US Airways’ unsolicited and increasingly hostile takeover bid for Delta Air Lines came under assault in the US Senate today in a hearing that exposed fears among parts of the legislature that airline consolidation will result in higher fares and the loss of service in small communities.
Senator Daniel Inouye, the new chairman of the Senate’s Commerce, Science and Transportation Committee warned that a Delta-US Airways deal would lead to multiple mergers that “would reduce air service”.
Despite efforts by US Airways chairman and chief executive Doug Parker to assuage Senators, other senior members of the Democrat Party that has control of the new Congress including the Senate aviation subcommittee chairman Jay Rockefeller also advocated the possibility of regulating service to the USA’s smallest airports.
The US government deregulated its airline industry in 1978.
Delta chief executive Jerry Grinstein, the only other airline executive at the hearing that was to debate the sate of the country’s industry, noted that small communities would be “the major losers in this proposed takeover”.
He also said that many travelers would lose if US Airways’ takeover succeeded, noting that “for every market where US Airways lowered the fares, fares increased in four other markets”.
Grinstein added that Delta would thrive by being allowed to emerge from its bankruptcy as a stand-alone carrier, and for the first time publicly denied reports that Delta was negotiating a merger with Northwest Airlines.
Parker repeated his arguments that the $10 billion offer for Delta was a good deal, would benefit consumers and lead to minimal service reductions at worst.
He repeated a pledge that no city will lose service by a merged Delta/US Airways despite a proposed 10% cut in combined capacity. “For those [Senators] who have small communities, which the low-cost careers will never serve, you should be very concerned about the health of the network carriers,” he said.
Parker did not address the possibility of raising US Airways’ cash-and-stock bid or extending its February 1 deadline.
Source: FlightGlobal.com
