- The Washington Times - Wednesday, January 24, 2007

ASSOCIATED PRESS

The chief executive of US Airways Group Inc. faced tough questioning at a Senate hearing yesterday as lawmakers fretted that his company’s proposed hostile takeover of Delta Air Lines Inc. would harm consumers, particularly those in rural areas.

Doug Parker, chief executive officer of Tempe, Ariz.-based US Airways, argued that the nearly $10 billion acquisition of Atlanta-based Delta would result in an efficiently run carrier that could offer low fares to fliers. He urged lawmakers to “let the market work.”

Several senators said their constituents are concerned that a merger would result in cutbacks to service in small communities, where the per-unit costs of running an airline tend to be more expensive than in big cities with lots of passenger traffic.

“You’re an aggressive suitor, but the lady from the South doesn’t want to be forced into this shotgun wedding,” said Sen. Trent Lott, Mississippi Republican, in a reference to Delta’s Atlanta headquarters.

On Jan. 10, US Airways increased its bid for Delta by nearly 20 percent, but Delta’s CEO remains cool to the offer.

Delta’s official committee of unsecured creditors, which will play a key role in deciding whether any merger agreement would move forward, has not issued a statement about its position since US Airways increased its offer.

“The surest, safest bet from the creditors’ point of view is to go ahead with our stand-alone business plan,” Delta Chief Executive Officer Gerald Grinstein told reporters yesterday.

Mr. Grinstein, in testimony before the committee, called US Airways’ hostile bid “blatantly anticompetitive,” and a “poster child of the worst kind of merger,” estimating that 10,000 jobs would likely be eliminated. Mr. Parker disputed that figure, saying any job losses would be gradual and through attrition, rather than layoffs.

Despite his opposition to US Airways’ offer, Mr. Grinstein said in a newsletter sent to employees Tuesday that a merger can’t be ruled out for Delta after it exits bankruptcy. Mr. Grinstein also said Delta is “not negotiating” a merger with Northwest Airlines, thus denying a report in the Wall Street Journal.

Mr. Parker, who led America West Airlines’ 2005 merger with US Airways, argued that the merger would lead to lower prices for consumers because the company would be in a better position to compete with low-cost carriers such as Jet Blue Airways and Southwest Airlines. The growth of those competitors, he said, shows the “tendency of the marketplace to respond.”

“New carriers can come in and lower prices,” Mr. Parker said.

Both airline executives said the industry has made important strides toward rebounding from the financial troubles they incurred as result of the 2001 terrorist attacks and soaring fuel prices.

Delta is planning to come out of Chapter 11 bankruptcy by midyear as an independent company and is planning for a Feb. 7 bankruptcy court hearing in New York to discuss the details of its bankruptcy exit plan. US Airways has said it will revoke its takeover bid if Delta’s creditors do not postpone that hearing by Feb. 1.

More than 30 uniformed Delta pilots packed the Senate hearing room Tuesday to show their opposition to the merger, which they said would lead to job reductions.

“We are not against mergers, we are not against consolidation. What we are opposed to is this merger,” said Robert L. Hazzard, a Delta pilot and spokesman for the Air Line Pilots Association International.

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