Delta confident of antitrust approval


The Atlanta Journal-Constitution
Published on: 04/17/08

Last week, Delta and Northwest airlines got preliminary federal approval to essentially function as a single carrier to Europe. Now, Delta officials are hoping that antitrust immunity is a sign of things to come in getting its proposed merger with Northwest approved.

The Department of Transportation allowed the two airlines — in conjunction with Air France-KLM, Alitalia and Czech Airlines — to share routes and revenue for service between Europe and the United States.

Kiichiro Sato/AP
A Northwest plane is seen behind the water fountain in a terminal of the Detroit Metropolitan Airport on Tuesday, April 15, 2008, in Detroit. Delta Air Lines Inc. and Northwest Airlines Corp., squeezed by record high fuel prices and a slowing economy, are combining in a stock-swap deal that would create the world's biggest carrier.
 
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The Justice Department will now investigate whether the Delta-Northwest merger announced this week will limit consumer choices and lead to higher prices.

Delta CEO Richard Anderson, in a wide-ranging discussion Wednesday with reporters and editorial writers from The Atlanta Journal-Constitution, mentioned the European arrangement when talking about the upcoming push to get federal approval on what would be the world's largest airline.

The Transportation Department "found that the merger of those four entities [internationally] were pro-competitive," Anderson said.

The upcoming Justice Department antitrust review of the merger would focus on domestic routes and pricing, but last week's ruling, Anderson said, might be a sign of things to come.

"It is a harbinger that on the international side there's no problem with the merger," he said.

Delta officials are touting the merger as the combination of two carriers that have few routes in common. "There's very little overlap between the two carriers," said Anderson, noting that Delta barely serves Asia and the upper Midwest of the United States, two strongholds of Northwest.

The decision to let Delta and Northwest act in concert in Europe was in response to the "Open Skies" agreement. It allows U.S. and European airlines to fly any route between any destination in the United States and any destination in Europe. The pact took effect March 30.

The Justice Department said it is "interested" in looking at the airlines' merger.

"We will look at the competitive effects of the transaction and how it would affect consumers," spokeswoman Gina Talamona told The Associated Press.

Stuart Klaskin, a partner with KKC aviation consulting in Coral Gables, Fla., said "in retrospect, [the European arrangement] looks like a litmus test. It was a positive sign for the merger."

William Swelbar, a researcher at the Massachusetts Institute of Technology's International Center for Air Transportation, said the arrangement with Air France-KLM "is certainly innovative," allowing the airlines to share revenue and pool routes.

"This merger is the beginning of the process of putting airlines in a global perspective," he said. "It's about connecting global dots."

Although federal transportation officials didn't see any international antitrust problems, Swelbar said, the Justice Department will focus more on the merger's impact on domestic routes. Officials also will revisit the European arrangement.

He said the two airlines have undoubtedly been putting out feelers to federal officials for months to get a sense of their appetite for the merger.

"They haven't proceeded down any path without talking to regulators in Washington," Swelbar said. "The two management teams are well down the road" to making the merger happen.

Vaughn Cordle, an airline pilot and head of AirlineForecasts, said, "I have talked to a number of people in Washington and I don't think [the merger] will have any problem with the Department of Justice review."

Georgia State University marketing professor Ken Bernhardt said Delta management is talking to media, investors, employees, government officials and others, to tout the deal.

"They're trying to convince people, including regulators, that this makes sense," Bernhardt said.

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