Delta-Northwest merger up in the air
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KAI RYSSDAL: Delta and Northwest reported today, between them, they lost $10.5 billion during the first three months of the year. Jet fuel prices were a big chunk of that. Last week, the two companies announced a merger, in part to try to get some economies of scale. The deal would create the world’s largest airline. First they have to convince antitrust officials in Washington the merger won’t harm consumers, and to that end, the companies’ CEOs testify before two congressional committees tomorrow.
Our Washington bureau chief, John Dimsdale, reports.
JOHN DIMSDALE: Delta and Northwest’s financial miseries have plenty of company. United, American and Continental also lost money in the first quarter. The industry only recently recovered from a wave of bankruptcies, and, once again, airlines are laying off workers, grounding planes and adding fuel surcharges and extra baggage fees.
Delta and Northwest claim size will help them cope better with the economic pressures facing the entire industry. They’ll be able to reduce management costs, consolidate routes and trim overlapping inventories. Congress and the Justice Department might worry that consumer choice will suffer, but airline management expert Darryl Jenkins says the industry’s financial headwinds will influence antitrust considerations.
DARRYL JENKINS: There is a provision in antitrust law for failing industries. I don’t know if the airline industry is covered under that yet, but certainly I think regulators will look at this.
What’s more, Jenkins says, the merging airlines can point to vigorous competition from many low-cost airlines these days, something United and US Airways could not argue when their merger failed some years ago. If Delta and Northwest get the go-ahead, Jenkins expects more airline mergers before the year is out.
In Washington, I’m John Dimsdale for Marketplace.
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