WASHINGTON (AP) - While talk of a combined Delta-Northwest and other airline
mergers seems to be in a holding pattern, further delays could jeopardize
carriers' chances of getting regulatory clearance under the business-friendly
Bush administration.
Antitrust experts say any such combination will take several months to gain
Justice Department approval, and that a decision likely would be needed before
Election Day or the airlines will have to roll the dice with whomever follows
George W. Bush into the White House.
"The Bush administration has rarely met a merger it didn't like," said
Darren Bush, an associate professor at the University of Houston Law Center who
worked in the Justice Department's antitrust division from 1998 to 2001. But the
airlines "have to get it done by the end of April if they have any hope of
getting it (approved) under the Bush administration," he said.
The carriers are convinced the Bush administration is more supportive of
their "business efficiencies argument" than the "constituency argument" that may
play better with a Democrat or John McCain in the White House, said Michael
Waxman, a professor at Marquette University Law School in Milwaukee.
Since talks began a few months ago, lawmakers have railed against the
proposed combination of Northwest Airlines Corp. and Delta Air Lines Inc.,
seeing it as competition-killer and ticket price-hiker. Many in Congress have
promised hearings if any mergers are announced, but antitrust review
responsibility ultimately falls to the Justice Department.
A spokeswoman for the Justice Department's antitrust division would not
comment on how long a review could take. Agency officials previously have said
airline merger reviews focus on ensuring that competition is not lessened in any
market by examining city pairs where both carriers provide service, and likely
will in the future, to gauge how market share will be affected.
Andrew Steinberg, who until mid-January was assistant secretary for aviation
and international affairs at the Transportation Department, said a deal could be
approved "relatively quickly" -- in a matter of months -- if the two sides were
well prepared and willing to compromise. That could leave the companies some
wiggle room, but not much.
"By the summer, they're running out of time," he said.
Antitrust concerns have grounded potential deals before. In July 2001, more
than a year after it was proposed, an attempt to merge UAL Corp.'s United
Airlines and US Airways fell apart amid concerns that the combined carrier would
control too much of the Washington, D.C. market and dominate several other key
routes.
But in the case of Eagan, Minn.-based Northwest and Atlanta-based Delta,
there is little overlap in most markets. And that, say observers, makes it more
like the America West and US Air combo -- which won Bush administration approval
in June 2005, a month after it was proposed.
"The ones that get through quickly are end-to-end mergers," Steinberg said.
Fundamental changes in the airline industry may also smooth the regulatory
road for Delta and Northwest. Low-cost carriers are gaining market share at the
same time that record-high oil prices are threatening to wipe out slim profit
margins.
Many on Wall Street are pushing for consolidation as a way for the industry
to shed additional domestic capacity and shore up its pricing power. Fewer seats
in the system means higher ticket prices.
But the Delta-Northwest deal seems to be taking its cue from so many
tarmac-stuck flights: going nowhere soon. Last week, Delta's pilots union
rejected going into arbitration with its counterpart at Northwest to break a
deadlock over the integration of seniority lists. Delta has said no seniority
protection means no deal.
If the two can work out their differences, the deal still could get rebuffed
given its precedent-setting potential.
Industry observers see a Delta-Northwest deal as starting a chain reaction
that would knock out at least half of the six traditional carriers.
The significance of the "tectonic shift" to the nation's air travel system
won't be something regulators will rush through, said airline consultant Robert
Mann. "These aren't small deals," he said. "There's no putting the genie back in
the bottle after it's out."
The Justice Department may ask the merged airlines to give up some gate
space at certain airports they both serve or where one has a particularly large
presence as a condition for approval, said Waxman.
But by the time Justice turns it back over to the carriers to divvy up
gates, there may be a new and less merger friendly passenger on Air Force One.
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