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Oberstar Opposes United Continental Merger

May 7, 2010 By: George Dooley

Rep. James L. Oberstar, a Democrat from Minnesota and chairman of the House Committee on Transportation and Infrastructure, announced his opposition to the proposed merger between United Airlines and Continental Airlines. Oberstar also released copies of a letter he sent to the Department of Justice  (DOJ) asking it to reject the merger plan on antitrust grounds. 

Oberstar also opposed the Delta/Northwest merger fearing the effects of consolidation on the airline industry and the public. Oberstar warned that the combination of domestic consolidation and international alliances among the major airlines will result in the world aviation market being carved up by three international mega-carriers. The United-Continental merger was announced this week.

“I strongly urge the Department of Justice to demonstrate its commitment to vigorous antitrust enforcement and healthy competition in the airline industry by disapproving the proposed merger between United Air Lines and Continental Airlines,” the Oberstar letter said.

Oberstar said that the proposed merger is another step in the overall consolidation of domestic and international air service, bringing with it corresponding reductions in competition, consumer choice, and service to smaller, underserved communities. He also warned, as he has in the past, that such mergers serve to spur even more consolidation in the industry.

“If United and Continental merge, another domino in a chain of mergers will fall, and there will be strong pressure for further consolidation,” Oberstar’s letter reads. “As I predicted when I wrote your predecessor in 2008 on the Delta-Northwest merger, approval of that merger created conditions that have persuaded Delta’s competitors to pursue their own combinations. The United-Continental transaction is the latest, but it likely will not be the last.”

Oberstar urged the Justice Department to consider three primary issues:

*    Whether the transaction presents a reasonable possibility that further consolidation activity among competing carriers will follow.
*    Whether, to avail itself of the potential benefits of the transaction, the combined carrier is likely to substantially eliminate capacity in such a way as to eliminate travel options between any city-pairs.
*    Whether the transaction would alter the structure of the U.S. airline industry in such a way as to permit the three largest carriers to create or enhance market power or to facilitate its exercise in either the domestic or the international marketplace.

Oberstar asked the department to give his concerns full consideration when evaluating the merger because the transaction “could have major and lasting consequences” for American consumers.


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