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Airline Merger Opponent Warns Of Higher Fares


Oberstar: "Higher fares, a deterioration in service and financially weakened survivors"

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May 15, 2008

Washington — If regulators were to allow major airlines to merge, passengers likely would see "higher fares, a deterioration in service and financially weakened survivors," House Transportation Committee Chairman James Oberstar (D-Minn.) warned Wednesday.

But a top federal antitrust enforcer held open the possibility that the proposed merger of Delta Air Lines and Northwest Airlines would be a good thing. "Many mergers raise no competitive concerns and can benefit consumers," James O'Connell, deputy assistant Attorney General of the Justice Department's Antitrust Division, said at a hearing.

O'Connell did not predict whether Justice would approve the pending merger, saying officials first must "carefully review the facts" to consider any potential loss of competition. "Antitrust analysis is highly fact-specific," he said.

In some cases, the data show a combination "may enable two ineffective, high-cost competitors to become a more effective, lower-cost competitor," he said.

The Justice Department alone has the power to block mergers that violate antitrust laws. In general, the Bush administration has been friendly to mergers.

Antitrust investigators get data and counsel from the Department of Transportation. Michael Reynolds, acting assistant secretary for aviation in the Transportation Department, told the committee that in a deregulated industry, "we will inevitably see restructuring resulting in consolidation."

But Oberstar suggested that even this particular merger, which involves carriers with few overlapping routes, would harm consumers.

"This should not be and must not be considered as a stand-alone, individual transaction but rather as the trigger of what will surely be a cascade of subsequent mergers that will consolidate aviation in the United States and around the world into global mega-carriers," he said.

Rep. Jerry Costello (D-Ill.), chairman of the aviation subcommittee, said he, too, has "grave concerns" about mergers and is "skeptical about claims that the merged Delta would retain both carriers' existing hubs."

Congress plays no direct role in the antitrust review process, which usually stretches over many months. But lawmakers can try to stir up political opposition.

Wednesday's lengthy hearing marked the fourth since the merger was announced last month. The House Transportation Committee hearing was expected to be the most negative because Oberstar is a harsh and long-standing critic of industry consolidation.

But none of the hearings generated much outrage. With jet fuel prices rising so rapidly, many lawmakers have expressed a willingness to allow mergers to go forward.

Rep. John Mica (R-Fla.), the senior Republican on the Transportation Committee, said he believes the Justice Department likely would approve the Delta-Northwest combination because of the "tremendous pressure" on airline profits.

The carriers' chief executives said they must combine forces to compete more effectively worldwide and must lower costs to cope with soaring fuel prices. They also argued that their combination would result in little reduction in service because the airlines' route maps have "very little overlap," Delta CEO Richard Anderson said. "There really aren't redundancies."

In testimony last month, Anderson said that roughly 1,000 headquarters jobs could be eliminated in Minnesota and Atlanta, where the combined airline will be headquartered.

ajc.com

Oberstar: "Higher fares, a deterioration in service and financially weakened survivors"
James Oberstar / cache.daylife.com



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