Members of a U.S. House subcommittee in a hearing this morning seemed generally receptive to the pending merger of American Airlines and US Airways, skimming over antitrust concerns to focus on what the deal might mean for their individual districts.
The bottom line for some members of the Regulatory Reform, Commercial and Antitrust Law Subcommittee was simple: the Justice Department approved the mergers of Delta and Northwest in 2008 and United and Continental in 2010, so American and US Air should have their chance to combine as well.
"They created other airlines with significant advantages," said subcommittee chair Spencer Bachus (R-Ala.). "If we don't let these guys merge," they'll be at a disadvantage.
"I'm concerned about this merger," added Blake Farenthold (R-Texas). "But it seems to me with the other mergers that have gone through, it's only fair" to green light American and US Air.
Judiciary Committee Chairman Bob Goodlatte (R-Va.) noted that five major airlines – United, Delta, American, US Air and Southwest – now control an estimated 80 percent of the domestic market. "If this merger goes through, that number will decline to four," he said. "Should this be the 'last merger' in the airline industry—so far and no farther? Would allowing this merger finally strike the right balance between competition and the cyclical bankruptcies that have occurred in the industry recently?"
On February 14, US Air and American announced the $11 billion deal, which would create the world's largest airline.
American Airlines general counsel Gary Kennedy assured the subcommittee members that the deal will "create significant value for our stakeholders and bring substantial benefits to the traveling public." He also stressed that the merger will give American, which is currently in bankruptcy, "the opportunity to become a stronger competitor, one with a degree of financial stability that we have not experienced in many years."
The deal is supported by American's unsecured creditors committee and the airlines' unions, with the exception of the machinists, which want a new contract before considering the merger.
Stephen Johnson, executive vice president for corporate and government affairs for US Air, said that after the merger, "I don't expect prices to go up across the board" and that "it will be a very, very competitive industry."
"It will be more competitive after the merger?" queried John Conyers Jr. (D-Mich.).
"I expect so," Johnson replied, an assertion that went unchallenged.
The deal may face tougher scrutiny in the Senate, which will hold a hearing on March 19 to examine the merger.
"As chair of the Senate Antitrust Subcommittee, I know how important competition in the airline industry is to help keep prices low for consumers without making cuts to service," said Senator Amy Klobuchar (D-Minn.) in a news release. "That's why I'm calling for a thorough review of the impact past mergers have had on the industry and I look forward to examining the merger at our hearing in the coming weeks."
US Air is represented by an antitrust team from Dechert led by Paul Denis, while American has tapped Jones Day antitrust lawyers led by David Wales.
Comments