The chairman of Delta Air Lines, which is in merger talks with Continental Airlines, on Wednesday urged Congress to stay out of the nation’s airline wars.
“If mega-carriers are created, then a competitive marketplace is possible only if the remaining airlines are allowed to respond effectively with all the necessary tools, which must include acquisitions and mergers,” Leo Mullin told members of the Senate Judiciary Committee.
He may not have to worry. Although eight members of the committee last week sent a letter to Justice Department antitrust regulators seeking a thorough investigation of proposed airline mergers, only four senators attended the four-hour hearing to which the chairmen of the nation’s seven largest airlines were summoned.
As the hearing was being held, St. Louis-based Trans World Airlines, which filed for bankruptcy last month, reported that passenger loads on its most lucrative international flights plunged 13 percent in January as travelers apparently began booking international flights on other carriers.
Last month’s bankruptcy filing preceded an announcement that American, the nation’s second-largest carrier, plans to buy TWA’s assets and 20 percent of US Airways. United Airlines, which started the consolidation drive last year by announcing the acquisition of US Airways, will acquire the remaining 80 percent. In addition, American said it planned to buy 49 percent of a new carrier, DC Air, that is to be formed as a result of the US Airways sale.
The deals, which would result in American and United dividing nearly 50 percent of the domestic airline market, have renewed fears about the effect of consolidation within the airline industry.
Many people have said that the merger frenzy will result in three airlines dividing as much as 80 percent of the domestic market.
“These are transactions that clearly threaten competition,” testified Alfred Kahn, former chairman of the now-defunct Civil Aeronautics Board. He is considered to be the father of the airline deregulation that occurred 22 years ago.
Although Sen. Mike DeWine (R-Ohio) said review of American’s acquisition of TWA should be “expedited,” he said United’s and American’s plans to divide US Airways need closer study.
“It appears the results of this consolidation will be to improve the fortunes of one or two giant airlines at the expense of the American consumer,” DeWine said.
James E. Goodwin, chairman and chief executive of United Airlines, defended its planned purchase of US Airways. “We believe domestic competition will be enhanced, and consumer choice and convenience will be improved,” he said.
US Airways Chairman Stephen Wolf said his airline would not survive if it is forced to continue operating independently.
He argued that there are only two operating models that work–a low-fare structure represented by carriers such as Southwest Airlines and a full-service network carrier such as United.
“US Airways is neither, and there is no place for a `neither.’ That is simply an economic reality,” he testified.