Posted in Evan's Fiskings, tagged competition, congress, continental, delta, Merger Mania 2008, mergers, northwest, regulation, united on February 17, 2008|
In a BusinessWeek op-ed, House Transportation Committee chairman James Oberstar (D-Minn.) has come out firmly against airline mergers involving the big six.
Yet this latest round of rumored mergers, which includes a United-Continental scenario, as well as a Delta-Northwest combination, is significant. It would mean further consolidation in the airline industry, further reductions in choice for consumers, and probably fewer flights, fewer jobs, and higher fares.
I think Oberstar’s jumping the gun here. The Justice Department will do a full review of any proposed merger. (See here, and see my analyses of Delta-Northwest and United-Continental.)
Deregulation held out the promise of a market-driven industry that would give rise to a host of new entrants, bringing more competition, lower fares, and better service. The immediate aftermath of deregulation saw the expected flurry of airline startups and new market service. That activity, however, was short-lived.
Actually, deregulation did bring new entrants to markets, introduce more competition, and lower fares. Service may or may not have improved (premium service certainly has), but you get what you pay for. Lower fares are a form of better service. And what does he mean by “short-lived”? Changes in the industry have been pretty much constant since 1978. There has never been any shortage of airline startups and new service. It’s a very dynamic industry, and since deregulation, that has redounded to consumers’ benefit. (more…)
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Congress and the airline merger: the small-R republican remedy
Posted in Evan's Commentary, tagged congress, delta, Merger Mania 2008, mergers, northwest on April 15, 2008|
Congress may usually cleave along party lines, but it often divides along local lines as well. We are seeing this bipartisan and narrow parochialism in congressmen’s response to the news of the Delta-Northwest merger. Congress is dividing along regional lines of business interest in support of or opposition to the tie-up. The dynamics of the merger mean that the headquarters’ home state is thrilled but that other states fear losses of hubs, jobs, and connections. Senator Saxby Chambliss (R-Ga.) is proud of his hometown airline: “Delta has met its challenges head on and is in a strong position to continue its service to people all over the world. The bottom line is Georgia has always been home for Delta and that is the way it should remain for many more years.” Representative John Lewis of Atlanta, on the other side of the aisle from Chambliss, was even more effusive: “This is a great step for Delta. It is a powerful combination that should help strengthen the air transportation industry in this country. . . . This merger should make it easier for people in Atlanta and around the nation to fly, and it preserves the Delta name. The Delta headquarters will remain in Atlanta, which helps protect the economy of the city during a time of recession.”
But others are not so happy. Representative Jim Oberstar (D-Minn.), the powerful chairman of the House Transportation Committee and from the state of the to-be-acquired NWA, has already come out against any mergers. Today he reiterated his opposition (“Other airlines and network carriers will not be able to withstand the potential power of the largest airline in the world; it will be a globe straddling, mega carrier.”) and pledged to use his full oversight power to question airline consolidation. Senator Amy Klobuchar (D-Minn.) sounded a populist theme in defense of NWA: “Today’s merger announcement is not just about Wall Street. It’s also about Main Street, including the best interests of our consumers, workers and local communities.” She added: “Minnesota’s economy is particularly tied to Northwest’s success,” and she promised to make sure that Minnesota retains the current facilities, jobs, and services that NWA houses there. Senator Norm Coleman (R-Minn.) was also skeptical. (more…)
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