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Oberstar: Consolidation would hurt service, collapse industry


Minn. congressman confirms Northwest, Delta merger talks

Jan 16, 2008

U.S. Rep. Jim Oberstar said he “vigorously opposes” an airline merger between Northwest and Delta airlines.

The Minnesota Democrat said he had summoned Northwest executives to discuss merger talks.

He confirmed that Northwest Airlines, Michigan’s dominant air carrier, entered into formal merger discussions with Delta Air Lines and will look for another partner if Delta tries to merge with United Airlines instead. Delta is in discussions with both airlines, he said.

Further consolidation of the industry would reduce competition and service to communities, he said.

“We did not deregulate aviation in 1978 to create consolidation in the industry but rather to expand competition,” he said. “Consolidation will result in rather a collapse of the industry.”

The congressman, who has opposed airline mergers in the past, most notably a merger between British Airways and American Airlines, said the airlines are in an early stage of discussion.

He said he had directed his professional staff to gather data and produce a report on the merger to gauge the effect on competition of such a merger.

Dean Breest, a spokesperson for Northwest airlines, said the airline would not comment on the subject.

Northwest customer Mark Levine said such news is welcome if it benefits customers.

“It would mean something if the service got better,” said Levine, of Birmingham, who got stuck in cancellations last summer.

Levine said he’s boycotted Northwest as much as possible since the airline bumped him off flights and he spent 14 hours trying to get from Detroit to LaGuardia airport this summer and received little in the way of compensation.

“But not if we’re still tied to one airline and they happen to go on strike and treat everybody like garbage,” said Levine, who used to live in Orlando and had a fair amount of choices, and wasn’t tied to a hub operation.

News of a Delta merger appeals to him.

“Delta seems to have it together,” he said. “I guess having good experiences with Delta, I would hope they would be with Delta.

“I think unfortunately, if they want to stabilize this thing, the government will have to get back in control and control pricing,” he said.

“Airlines are cutting each others’ throats and deregulate airlines so they’re charging about the same and get back to giving you service.”

“As an average consumer you kind of hope that they (together), would have a better financial strategy and figure out how to make some money and pay employees what they’re worth ...,” he said.

Analysts have long been speculating who would be the most likely airlines to merge.

Delta buying Northwest topped a list of merger possibilities assembled by Calyon Securities in New York this past November.

The two systems have little route overlap both domestically and internationally.

Delta has two dominant Atlantic seaboard hub operations at JFK and Atlanta, which complements Northwest’s two operations at Detroit and Minneapolis-St. Paul.

Northwest is a powerhouse internationally and within Asia, where Delta is relatively weak. Delta is very strong in the Atlantic and has a solid position in Latin America, areas where Northwest is relatively weak or does not compete, according to the report.

Delta is also largely nonunion, which would make an integration of the two systems easier.

Both carriers also share a vast international systems and similar pilot seniority even, which would aid the integration of the two.

Delta’s presence at Detroit Metro is relatively small. Delta has 16 to 18 departures per day depending on the season, whereas Northwest has more than 500 departures per day.

Terry Trippler, a Minneapolis-based airline expert, is not convinced that Delta would be the buyer in such a merger.

“I wouldn’t bet my rent money on it,” Trippler said. “Northwest has more money than Delta.”

If Northwest buys Delta, he could see that the new airline would adopt the Delta name and move its headquarters to Atlanta, a move that would end up costing Minneapolis jobs.

A merger could also mean a vanishing of unions, as Delta employees are not unionized, Trippler said.

“That’s one reason Delta might buy Northwest,” Trippler said. “I don’t think any merger is going to give anyone a pay raise."

But Michael H. LeRoy, labor professor at the Institute of Labor and Industrial Relations and College of Law at the University of Illinois at Urbana-Champaign, said an employer cannot summarily reject a union.

Who ends up being the acquirer wouldn’t determine the fate of the union, LeRoy said.

Getting rid of a union would require a de-certification vote and unionizing Delta’s nonunion employees would require an accretion, in other words a vote to unionize the nonunion employees.

“It can go either way,” LeRoy said. “The acquirer is irrelevant. What matters is the percentage of nonunion to union employees.”

For years, Delta has remained a nonunion airline by providing a substitute method of employee representation, LeRoy said.

“That effort, while it has been successful, has also been strained by downsizing and other curtailments of employee benefits.”

“A merger would call that whole arrangement into question,” LeRoy said.

freep.com

Minn. congressman confirms Northwest, Delta merger talks
oberstar.house.gov



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