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"Congress prepares for hearings over airline mergers"
Monday, December 18, 2006
Congress prepares for hearings over airline mergers
By Marilyn Geewax
Cox News Service
WASHINGTON - Even though the new Congress won't convene until January, key
lawmakers are preparing for hearings to examine the economic impact of
possible airline mergers.
Many members of Congress are condemning the potential deals, while few, if
any, are supporting the idea of industry consolidation.
Congress has no direct role to play in approving mergers, but it could help
sway public perceptions and increase political pressure on the Department of
Justice to reject the airline transactions on antitrust grounds.
Perhaps the most controversial of the potential acquisitions involves US
Airways Group Inc.'s unsolicited $8.7 billion bid for Delta Air Lines Inc.
The two carriers have routes that overlap significantly along the East
Coast, and hubs relatively near each other in the West.
Congressmen representing Phoenix, Atlanta, Cincinnati, Pittsburgh,
Philadelphia, Salt Lake City, Charlotte, N.C., and other cities where the
two airlines have major operations fear that a merger would wipe out jobs,
diminish air service and drive up ticket prices, said Rep. John Lewis, D-Ga.
Concerns about a loss of competition grew dramatically last week when UAL
Corp., parent of United Airlines, and Continental Airlines Inc. announced
they are considering a possible merger. In addition, AirTran Holdings Inc.
offered to buy Midwest Air Group Inc. for about $290 million. With so many
carriers now in play, the number of concerned congressmen is on the rise.
"We can voice our opinion," Lewis said, "and because we all represent
different parts of the country, speaking out could have a tremendous impact
on what happens."
James Oberstar, D-Minn., is incoming chairman of the House Transportation
Committee. He said recently that if it appears that the US Airways takeover
of Delta would be going forward in the new year, he would hold a hearing
into the matter. Teri Rucker, a spokeswoman for Daniel Inouye, D-Hawaii, the
incoming chairman of the Senate Commerce Committee, said that panel also
plans to hold a hearing.
Oberstar said by publicly exposing the potential dangers of airline
consolidation, his committee may be able to "throw cold water" on merger
"We can nudge the Justice Department to take the action" it must to prevent
a loss in competition, he said.
Oberstar also said opposition to consolidation is bipartisan.
"I've heard from members on both sides of the aisle," he said, as worries
have grown about the economic impact on jobs and service.
"I haven't heard anyone come forward and say this is a really good deal," he
Michael Boyd, president of the Boyd Group Inc., an aviation consulting firm,
agreed that Congress would become involved because so many lawmakers
represent cities with huge stakes in the outcome.
"There are a lot of dogs in this fight," he said.
Delta management opposes the transaction with US Airways, but if it were to
go forward, the two carriers would have to drop routes to avoid expensive
redundancies and overcome antitrust concerns.
That could eliminate jobs and flights, especially in smaller cities, like
Savannah, Ga., and West Palm Beach, Fla.
"Any Georgia legislator who doesn't stand up against this merger isn't doing
his constituents any good," Boyd said.
Earlier this month, the two chief executives, Delta's Gerald Grinstein and
US Airways' Doug Parker, each met with Oberstar to discuss their views.
Darryl Jenkins, an industry consultant based in northern Virginia, said that
whether Congress gets deeply engaged in the issue of airline competition may
depend on the views of creditors owed money by Delta, which is under the
protection of Bankruptcy Court.
If by next month those creditors are in favor of the deal, then the
bankruptcy judge may in turn support it, and the transaction could be
completed. That would push the other deals forward, too.
"Everyone is interested in this (Delta deal) because if one merger goes
through, then two or three other mergers will follow," Jenkins said.
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