Airline Execs Taken To Task By Committee Members

United Airlines CEO Glenn Tilton and Continental chief Jeff Smisek did not exactly receive a warm welcome from the U.S. House Transportation Aviation subcommittee Wednesday in the first hearing concerning a possible merger of the two airlines.

"This merger’s consequences for consumers and employees are practically certain," said subcommittee chair James Oberstar (D-MN). "It will reduce consumer choice and increase air fares – significantly, in some cases – among major U.S. and world markets, from Washington, D.C., to Beijing. With abundant support, the Department of Justice (DOJ) has found that air fares are likely to increase significantly when the number of competitors in any given market is reduced from three to two or from two to one."

Oberstar said in his opening remarks that in his view, the larger an airline becomes the more it is able to use its market share "to the detriment of passengers."

Congressman Oberstar

"When I voted for airline deregulation in 1978, I did not vote for an industry of mega-carriers," Oberstar said. "I voted for vibrant competition among airlines, competition that would encourage innovation in schedules, pricing, and services. I voted for the promise of an industry in which carriers would have every incentive to create value through intense competition. There are only a few of us left who voted in this Committee room on deregulation in 1978. When I cast my vote, I expected the antitrust laws to be vigorously enforced, as did others."

Representative Jerry Costello (D-IL) echoed some of Congressman Oberstar's concerns. "I am very concerned how this merger, if approved, will affect ticket prices for passengers; how the merger would affect the pilots, flight attendants, mechanics, and employees of both airlines; how many employees will lose their jobs or see reduced wages and benefits; and what will happen with existing union contracts. Less competition generally leads to higher prices, fewer choices, and a loss of jobs."

Congressman Costello

"I sympathize with the thousands of airline employees who have suffered as a result of airlines’ financial problems in the past," he continued. "Many have seen their hard-earned pensions dropped during airline bankruptcies, seniority rights disappear, labor disputes go unresolved, wages frozen or cut, and jobs lost to outsourcing and consolidation.

The Wall Street Journal reports that both executives insisted that job cuts would be held to the fewest number possible, and that most of those would be at Continental's current Houston headquarters. The reason, they said, was that the airlines fly few routes that overlap, and so pilots and crews would, for the most part, keep their jobs. They said the merger was necessary in order for the two airlines to be able to compete with airlines such as Delta, which recently merged with Northwest, and American. "This is a brutally competitive industry. It is today and will be after this merger," Continental CEO Jeff Smisek said.

Also testifying was AFA-CWA President Patricia Friend, who said that the employees are the most vulnerable in a merger situation. "Since the Airline Deregulation Act of 1978, there has been little attention paid to the extreme upheaval that mergers create for the thousands of airline employees who find themselves unemployed or whose lives are disrupted," testified Friend. "Over the past 32 years, we have seen the end of extensive and specific protections - like displacement and relocation allowances, wage protections, transfer and seniority protections, layoff protection, and others - that helped shield workers from an unfair share of the burden resulting from corporate mergers."

In addition to leaving thousands of employees with little to no protection, Friend said current negotiations for the over 16,000 United flight attendants, represented by AFA-CWA, are also threatened. For almost six years, she said, the United flight attendants have been working under a collective bargaining agreement negotiated while the company was in bankruptcy.

Patricia Friend

"If the focus of this hearing is on the possible effects for consumers - you only have to observe how United is treating its workers to understand how the passengers at the 'new' United may fare. The employees at United made deep sacrifices to keep the airline flying and it is imperative that current negotiations for United flight attendants be completed in some manner before this merger is finalized. Management needs to focus on protecting their employees in this merger and providing some economic relief now," added Friend.

Smisek and Tilton are making the rounds on Capitol Hill this week, as additional hearings are scheduled.

FMI: http://transportation.house.gov, www.united.com, www.continental.com, www.afanet.org