DELTA-NORTHWEST

Airline CEOs make rounds to win over lawmakers


The Atlanta Journal-Constitution
Published on: 04/22/08

The chief executives of Delta Air Lines Inc. and Northwest Airlines Corp. met Tuesday with key lawmakers to argue that the carriers' proposed merger won't undermine competition.

And they insist they'll make a winning case.

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"There will be no impact on competition," Northwest CEO Doug Steenland said at a briefing for reporters. His Delta counterpart Richard Anderson joined him.

Delta's routes are concentrated in the South and East, while Northwest's are in the upper Midwest and Northwest, so "it's really an end-to-end combination," Anderson said. "We're hopeful we'll be able to get through the process here with the regulators at the Department of Justice and be able to put the airlines together."

In some previous mergers, airlines have had to reduce concerns about harming competition by relinquishing airport gates, slots and other assets to make more room for rivals.

The executives said their companies have formally submitted their merger proposal to the Justice Department, which must review its antitrust implications. The new airline, which would be called Delta and based in Atlanta, would be the biggest airline in the world by passenger volume.

Congress plays no direct role in the antitrust review process, which typically takes many months. But lawmakers can hold public hearings to drum up political opposition. Some Democrats hope such hearings will drag out the review process beyond January, when the merger-friendly Bush administration ends.

Rep. James Oberstar, D-Minn., chairman of the House Transportation and Infrastructure Committee, has promised to use his committee's hearings to "shine the bright spotlight" of truth on the downsides of mergers.

On Thursday, Anderson and Steenland will begin the first round of hearings by testifying before the House Judiciary Committee's antitrust task force in the morning. In the afternoon, they will appear before the antitrust subcommittee of the Senate Judiciary Committee.

Their two-day Capitol Hill tour is intended to win over committee members before the cameras start rolling during the public hearings.

Anderson and Steenland also said the latest spike in the cost of fuel is making it difficult for airlines to hold down air fares. With crude oil reaching another record Tuesday of just under $120 per barrel, airlines are facing tough choices about fare hikes.

Anderson said that if airlines were to charge passengers enough to fully cover the recent fuel cost increases, "every single ticket in the United States would have to go up 15 to 20 percent."

Tuesday's spike in oil prices sent shares of both Delta and Northwest down more than 17 percent on the New York Stock Exchange. But even with fuel prices surging, a merger of Delta and Northwest still makes sense, Anderson said. "No matter where fuel is ? you still create an enormous amount of value" by putting the carriers together, he said.

The combined carrier expects to save about $1 billion a year through the efficiencies resulting from combining their operations.

The CEOs also said that while they plan no reductions in the number of hub airports, they will have to respond to changing conditions if oil prices keep rising.

"I think we can be very comfortable" with the prediction that the current hub configuration will endure, Steenland said.

Still, "it's not a static world where we can say, guarantee, positively, this is exactly what it's going to look like," he said. With fuel prices constantly rising, "we're in uncharted waters," he said.

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