General Lee
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By John Crawley
WASHINGTON, Jan 9 (Reuters) - U.S. Senate lawmakers said on Tuesday they would more closely examine potential airline mergers, including the hostile bid for Delta Air Lines Inc.(DALRQ.PK: Quote, Profile , Research) by US Airways Group Inc. (LCC.N: Quote, Profile , Research)
The Commerce Committee said it would hold a hearing on airline consolidation on Jan. 24. The panel did not release a witness list and a spokeswoman would not say if airline chief executives would be called to testify. Lawmakers in both houses have expressed concern about the potential impact of new consolidation on consumers, especially the potential for higher fares and more erosion of service to small communities.
"I think we want to understand from the airlines what's happening here," Sen. Byron Dorgan, a North Dakota Democrat and member of the commerce panel, said in an interview.
"I'm concerned about any additional proposals by large carriers. I don't think we need less competition. I think we need more. From the standpoint of consumers I don't think it's beneficial to see some of the largest carriers marry up," Dorgan said.
Dorgan said he wants to hear from the airlines themselves as well as Justice and Transportation Department regulators who would review any formal proposals.
Sources have said United Airlines, a unit of UAL Corp. (UAUA.O: Quote, Profile , Research) and Continental Airlines (CAL.N: Quote, Profile , Research) are in preliminary talks about a merger. In November, US Airways made an unsolicited offer for larger Delta, which is bankrupt. Delta management rejected the $8.7 billion bid.
Separately, Northwest Airlines Corp. (NWACQ.PK: Quote, Profile , Research) wants to evaluate strategic alternatives, including a merger. Continental is seen as a potential partner.
The House of Representatives is also likely to hold hearings, according to congressional aides.
Rep. James Oberstar, a Minnesota Democrat and chairman of the Transportation Committee, has "very strong concerns" about possible negative impacts airline mergers, especially the potential for higher fares, a spokesman said. To ally concerns, the aide said Oberstar would have to be convinced that airline consolidation would generate a general economic upside and not hurt consumers.
Congressional concerns over service and competition, which led to hearings, contributed to the failed merger between United and US Airways in 2001.
The new proposals for consolidation come as the industry is on a financial upswing after slowly emerging from its worst economic downturn.
The leading trade group for big U.S. airlines projected on Tuesday that passenger and cargo carriers will net an estimated $4 billion next year.
The group estimates the major carriers will report 2006 earnings of between $2 billion and $3 billion. The last year the industry made money was 2000, which was also the last year for consecutive annual profits. Big airlines are running much leaner than they were five years ago as industry restructuring, most of it in bankruptcy since 2002, has led to major cost savings and capacity cuts. But the industry acknowledges it must improve its weak credit ratings so it can weather normal economic turbulence -- like fuel price spikes.
© Reuters 2007. All Rights Reserved
Bye Bye--General Lee
WASHINGTON, Jan 9 (Reuters) - U.S. Senate lawmakers said on Tuesday they would more closely examine potential airline mergers, including the hostile bid for Delta Air Lines Inc.(DALRQ.PK: Quote, Profile , Research) by US Airways Group Inc. (LCC.N: Quote, Profile , Research)
The Commerce Committee said it would hold a hearing on airline consolidation on Jan. 24. The panel did not release a witness list and a spokeswoman would not say if airline chief executives would be called to testify. Lawmakers in both houses have expressed concern about the potential impact of new consolidation on consumers, especially the potential for higher fares and more erosion of service to small communities.
"I think we want to understand from the airlines what's happening here," Sen. Byron Dorgan, a North Dakota Democrat and member of the commerce panel, said in an interview.
"I'm concerned about any additional proposals by large carriers. I don't think we need less competition. I think we need more. From the standpoint of consumers I don't think it's beneficial to see some of the largest carriers marry up," Dorgan said.
Dorgan said he wants to hear from the airlines themselves as well as Justice and Transportation Department regulators who would review any formal proposals.
Sources have said United Airlines, a unit of UAL Corp. (UAUA.O: Quote, Profile , Research) and Continental Airlines (CAL.N: Quote, Profile , Research) are in preliminary talks about a merger. In November, US Airways made an unsolicited offer for larger Delta, which is bankrupt. Delta management rejected the $8.7 billion bid.
Separately, Northwest Airlines Corp. (NWACQ.PK: Quote, Profile , Research) wants to evaluate strategic alternatives, including a merger. Continental is seen as a potential partner.
The House of Representatives is also likely to hold hearings, according to congressional aides.
Rep. James Oberstar, a Minnesota Democrat and chairman of the Transportation Committee, has "very strong concerns" about possible negative impacts airline mergers, especially the potential for higher fares, a spokesman said. To ally concerns, the aide said Oberstar would have to be convinced that airline consolidation would generate a general economic upside and not hurt consumers.
Congressional concerns over service and competition, which led to hearings, contributed to the failed merger between United and US Airways in 2001.
The new proposals for consolidation come as the industry is on a financial upswing after slowly emerging from its worst economic downturn.
The leading trade group for big U.S. airlines projected on Tuesday that passenger and cargo carriers will net an estimated $4 billion next year.
The group estimates the major carriers will report 2006 earnings of between $2 billion and $3 billion. The last year the industry made money was 2000, which was also the last year for consecutive annual profits. Big airlines are running much leaner than they were five years ago as industry restructuring, most of it in bankruptcy since 2002, has led to major cost savings and capacity cuts. But the industry acknowledges it must improve its weak credit ratings so it can weather normal economic turbulence -- like fuel price spikes.
© Reuters 2007. All Rights Reserved
Bye Bye--General Lee
