Airlines Testify on Effects of Mega-Mergers

Competing airline executives aired their competing visions of how mergers in the air industry may or may not benefit consumers.

The Senate Judiciary Committee heard testimony today from air carriers who might stand to gain or lose from the industry trend toward consolidation. The panel was called as the world's largest airline, United, awaits regulatory approval to purchase US Airways for $11.6 billion, and American, the nation's second largest carrier, pursues a buyout of bankrupt Trans World Airlines Inc. and some US Airways assets for more than $5 billion.

The chairman of Delta Air Lines, Leo Mullin, told the Senate Judiciary Committee today that more airline mergers should be allowed, if only to help balance the anti-competitive effects of just two carriers handling half of domestic passenger traffic.

"If these transactions are allowed to go forward with an understanding that the door is now closed in terms of further industry consolidation, then consumers and other carriers may be required to deal with a huge duopoly," Mullin testified.

Gordon Bethune, Chairman of Continental, said the mergers of these air giants will harm competition, increase airport delays and reduce customer service.

"The proposed mega-mergers are bad for consumers, bad for communities and bad for employees," Bethune said. "Customer service levels at the merging carriers will continue to tumble as those carriers will be able to do nothing more than keep just their systems running."

He also warned that more mergers would follow if these are approved. "Other airlines will be forced to combine, be carved up, or be put out of business by the onslaught brought on by the United and American cartel," said Bethune.

Bethune did not discuss reports that Continental itself has been in talks with Delta about a possible merger.

'Consumers Will Reap the Benefits'

United Airlines chairman and chief executive James Goodwin spoke in defense of their proposed purchase of US Airways: "We believe domestic competition will be enhanced and consumer choice, and convenience will be improved."

Stephen Wolf, a former chairman of United and now head of US Air, said that the joining of the two carriers "will result in a truly efficient nationwide network that will preserve jobs and service, and enhance competition. Both the economy and consumers will reap the benefits of this enhanced competition and improved service, and importantly, more than 45,000 employees of US Airways will keep their jobs."

Wolf promised that competition would still thrive in the face of two air giants: "American and United are vigorous competitors and intense rivals."

Also scheduled to testify are executives from American, TWA, DC Air, America West and AirTran Airways.

Mergers Seen as 'Dangerous'

Critics have warned that allowing these proposed mergers would result in just three major U.S. airlines: United, American, and Delta joined with either Continental or Northwest.

In his opening remarks, Sen. Herb Kohl, D-Wis., characterized the proposed mergers as dangerous. "We could be witnessing the beginning of the end of airline competition as we know it."

Kohl previously signed a letter to the Justice Department stating that the proposed airline mergers raised "serious competition concerns."

The Justice Department will decide whether or not the mergers shall go through, with or without modifications, or if they would be challenged in court.

Also signing the letter were Democratic Sens. Russ Feingold, Wis.; Patrick Leahy, Vt. and Charles Schumer, N.Y. and Republican Sens. Mike DeWine, Ohio; Chuck Grassley, Iowa; Arlen Specter, Pa. and Strom Thurmond, S.C.

In his opening statement today, Senate Judiciary Committee Chairman Orrin Hatch, R-Utah, said that antitrust officials needed to ask whether the mergers, if allowed, would help passengers get to their destinations more quickly, more cheaply and more safely.

"Effective antitrust enforcement today will prevent the need for stifling regulations tomorrow," he said.