airline would have seven hubs in the U.S., counting Delta's operations at New York's JFK. He asked if it wouldn't be easier for the larger, combined carrier to eliminate a hub -- specifically, Northwest's in Memphis, Tenn. -- after the merger.
Delta CEO Richard Anderson said not necessarily, and Northwest CEO Doug Steenland said service in Memphis is expected to remain at current levels.
The deal, announced last month, has Delta acquiring Eagan-based Northwest for $3 billion; the combined airline would be called Delta, based in Delta's home city of Atlanta and led by Anderson.
Representatives from California, Hawaii and Illinois asked
pointed questions about how the combined carrier might change airport service. Closer to Delta's base in the South, the deal elicited some signs of support.
"There were not a lot of choices out there," said Rep. Lynn Westmoreland, R-Ga., whose district is home to more Delta employees than any other in the country. "I think Delta and their board has made the best choice possible."
Rep. John Mica, R-Fla., said the government is likely to approve the merger since there is little overlap between the two carriers.
In a discussion with regulators from the Department of Justice and Department of Transportation, Oberstar said he wasn't satisfied with their prepared testimony that failed to say that the scope of the antitrust review should be broad. The review, he said, should consider the market consequences of other airline mergers that could follow Northwest-Delta.
"You don't bite the bullet," Oberstar said.
When the airlines' two CEOs testified Wednesday, they indicated they would consolidate terminal operations at some airports, including Los Angeles International and Chicago-O'Hare.
While the two airlines plan to maintain their current hubs, certain other facilities at other non-hub airports would be consolidated, Delta's Anderson told committee members.
In Los Angeles, for example, Delta and Northwest are in two different terminals. After they merge, "we'll figure out where we can accommodate both, and work with the city to rationalize the facilities," Anderson said. The airlines would want to put their gates in closer proximity to each other for passengers' convenience.
The airlines are hoping to have antitrust approval for the merger later this year; they then would start the lengthy task of integrating operations.
John Welbes can be reached at 651-228-2175.
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Source: Saint Paul Pioneer Press (St. Paul, Minn.)
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