Doubt, Resistance Grows Over Airline Mergers

May 27, 2008 - On Capitol Hill and in the court of public opinion, airline mergers have been getting a chilly reception.

At a  House Transportation Subcommittee hearing held last week to examine the proposed Delta-Northwest merger, Transportation GVP Robert Roach, Jr. declared: “A Delta-Northwest merger will eliminate jobs, reduce choices for passengers, further deteriorate customer service, trigger additional senseless mergers, make millionaires even richer, and most importantly, do nothing to address the problems of a failing industry.”

The judgment of lawmakers and industry analysts, who normally support airline management, has been equally grim. Below is a sampling of opinion drawn from recent testimony at four congressional hearings:

“The inescapable lesson of 29 years of deregulation is that mergers and a reduction in competition are likely to lead to higher fares, a deterioration of service, and financially weakened survivors.”  Rep. James Oberstar (D-MN).

“Mergers have been good for airline executives, but not so good for consumers and employees.”  Rep. Jerry Costello (D-IL).

“Airline mergers have a checkered track record, rarely delivering on expected gains and usually creating labor unrest and service disruption.”  Philip Baggaley, Managing Director, Standard & Poor’s Ratings Services.

“If there is one thing that we have learned from the long history of antitrust, it is that efficiencies are easy to assert, difficult to achieve, and rarely of the magnitude that their parties – in their self-interest – claim.” Albert Foer, President, American Antitrust Institute.

“Delta/Northwest and other mega-mergers can not be justified by synergies and improved efficiencies.” Hubert Horan, Airline industry analyst and consultant.

“There are amalgamations that make economic and public policy sense but…this is not one of them.” Aaron Gellman, Professor, Northwestern University’s Transportation Center.

“There are powerful reasons why these mega-mergers would be harmful to consumers, and would solve none of the industry’s most serious problems.” Kevin Mitchell, Chairman, Business Travel Coalition.

Links to the complete testimony from all witnesses and archived video can be accessed at www.goiam.org/mergers.