Congress Weighs American-TWA Merger Fallout

Missouri lawmakers said today that American Airlines' proposed acquisition of TWA could save thousands of jobs in their state, but others cautioned that consumers could be the losers from reduced competition.

Sen. John McCain. R-Ariz., chairman of the Senate Commerce Committee, said the deal would accelerate movement toward control of the aviation industry by three giants — United, American and Delta. "I don't know of anyone, other than the airlines, who think that a 'Big 3' industry is good for the consumer," he said at a hearing on the proposed American-TWA merger.

The deal is "fundamentally different" from other airline consolidations that have recently changed the makeup of the aviation industry, Missouri Gov. Bob Holden told the committee.

"The primary difference in this case is that TWA cannot be saved without America's help."

He said that without the deal, Missouri would lose nearly 33,000 jobs and $876 million in annual wages — "a devastating blow to our state's economic future."

Trans World Airlines, which filed for bankruptcy protection last month as part of its agreement with American, operates out of St. Louis.

"Having a hub in St. Louis is critical to maintaining the region's economic vitality," said Sen. Jean Carnahan, D-Mo. "Officials at American Airlines have assured me that they plan to offer employment to virtually all of TWA's contract employees."

Two Airlines Would Control Half the Market

Some 4,000 jobs are also at stake at Kennedy Airport in New York, said Rep. Gregory Meeks, D-N.Y. "I view this not as a merger but as a rescue mission for TWA."

American agreed to buy most of TWA for about $500 million, including up to 190 planes. American is also to pay $82 million for a 49 percent stake in DC Air, a start-up to be created from the merger of United and US Airways that is to be based at Reagan National Airport outside Washington.

The proposal by American, the nation's second-largest airline, came after United moved to acquire most of US Airways. If both deals are approved, the two airlines would control half the U.S. market.

"Every independent analysis has concluded that these mergers will erode what little competition remains in the aviation industry," testified Rep. Louise Slaughter, D-N.Y.

"We all sympathize with TWA's workers," she said. "But my district of Rochester, N.Y., has already seen thousands of jobs lost because businesses move out when they can't afford our high air fares."

Don Carty, American chairman and chief executive officer, acknowledged that the deal was spurred by United's proposed takeover of US Airways. "If one airline is able to grow its route network significantly larger than its competitors, that airline would have a competitive advantage," he told the panel.

But he added that American was the only company willing to take on the financial risk of saving the failing TWA and "it is truly a stretch of the imagination to believe that the American-TWA transaction could in any way trigger the merger of far larger airlines."

William F. Compton, president and chief executive of TWA, said consumers would pay the price in a reduction of service if TWA assets were liquidated without a commitment to maintaining jobs and routes.

null
Join the Discussion
You are using an outdated version of Internet Explorer. Please click here to upgrade your browser in order to comment.
blog comments powered by Disqus
 
You Might Also Like...