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By Bill Catlin
June 21, 2000
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RealAudio 3.0 |
United Airlines plan to buy US Airways came in for more flack in Washington. The merger proposal has taken a drubbing in several recent congressional hearings, in part because of concerns it would cause a chain reaction of airline mergers. The drumbeat in Congress may affect the proposed merger.
OFFICIALS FROM UNITED AIRLINES, US Airways and a few supporters say the merger is good for consumers.
But in congressional hearings there have been skeptics on both sides of the political aisle joining those at the witness table. Many have said the deal could result in a merger frenzy among industry titans, including the possible pairing of American and Minnesota-based Northwest Airlines. At the Senate Commerce Committee hearing, Democrat Ron Wyden of Oregon, an industry critic, said he'd try to block United's plan to buy US Airways, because it will lead to industry consolidation.
"We will then have three behemoths, that will dominate the American airline marketplace," Wyden said. "The history of those kinds of mergers is for the public, the consumer gets less service, they get higher prices."
Albert Foer, president of the American Anti-Trust Institute says a clear message has emerged from the congressional hearings.
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"There's a sizeable chance that conditions will be so tough, United will say, 'The hell with it,' and will walk away."
- Robert Litan | |
But Congress has no direct authority to approve or reject the United - US Airways deal. That's in the hands of the Justice Department anti-trust division.
Foer says the department's reviews have been remarkably free from political influence over the years. But he also says the skepticism in Congress about airline mergers may well influence the Justice Department review this time.
"There's a green light for Justice to be tough on this. But there's a difference between a green light and a command."
Foer says lawmakers might even consider a return to airline regulation if they're unhappy with the outcome.
One Republican congressional staff source says that's not likely at this point. But he also says the conventional wisdom on Capitol Hill is the United - US Airways deal won't survive the Justice department's review.
Jon Ash, a Washington-based consultant, isn't going that far. But Ash's preliminary assessment for the Metropolitan Airports Commission is the deal is unlikely to succeed. Ash says there are financial hurdles, and difficult labor problems to solve. But he contends the Justice department's anti trust division is hardly immune from political influence.
"I don't think that the Justice Department is going to sit there in a vacuum," he said. "They're going to listen to Congress. Congress approves their budget. Congress represents the public interest."
Ash says much of the opposition so far is based on fears of a chain reaction of mergers. Justice Department officials have told Congress the anti-trust review would look at the state of industry competition in the wake of a United - US Airways combination.
But Robert Litan contends the Justice Department generally gives little weight to arguments that one merger will lead to others. Litan is a former high-ranking U.S. anti-trust official now at the Brookings Institution in Washington. He says the critics and skeptics in Congress strengthen the Justice Department's hand in demanding that United and US Airways give up routes or other assets to pass muster.
"My odds are 60-40 (that) the deal will go through and they're predicated on the assumption Justice asks for tougher conditions and that United ultimately accepts them," says Litan. "The only reason I'm not saying 100 percent is because there's a sizeable chance that conditions will be so tough, United will say the hell with it and will walk away."
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