2 Senators now asking DOJ to look into US/DL takeover attempt

[General Lee]

DOW JONES NEWSWIRES
January 26, 2007 7:34 a.m.
By Corey Boles
Of DOW JONES NEWSWIRES

(This article was originally published Thursday)


WASHINGTON (Dow Jones)--Two U.S. senators urged Attorney
General Alberto Gonzales on Thursday to ensure that the
Justice Department will conduct a thorough investigation
before any potential consolidation in the airline industry
is granted approval.

Writing in a letter to the Attorney General expressing their
concern, Sens. Herb Kohl, D-Wis., and Orrin Hatch, R-Utah,
told Gonzales of their "firm expectation" that Justice's
antitrust unit would investigate a proposed merger in the
sector "with all due care and vigor."

The two said they are concerned about the effects of a
possible merger between US Airways Group Inc. (LCC) and
Delta Air Lines Inc. (DALRQ) on competition in the industry.

US Airways is engaged in a hostile takeover battle to
acquire Delta, which is in bankruptcy protection. US
Airways' first bid was rejected out of hand last year, while
a second - worth around $10 billion - has not yet received
any response from Delta's creditors, who must sign off on
the deal.

On Wednesday, chief executives from both companies appeared
before the Senate Commerce Committee, and US Airways' CEO
Doug Parker was questioned by committee members about the
potential effects of the merger on rural service, airfares
and jobs.

Kohl is the chairman of the subcommittee on antitrust,
competition policy and consumer rights - a panel that falls
under the Senate Judiciary Committee. Hatch is the former
chairman of the subcommittee and now ranking Republican
member of the body.

The letter says the two legislators are concerned that a
merger between the two companies would "result in a
significant decrease in competition ... as well as lead to a
reduction in capacity and higher overall fares."

The senators say in the letter they realize that antitrust
authorities in the Justice Department won't get involved in
the situation until a deal emerges, but they urged Gonzales
to ensure a full analysis of the potential consequences is
done at that time.

The letter also stresses that the treatment by authorities
of any merger would set a precedent for subsequent mergers
likely to occur in the sector.

The issue of airline consolidation is one that is guaranteed
to garner interest on Capitol Hill given the number of
people employed within the sector and the position it holds
as an important national industry.

Justice Department officials were not immediately available
to comment on the letter.

-By Corey Boles, Dow Jones Newswires; 202-862-6637;
[email protected]


Bye Bye--General Lee

 

[mamba20]

Well Duh! If the United deal was shot down for anti-trust reasons then the US Air, Delta deal most definiely will be shot down. I hope so for the sake of you Delta guys.

 

[Dogwood]

Well Duh! If the United deal was shot down for anti-trust reasons then the US Air, Delta deal most definiely will be shot down. I hope so for the sake of you Delta guys.

This is a far different world we are in since the U/UAL deal was disapproved.

 

[WSurf]

This is a far different world we are in since the U/UAL deal was disapproved.

True, Very True!!!

 

[FDJ2]

This is a far different world we are in since the U/UAL deal was disapproved.

I agree, the Senate is much more skeptical of mergers and much more aware that promises made by CEOs during a merger are not promises kept. In the Senate hearings the Senators were very skeptical of Parkers promises. It became apparent to the Senators, that mergers lead to less service, not more, higher prices not lower and despite Parkers promises to the contrary many job losses.

The Senate is now well aware that since the AWA/U merger flights to small and medium sized cities have been reduced, not increased, fares have increased in 4 times as many AWA/U cities than the number of cities in which fares have actually gone down, and although AA had promised to keep the STL hub, just like Parker promises to keep CLT among others as a hub, in its AA/TWA merger, STL is no longer a hub. Although Parker, wrongley claims that a decrease in network service will be back filled by low cost providers and other network carriers, history has shown the Senate the contrary. Using STL as an example, STL has lost approximately 70% of its air service and low cost providers have not come in to backfill that service since the AA/TWA merger. As a matter of fact SWA has actually decreased its service to STL. Additionally, STL now only has 1 international flight a week, to Puerto Vallarta.

The Senators also loudly critized Parker for AWA/U using over $1B of taxpayer money, than dumping $5B of pension obligations on the taxpayers and then magically coming up with billions in a hostile takeover attempt of a company which has honored the pension obligations of nearly 90,000 employees and retirees. When asked if Parker would reinstate the lost pensions of LCC pilots, since he promises to keep the DAL pensions and raise everyone to the highest level of compensation, Parker said NO. IOW, most DAL employees working at the "new" Delta would have pensions, but the AWA/U employees are left out in the cold with no pensions.

In effect Parker promises to keep everyone employeed with no furloughs, with some employees who do similar work having a pension while the others have lost theirs, no lost service, no lost hubs, to lower fares and operate at lower costs while eliminating 200 airframes and having approximately 10,000 employees just hanging around on the pay roll unless they decide on there own to leave, while saddling the new enterprise with an unsustainable $24B in debt.

Parker has a credibility problem, not only on Capitol Hill with his dubious promises, but also with his own employees, given his failure to complete his first merger before embarking on a much larger merger.

 

[pipers]

Well, well, said FDJ2

 

[General Lee]

"Two U.S. senators urged Attorney
General Alberto Gonzales on Thursday to ensure that the
Justice Department will conduct a thorough investigation
before any potential consolidation in the airline industry
is granted approval.

Writing in a letter to the Attorney General expressing their
concern, Sens. Herb Kohl, D-Wis., and Orrin Hatch, R-Utah,
told Gonzales of their "firm expectation" that Justice's
antitrust unit would investigate a proposed merger in the
sector "with all due care and vigor."



I think the Senators are WARNING the creditors that the DOJ process will not be quick like Parker says it could be (he stated he could get things done by June of 2007). The process for the UAL/US attempt took 14 months, and the overlap was far less. The creditors will have to weigh several factors with this offer. Delta's offer amounts to less cash, but will arrive quicker in the creditors' hands. These Senators are "expecting" a long review process, maybe trying to sway some votes. I expect Parker to come up with another larger offer soon because he is desperate to get this deal done. If that happens and the deal is not dead by Feb 15th, the House Transportation Committee will drill Parker and Grinstein, with Jim Oberstar as the Chairman.(on Feb 15th) That will be interesting for sure if it gets to that point.


Bye Bye--General Lee

 

[General Lee]

True, Very True!!!

Your CLT hub has been mentioned as a possible divested asset if this whole thing goes through. If you want to stay in New Bern, then you may have to work at Kooter's gas station with Kleetus.....PDT may go bye bye or downsize big time. Keep up the enthusiasm, though!!!!


Bye Bye--General Lee