House members grill American, US Airways officials about merger

Posted Wednesday, Feb. 27, 2013  comments  Print Reprints
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WASHINGTON -- Members of Congress expressed misgivings Tuesday about the proposed merger of American Airlines and US Airways, pressing company officials about whether the $11 billion deal would preserve competition and jobs, and keep fares from rising.

The combined company, which would become the world's largest airline, would have a concentration of hubs serving the eastern and southern portions of the country, including airports at Dallas/Fort Worth; Miami; Charlotte, N.C.; Phoenix; and Philadelphia, as well as John F. Kennedy in New York.

In a hearing before a House Judiciary subcommittee, Gary Kennedy, senior vice president and general counsel at American, said there are no plans to close any hubs.

"We have a high degree of confidence the hubs we have will remain in place," he told the Subcommittee on Regulatory Reform, Commercial and Antitrust Law.

In particular, Kennedy said that Miami, an American Airlines hub, would continue to serve as a gateway to Latin America and that Charlotte and DFW still made sense for north-south and east-west air traffic, respectively.

"We find them to be highly complementary of each other," he said.

Lawmakers from states where hubs are located didn't sound so sure.

"The geography doesn't seem to make sense," said Rep. Blake Farenthold, R-Texas. "That's a whole lot of hubs in a close proximity."

Rep. Joe Garcia, D-Fla., wanted assurance that the new company wouldn't scale back its operations in Miami. He noted the billions of dollars in bond debt assumed by Miami-Dade County, the airport's owner, to build new terminals to serve American Airlines.

"In my community, we are leveraged to the hilt because of this airport," he said.

Stephen Johnson, the executive vice president for corporate and government affairs at US Airways, told him, "You should be optimistic about Miami's future in this."

Other lawmakers were concerned about the effects on pricing. Rep. George Holding, R-N.C., worried that fares might go up as the two carriers ceased competing in nearby markets.

"It costs a lot more to fly from Charlotte to Washington than it does from Raleigh to Washington," he said. "And that's concerning."

American and US Airways are under pressure to keep up with their larger rivals, United and Delta, themselves the products of recent mergers. Since dozens of air carriers have combined since deregulation in 1978, resulting in efficiencies for the industry, critics say they've hurt competition.

"We have seen many mergers in the 35 years since deregulation," Christopher Sagers, an anti-trust professor at Cleveland-Marshall College of Law, told the panel. "Quite often, they have been disappointing."

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