Would merger boost MSP hub?

WASHINGTON - Northwest Airlines Chief Executive Doug Steenland told Congress on Thursday that the proposed merger with Atlanta-based Delta would expand Northwest's long-standing hub service in the Twin Cities.

"The added traffic from Delta's larger U.S. domestic network will help strengthen and promote development of Northwest's Minneapolis-St. Paul hub," Steenland told a subcommittee of the House Judiciary Committee.

However, while promising no layoffs to "front-line" airline workers as a result of the merger, Delta Chief Executive Richard Anderson said that redundancies in headquarters staffs in Atlanta and Eagan could lead to as many as 1,000 job cuts.

While the two executives have said before that they would not close any of Northwest and Delta's seven existing hubs, Steenland's remarks were the first time he has promised that a merger would lead to more extensive airline service to the Twin Cities.

Lawmakers on separate House and Senate panels also heard from union and air traveler groups who oppose the merger on the grounds that it could cost jobs, reduce competition and raise fares.

"Already, this announced merger has led to credible speculation about what airlines will be next to merge," said Veda Shook, international vice president of the Association of Flight Attendants. "Consumers are frightened that this airline merger in particular, and further consolidation of the industry in general, will lead to much higher fares and reduced service."

Also voicing skepticism was Minneapolis Democrat Keith Ellison, a member of the House Judiciary Committee. "This new airline will adversely affect competition and will ultimately lead to higher fares for consumers," he said.

While Congress has little role in approving the merger, it can exert pressure on Justice Department regulators who must sign off on the deal.

Sen. Amy Klobuchar, D-Minn., who joined the witnesses testifying before the Senate Judiciary antitrust panel, said she hoped the hearings would "create a record" for Justice Department regulators. The government, she added, should "not review this merger in a vacuum, but consider its likely broader implications for the aviation industry and society as a whole."

While some Democrats in Congress want to slow down the antitrust review to "wind down the clock" on the Bush administration, Steenland and Anderson were buoyed by remarks from New York Sen. Chuck Schumer, an influential Democrat, who said the proposed merger "makes some sense."

'A merger of addition'

In remarks designed to allay antitrust concerns, Steenland and Anderson emphasized the consumer benefits of an integrated airline, one that would become the world's largest carrier.

"This is a merger of addition, not a merger of subtraction," Steenland said.

The alternative, Steenland said, is "being whipsawed by the high price of oil, facing nationwide competition from discount carriers while unable unilaterally to achieve the cost and revenue synergies that the merger will produce."

He also touted the support of Minnesota business groups, including the Minnesota Chamber of Commerce, which submitted a statement calling the merger an "economic necessity."

"Synergy" became the byword of the day, with the executives arguing the combined airline's global network would offer customers greater choice, more competitive fares and better service, including to the Twin Cities and more than 140 small communities across America.

"We are committed to retaining significant airline jobs, operations and facilities in the Twin Cities, and the combined carrier will continue to be an important part of the Minneapolis-St. Paul community," said Steenland.

Despite achieving about $1 billion a year in savings or "synergies," Anderson said, the merger would involve no front-line layoffs because Delta and Northwest currently share only 12 nonstop routes out of 800 total in different parts of the country.

Steenland promised that the Northwest employees in the Twin Cities, Memphis and Detroit "can be confident that their jobs are in good hands."

Still, the executives' assurances were met with skepticism from some lawmakers, particularly from House Judiciary Chairman John Conyers, D-Mich., who said the history of deregulation has seen the industry go "from a highly competitive structure to an oligopoly."

The airline executives countered that the new world of $120-a-barrel oil has brought the industry to a crossroads: Build substantial cost savings or face decline and bankruptcy, which has already cost more than 150,000 jobs since 2001.

"We did not come easily to the decision to merge with Delta," Steenland said. "Northwest is proud of its long and distinguished history as a stand-alone carrier, and the company has made Herculean efforts in recent years to preserve its ability to continue operating independently."

But that argument didn't hold much sway with the unions testifying before Congress.

"Airlines cite high fuel prices as a reason to merge, but the cost of a gallon of fuel for two individual airlines will be the same as for one large airline," said R. Thomas Buffenbarger, international president of the International Association of Machinists and Aerospace Workers. "Consolidation is not the solution for this troubled industry. More competent management is."

Critics also emphasized the executives' promises will be hard to enforce once the deal is done. Kevin Mitchell, chairman of the Business Travel Coalition, told lawmakers they need to put the burden of proof on the airlines.

"When airline CEOs say 'Trust us, this megamerger will be great for consumers and solve many industry problems,' this committee needs to respond, 'We would fall down in our duty to approve this merger on trust alone.'"

Kevin Diaz • 202-408-2753