Senate Hears Pros, Cons of United/Continental Merger

U.S. Senator Herb Kohl (D-WI) urged caution during Senate hearings on the proposed merger of United Airlines and Continental, questioning the effects of the merger on consumers and airline competition. “At what point do we reach a tipping point for competition?” Kohl asked.

Kohl chaired a Judiciary Antitrust Subcommittee hearing on the proposed United-Continental merger that was defended by both airlines who believe the merger passes the antitrust test and will help both carriers.

“At the outset, I should stress that we consider this merger with an open mind, and do not reflexively oppose or support this merger,” Kohl said. “We are very mindful of the difficulties faced by the airline industry.

“How will the loss of competition between these two national systems impact airfares and service?” Kohl asked. “Will a combined United/Continental be a stronger competitor to the previously merged Delta/Northwest or will the large, networked airlines that remain dominate the airline industry across the country and internationally?

continental airlines“This merger will combine the two airlines that rank number four and six in terms of domestic revenue into one of the world's largest airlines,” Kohl continued. “The two airlines' CEOs claim that the deal was 'built to pass' antitrust scrutiny because the two airlines' routes do not overlap substantially and the low cost carriers will constrain their ability to raise prices. However, fundamentally, this merger will reduce the number of national networked airlines. Two years ago, we had six, after this merger we'll have four.”

Kohl also questioned the impact of the merger on consumers. “At the same time, we must recognize the problems also faced by air travelers today,” he said. “Consumers are understandably frustrated by crowded flights, disappearing leg room, frequent delays and puzzling prices. Once free services that passengers took for granted – like checked bags, telephone reservations, and even blankets and pillows – today are available only for a fee on most carriers. Is this decline in service an inevitable consequence of the industry's need for profitability?

“In the last decade, the airline industry has faced unprecedented challenges— from the devastating tragedy of 9-11 and crippling increases in fuel prices to bankruptcies and a drop in travel due to the economic downturn,” Kohl said. “We all have an interest in seeing a profitable airline industry so that hundreds of communities all across America can continue to see frequent and reliable air service so essential to economic growth. Will the low cost carriers be able to step in and fill the competitive void or will they feel less competitive pressure to keep fares low or compete by offering things like free checked bags? And how will small and medium sized cities fare after this merger, at the very time that they most need frequent and inexpensive air service for their economic health?”

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