AMR, US Airways leaders defend merger at Senate hearing

Posted Tuesday, Mar. 19, 2013  comments  Print Reprints

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WASHINGTON -- Senators questioned the top executives of American Airlines and US Airways on Tuesday about their proposed merger. But aside from concerns about the potential impact on jobs, competition and airfares, no significant obstacle has arisen to the $11 billion deal.

One primary justification for the merger is to create a company that can compete more effectively in the global aviation market with large rivals Delta and United, themselves involved in recent mergers.

Federal regulators gave those deals their blessing in 2009 and 2011, respectively, and antitrust and aviation experts say there's little reason to think this time will be different.

If the merger is approved, just four carriers -- United, Delta, American and Southwest -- would control 80 percent of the domestic market. That worries lawmakers and consumer advocates, who fear reduced competition and jobs and higher fares.

"I've long been concerned about consolidation in the airline industry," said Sen. Amy Klobuchar, D-Minn., who chaired Tuesday's hearing. "We need to be vigilant in examining any potential challenges this merger might create."

The proposed union requires the blessing of the Justice and Transportation departments, as well as the U.S. Bankruptcy Court in New York.

Aviation industry expert Daniel Kasper, a senior consultant with Compass Lexecon in Boston, sees few reasons the airlines won't get approval.

"There's a decent chance they could get that wrapped up by the end of the year," he said.

In testimony before the Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights, the two CEOs -- Doug Parker, from US Airways, and Tom Horton, from American -- said the new company would serve as a "counterweight" to Delta and United.

"By putting our airlines together, we create a third competitor," Parker said.

But consumer advocates said competition is precisely what would suffer.

"Once again we're being told that this merger is needed to save the airline industry," testified William McGee, a travel and aviation consultant for the New York-based Consumers Union. "Frankly, we're not so sure."

Diana Moss, director and vice president of the American Antitrust Institute, said low-cost carriers such as Southwest, JetBlue and Spirit would have difficulty competing with the consolidated airlines.

"Low-cost carriers can no longer be relied upon to save the day," she said.

Lawmakers seemed most concerned about how the proposed merger would affect jobs and service in their home states.

Sen. Jeff Flake, R-Ariz., lamented the pending departure of the US Airways corporate headquarters from Tempe, Ariz.

The merged company would be based at American's Fort Worth headquarters.

Flake was also concerned about the impact on operations in Phoenix, where US Airways has a hub.

The combined company also would have hubs in Los Angeles; Dallas/Fort Worth; Miami; Charlotte, N.C.; Philadelphia; and New York. Aviation experts widely believe that at least one hub would become less important but that others could gain.

"I look forward to welcoming Mr. Parker and your colleagues to becoming new Texans," said Sen. Ted Cruz, R-Texas.

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