Delta and Northwest airlines will argue their case to create the world's biggest airline to congressional lawmakers this week.
The two carriers, which want to combine to create a single mega-airline called Delta and based in Atlanta, announced their proposed merger last week. Executives immediately went on the road to sell the idea to newspaper editorial boards and airline employees in major hubs, like Atlanta, Minneapolis, Cincinnati and Salt Lake City.
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Now on to Washington. Delta and Northwest executives will appear Thursday before U.S. House and Senate committees looking at the impact of consolidation in the financially battered airline industry, hit by soaring oil prices and a softening economy.
Congress has no authority to stop the merger, but committee appearances often become public forums for lawmakers who oppose or support such plans.
It could take eight months to finalize the merger, during which officials from Delta and Eagan, Minn.-based Northwest will attend a series of congressional hearings and community outreach meetings to build support for the idea. The merger has to be approved by both carriers' shareholders and by regulators with the U. S. Department of Justice.
"Given the complexity and scope of the transaction, it's important that we spend the time to inform our constituencies why building a global airline in the face of these fuel prices and economic conditions is good for our customers and our communities," said Delta spokesman Kent Landers.
The carriers argue that a combined airline will create economies of scale to help offset oil prices that have topped $115 a barrel, up more than 70 percent over the last year. Jet fuel, which is distilled from crude oil, has run about $15 a barrel higher.
The House Judiciary Committee's antitrust task force will look at the proposed merger in a 10 a.m. Thursday hearing. The Senate Judiciary subcommittee that deals with antitrust issues will examine the proposed combination during an afternoon hearing.
Airline analyst Robert Mann of R.W. Mann & Co. based in Port Washington, N.Y., said the carriers have lined up "a couple of million dollars' worth of lobbying to help them out."
Two high-profile former U.S. senators — Republican Trent Lott of Mississippi and Democrat John Breaux of Louisiana — have been enlisted to push the merger. Delta also has signed up government affairs firm Mehlman Vogel Castagnetti Inc., packed with former Capitol Hill senior staffers, and a law firm that employs R. Hewitt Pate, who ran the antitrust division at the U.S. Justice Department from 2003 to 2005.
Those paid proponents could have their work cut of for them, Mann said, as the Delta-Northwest merger is likely to spawn even more airline industry consolidation. Five discount carriers have either shut down or declared bankruptcy over the last few weeks as fuel prices have soared, and many carriers see consolidation as a way to cut costs.
Mann said Delta and Northwest officials might have to make repeat visits to some congressional committees if other mergers are announced in their wake. Continental late last week announced plans to explore consolidation as a result of the Delta-Northwest union. There has been growing speculation that Continental and United will combine.
Delta and Northwest executives will have to respond to how the industry is going to change, Mann said, "and how they figure this is pro-competitive when you go from six [major] carriers to possibly three."
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