But Anti-Trust Scrutiny Awaits

The proposed joining of Delta Air Lines and Northwest Airlines faces many harsh questions in the months ahead from federal antitrust regulators, wary the new "global airline" might prove too monopolistic... but to hear Richard Anderson and Doug Steenland speak, one would think all that's required for the deal to happen are some forms to be completed.

USA Today reports the two old friends -- Delta CEO Anderson (above, right) once held that title at Northwest, where Steenland, Anderson's former number-two man, now reigns -- embarked on a massive public relations campaign this week, in an attempt to sell the merger as the best choice for airline employees and passengers alike. But that rosy plan faces criticism from lawmakers who are worried about reduced competition, higher ticket prices, and closings of hubs in their districts.

In something of a surprise to both carriers, shares in Delta and Northwest also fell Tuesday, the day after the merger was announced publicly. Shares fell as much as 12 percent at Delta, on a day when the Dow Jones rose 60 points overall. Many analysts view the market's reaction as a signal investors aren't entirely sure the deal will go through... or if it does, will only become reality after concessions from both sides, bitter contract fights with employees, and probable layoffs.

Despite that gloomy outlook, however, most industry insiders believe the merger will pass muster with the Justice Department by year's end, helped by news last week that regulators in the US and European Union backed a four-way trans-Atlantic alliance between Delta and Northwest, and Air France/KLM.

Given the implications of that agreement, executives at Delta and Northwest believe the combination of their two airlines -- which directly compete on just 12 domestic routes, as Delta and NWA now fly to different airports within the same large markets -- should encounter smooth sailing.

For a deal to happen this year, the regulatory seas would need to be calm indeed... as the accelerated timeframe would represent a major decrease in the amount of time regulators have needed to approve most mergers between airlines in the past 20 years. Still, many believe it can be done... including Roger Fones, who until 2005 ran the DOJ's anti-trust division, and who blocked a 2001 merger between United and US Airways.

"The industry looks a lot different than when I was in government," Fones told USA Today this week. "When the government looks at individual markets, it will see that the market shares of low-cost carriers are higher" -- an indicator even a joined Delta/Northwest wouldn't necessarily dominate most markets.

That view is contrary to Anderson's beliefs, however. "This gives us the opportunity to have the No. 1 or No. 2 market share in every market in the world," he said this week.

Maybe Anderson should speak a bit more quietly when he says that...

FMI: www.newglobalairline.com