Few Antitrust Hurdles, Justice Department Cause Of Worry For Delta, Northwest

Instead of the speculated antitrust hurdles, which the proposed merger of Delta Air Lines Inc. (DAL) and Northwest Airlines Corp. (NWA) probably will not face from the federal antitrust regulators, the airlines might be required to give up gates or other assets where service overlaps.

The deal has already entered the bad books of politicians running into opposition from lawmakers as well, over the concern about its impact on service and jobs in their districts. The merger of the two companies is said to form the biggest airline company of the world, which is a matter of concern for most of the lawmakers.

It is suspected that this deal would avalanche into a number of other mergers, resulting in the formation of three big air-carriers, which would dominate the American market, suffocating the smalltime, low-fare carriers, which would not be able to compete.

House Judiciary Committee Chairman John Conyers, D-Mich., will hold a hearing on the proposed merger April 24, according to his spokeswoman. Delta Chief Executive Richard Anderson and Northwest CEO Doug Steenland are expected to testify at the hearing of the panel's Task Force on Competition Policy and Antitrust Laws.

"We will have three global mega-carriers. In the face of that, so called low- fare carriers will not be able to compete," Oberstar warned at a press conference.

Aside from regulatory concerns, the proposed deal must gain shareholder approval and the approval of Northwest pilots, who have vowed to oppose it.
The Department of Justice, which reviews airline mergers, would typically be examining the routes to see if the combining airlines operate nonstop flights between the same cities. Justice officials would frown on combinations with a lot of overlap, because a merger would reduce competition on those routes.

Overlap between Delta, strong on the East Coast and transatlantic routes, and Northwest, which has a heavy presence in the U.S. Northwest and on Pacific routes, is minimal.

In cases where the airlines currently offer the same service between cities - for example, Cincinnati to Detroit or Salt Lake City to Minneapolis - federal regulators could require the new airline to give up gates or landing slots to enhance competition from other carriers. But that demand would probably only apply for routes between airports where gates would not otherwise be available to competing carriers.

First Delta and Northwest must formally notify the Justice Department of their proposed merger, which would be done soon. After which the department in its ‘second request’, requests for the firms’ documents within 30 days.
After both firms have complied with the document request, the Justice Department will have 30 days to tell the airlines whether it intends to challenge the proposed combination.

Aviation experts said the Justice Department is not required to examine the potential impact of other mergers that could be triggered by the Northwest-Delta deal. Continental and United Airlines have held exploratory talks toward a possible merger.

If the Justice Department receives another notice for a merger involving rival carriers, while the Northwest-Delta merger is still under review, that could complicate approval of the Delta-Northwest merger. Federal antitrust officials would then have to look at the effect of combining Delta and Northwest routes, together with the effect of other combinations being proposed.

The Justice Department intends to take into account not only route overlaps but also the consent of the pilots and the issue of job cuts before it gives the merger a green signal.