UPDATED: 6:04 p.m. April 15, 2008
Oberstar: Merger is 'worst development in aviation history'
Minnesota congressman vows to down Delta-Northwest deal


Cox News Service
Published on: 04/15/08

WASHINGTON — The U.S. Department of Justice alone has the authority to decide whether the proposed merger of Delta and Northwest airlines should take off. But one powerful congressman said Tuesday he'd try to persuade the department's Antitrust Division to kill the deal on the grounds it would hurt competition.

This merger would be "the worst development in aviation history," Rep. James Oberstar, D-Minn., chairman of the House Transportation and Infrastructure Committee, said at a briefing.

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"We will marshal all the forces we can" at committee hearings to show the harmful effects of mergers, he said. If regulators allow further consolidation, "there will be a cascade of mergers" throughout the industry, he predicted.

In a world of mega-airlines, "the so-called low-fare carriers will not be able to compete," he said, and consumers will face "an even greater concentration of economic power."

Some lawmakers doubt, however, whether Oberstar can muster enough opposition to influence the Justice Department.

Sen. Arlen Specter of Pennsylvania, the senior Republican on the Senate Judiciary Committee, which deals with antitrust issues, said the department won't be deterred if its antitrust investigators decide the merger won't reduce overall competition.

Their decision "will depend on the underlying economic facts" of the airline business, Specter said. "This is a troubled industry," so Justice may well conclude mergers can be justified to shore up struggling carriers, he said.

"DOJ acts independently," he said. "They listen a little (to Congress), but they will make up their own minds."

The political pressure from Congress may be somewhat muted initially because Delta says it will not cut any of the hubs now occupied by itself and Northwest. But if the Delta-Northwest deal were to touch off a wave of mergers that result in many job losses nationwide, the opposition might grow.

Sen. Johnny Isakson, R-Ga., who strongly supports the merger, said he has begun reaching out to other senators to support the deal. "I passed Amy Klobuchar from Minnesota in the hall and said, 'We need to get together because it looks like we're going to be partners.' And she said she'd like to do that. But obviously, Minnesota has some concerns."

Klobuchar, D-Minn., released a statement saying that the Senate Commerce Committee, on which she serves, plans to quickly schedule a hearing with Delta CEO Richard Anderson and Northwest CEO Doug Steenland.

"I will hold their feet to the fire to live up to their commitments and show that any merger is, in fact, in the best interest of Main Street and not just Wall Street," she said.

Isakson said that despite local concerns about job losses, most members of Congress will support the merger because they fear spreading bankruptcies. "The aviation industry is under huge stress" that might be lessened through consolidation, he said.

Justice Department spokeswoman Gina Talamona said antitrust officials plan to "look at the competitive effects of the transaction," but won't establish a schedule. "Every transaction is different. We look at them on a case-by-case basis, so I wouldn't be able to give you a timetable," she said.

The Department of Transportation will participate in the antitrust review process by providing Justice with information on the two airlines' routes, "code-sharing" marketing arrangements with other carriers, unfair practices and economic fitness.

DOT also will consider the merger's impact on international routes and will conduct a "fitness" review of the combined airline's management condition and financial soundness.

Finally, it will consider whether consumers will be given ample opportunity to adjust to changes in their frequent flyer programs.

In general, the pro-business Bush administration has been very friendly to airline mergers, approving a number of them in recent years.

In May 2000, during the Clinton administration, the Justice Department began a review of the proposal by UAL Corp., which owns United Airlines, to take over US Airways. But the review dragged on until July 2001, when the Bush administration concluded that the acquisition "would reduce competition, raise fares, and harm consumers on airline routes throughout the United States." The carriers then called off the deal.

Since then, however, the Bush administration has been open to mergers. It did not oppose American Airlines' acquisition of Trans World Airlines in 2001, America West Airlines' purchase of US Airways Group in 2005, SkyWest Airlines' purchase of Atlantic Southeast Airlines in 2005, or an agreement reached last year for the sale of Midwest Airlines to TPG Capital and Northwest Airlines.

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