Market Conditions Overrule Anti-Trust Concerns
Whenever two big airlines discuss
merging, two big question marks are workforce integration and
government anti-trust approval. While labor unions and many
democrats in Congress are clearly are not happy about industry
consolidation, at least one influential congressman predicts the US
federal government will approve the merger of Delta and
Northwest.
Reuters reports Congressman John Mica, a Florida Republican and
former chairman of the House of Representatives aviation
subcommittee, told a hearing on the merger proposal the deal does
not appear anti-competitive.
Democrats have argued the merger would lead to service
reductions, job cuts, and more mergers which would further narrow
choices for consumers. James Oberstar, a Minnesota Democrat and
chairman of the House Transportation Committee, said "In short, the
pending merger places at risk the consumer benefits of airline
deregulation."
But Mica said it's more than likely the enormous challenges
facing the industry will convince officials at the Justice and
Transportation departments to approve the deal. Antitrust and
industry experts have predicted the same outcome.
Representative Jerry Costello of Illinois is the current
aviation subcommittee chairman. He told executives of both
airlines, "Previous airline mergers have rarely produced the
projected benefits and efficiencies promised. This has frequently
led to reduced competition and higher fares."
To industry executives, struggling to stem massive losses,
reduced competition and higher fares probably sounds like exactly
what's needed, although the hearing might have been an unwise time
and place to say so. In recent financial reports, Delta and
Northwest reported a combined loss 10-point-5-billion dollars just
in the first quarter of 2008, much of it one-time "goodwill"
charges related to their brushes with bankruptcy.
Delta estimates a merger with Northwest would produce cost
savings and revenue gains of at least a billion dollars a year, and
result in cuts of about a thousand management and administrative
positions.
Assuming Justice Department approval for the merger, that would
leave the two airlines to worry about the other big question. delta
has reached an agreement with its pilots for a contract covering
the post-merger era which includes stock in the airline. So far,
Northwest pilots are not a part of it.