- The Washington Times - Thursday, November 16, 2006

If US Airways thinks it will be difficult to persuade a reluctant Delta Air Lines to go along with its $8 billion takeover offer, just wait until it tries to convince Congress and regulators of the plan’s merits.

Rep. James L. Oberstar, the ranking Democrat in the House Transportation and Infrastructure Committee who is expected to become chairman of the panel in January, is concerned that combining the airlines could erode competition, weaken service and increase fares.

“Both airlines serve a lot of small communities, so is that service going to continue, or will communities be left without air service?” Jim Berard, a spokesman for Mr. Oberstar, asked yesterday. “Are we better off with one or two huge behemoth national airlines, and is that good for the consumer?”

The proposed new airline, which would operate under the Delta name, would create the nation’s largest airline and the No. 1 trans-Atlantic carrier.

Delta Chief Executive Gerald Grinstein rebuffed Wednesday’s unsolicited bid, saying the company is committed to exiting bankruptcy next year as an independent airline.

Mr. Oberstar hasn’t made up his mind yet and wants more information about the deal, Mr. Berard said.

“It’s very early in the process,” Mr. Berard said. “We’ll just have to wait and see how things develop.”

Six years ago, Mr. Oberstar strongly opposed United Airlines’ attempt to buy US Airways, saying it would hurt competition. United later backed out of the deal.

“Fewer choices, higher fares and a deterioration in service is not what Congress contemplated in 1978 when it deregulated the airline industry,” Mr. Oberstar said in December 2000.

US Airways’ proposal could attract more offers to buy Delta.

“We would not be surprised if other offers emerge for Delta,” said airline analyst Ray Neidl of Calyon Securities in New York. “The industry is fragmented and primed for consolidation.”

Domestic mergers are subject to U.S. antitrust laws and must be approved by the Justice Department, the Transportation Department, the Federal Aviation Administration and the Securities and Exchange Commission.

A merger wouldn’t require congressional approval. But if Congress opposed the plan, the Justice Department would listen, airline analysts and law specialists say.

“Oberstar will have significant influence, absolutely,” said Mike Boyd, a Colorado airline consultant.

“Congress does have a loud voice and is usually heard when it speaks in a loud voice,” Mr. Berard added.

The Justice Department, which consistently opposed large airline mergers in the 1980s and 1990s because they diminished competition, might be less likely to resist now that airlines have been devastated by years of losses while fares have fallen over the past 20 years when adjusted for inflation.

US Airways could satisfy the concerns of regulators by giving up a few routes and gates and consolidating regional shuttle service.

Airline unions could be another hurdle.

US Airways pilots are demanding better contracts before the airline moves to acquire rival Delta. About 200 members of the Air Line Pilots Association picketed at Phoenix Sky Harbor International Airport yesterday.

“I’m picketing to defend my career, my profession and my family,” said pilot Tania Bziukiewicz. “While the company keeps us on these bankruptcy-type wages, they’re making multimillions of dollars in compensation packages.”

US Airways pilots work under two contracts — one for pilots who came from America West Airlines after it bought US Airways while it was in bankruptcy in September 2005, and another for pilots who were always at US Airways. Contract negotiations began shortly after the airlines combined; no deal is in sight.

This article is based in part on wire service reports.

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