WASHINGTON (Reuters) - Congressional lawmakers are concerned a merger between US Airways LCC.N and Delta Air Lines DALRQ.PK will trigger wider consolidation and hurt consumers by reducing service and increasing fares.
But in interviews with key members, their staff, lobbyists and consultants ahead of Wednesday’s Senate Commerce Committee hearing on the hostile proposal revealed no consensus in the new Democratic-led Congress that lawmakers should oppose the $10.5 billion deal if it moves forward.
Concern centers on losing hubs, routes or low-cost service mainly in eastern states. Lawmakers are also sensitive to more industry job losses and pension cuts. Unionized pilots at bankrupt Delta oppose a merger with US Airways.
“I assume there are going to be some mergers in the aviation industry but I think each one has to be looked at on its own merits,” said Sen. Trent Lott, a Mississippi Republican and member of the commerce panel.
Lott is also an influential supporter of Delta, which wants to emerge from bankruptcy this year as a stand-alone company.
Congress cannot block a merger, but opposition from a number of lawmakers or a mix of key members could complicate deals, industry and congressional observers said.
“Congress is skittish over everything that happens in the airline industry and can find ways to work with regulators to make your life miserable. One way or another, they can exert influence,” said aviation consultant Darryl Jenkins of Embry Riddle Aeronautical University.
“If I‘m Delta right now, I‘m spending all of my time in the halls of Congress and talking to every mayor and chamber of commerce,” Jenkins said.
Atlanta-based Delta is trying to convince members the merger would harm service and face uphill antitrust review. Delta Chief Executive Gerald Grinstein says Delta will be stronger on its own.
Grinstein’s counterpart at US Airways, Doug Parker, has been pushing a case for winning Justice Department antitrust review, if Delta’s creditors accept the offer. Parker, in Capitol Hill meetings, also has promoted his view that a merged company would be a muscular and efficient airline that could compete effectively.
Both Grinstein and Parker are expected to testify before the Senate panel.
Rep. Jerry Costello, an Illinois Democrat and the new chairman of the aviation subcommittee in the House of Representatives, said the House has a tentative hearing scheduled for mid February if the US Airways plan proceeds.
Delta creditors have until February 1 to decide.
“I‘m skeptical of mergers in general. I‘m concerned about what mergers will do to competition and what it does to capacity as well as jobs,” Costello said.
“In the case of Delta, where they may be able to survive without a merger, I think we have to look at that,” Costello added.
Democratic Sens. Charles Schumer of New York and Byron Dorgan of North Dakota have expressed reservations about the merger proposal on grounds it could hurt service to small communities. Dorgan is a member of the Senate commerce panel.
Lawmakers also question if Delta/US Airways would “open the floodgates” for consolidation. Bankrupt Northwest Airlines Corp. NWACQ.PK has talked with Delta about a possible merger and United Airlines UAUA.O and Continental Airlines (CAL.N) have held discussions with each other, industry sources familiar with the talks have said.
The last two big airline mergers -- bankrupt US Airways and Parker’s America West Airlines in 2005, and American Airlines AMR.N and TWA in 2001 -- rescued failing companies (TWA/US Airways) and attracted little attention from Congress. But a United/US Airways proposal generated strong lawmaker opposition prior to collapsing in 2001 over antitrust concerns.
Consumer reaction will also be a factor in how Congress approaches mergers, industry experts agree.
“They won’t block out what the public believes particularly at a time when you may be looking at two carriers (Delta/Northwest) facing some economic difficulties that could cancel flights and do other things,” said aviation attorney Ed Faberman.
Source : http://www.reuters.com/article/businesspro-airlines-congress-dc-idUSN2139394620070122