Thursday, June 17, 2010

United and Continental Grilled on Merger in House

Top executives of United Airlines and Continental Airlines sparred with irritated lawmakers on Wednesday over their merger plan, drawing a threat for closer industry regulation if the deal is approved.

United's Glenn Tilton and his counterpart at Continental, Jeff Smisek, received a frosty reception at House of Representatives Transportation and Judiciary committee hearings, and faced the sharpest public questioning yet on their proposal to create the world's biggest airline.

"United and Continental are repeating a strategic move that many airlines before them have made that has brought sustained success to none," said Representative James Oberstar, who as Transportation Committee chairman is influential on aviation matters.

Oberstar, who says the United/Continental deal will harm competition and raise fares, said he would explore legislation to stiffen regulation if the deal is approved. Oberstar voted for airline deregulation 30 years ago, but said he did not envision an industry of mergers and mega-carriers.

"When I cast my vote, I expected the antitrust laws to be vigorously enforced, as did others," said Oberstar, whose home-state airline, Northwest, merged with Delta Air Lines in 2008. He also opposed that deal.

If the deal is approved by antitrust officials at the Justice Department, United/Continental operating as new United would join Delta and American Airlines, a unit of AMR Corp , as the three largest domestic U.S. carriers. They would hold a combined 35 percent share of the market and new United would command about half of that.

Tilton and Smisek told the aviation and judiciary panels that the merger was necessary to compete effectively with American, Delta, Germany's Lufthansa , and Air France/KLM .

"This is a brutally competitive industry. It is today and will be after this merger," Smisek said.

Congress cannot block the merger but can pressure regulators and influence public opinion. The U.S. has approved two big mergers and several alliances since 2005.

The Senate Commerce Committee will review the United/Continental proposal at a hearing on Thursday.

While pilots expressed support for the merger on Wednesday, the loudest complaints from lawmakers generally came from those whose states or districts may be negatively impacted.

These included Dennis Kucinich of Ohio and Judiciary member Ted Poe of Texas, who praised Continental for its service but was less impressed with United. Poe told Tilton that he would rather travel by stagecoach than fly his airline.

Continental, which is headquartered in Houston, will shift its executive operation to Chicago, where United is based.

At the transportation committee hearing, Kucinich appeared as a witness and said he would investigate Continental's marketing alliance with United.

Kucinich, who chairs the domestic policy subcommittee, questioned why Continental would tell regulators in 2009 it did not want to merge with United and then do so a year later.

Kucinich represents Cleveland, a Continental hub that some say could lose jobs and service. Tilton and Smisek say they plan to grow the airline, not cut jobs or pare flights.

Northwest and Delta also forged an alliance before their merger. Continental decided not to merge with United two years ago over concerns about United's finances, which have since improved. United has also addressed service issues.

Tilton and Smisek also tangled with Transportation Committee members John Garamendi and John Boccieri over safety, including outsourcing of some United maintenance to China.

Smisek was grilled on pilot training following the February 2009 crash of a plane operated by Continental regional partner Colgan Air near Buffalo that killed 49 people. Family members of some of the victims of Flight 3407 attended the hearing.

Smisek called the crash tragic and regrettable, and said Continental was not aware that the pilots of the plane were undertrained, as U.S. crash investigators concluded.

Smisek said individual airlines should ensure safe operations, but training oversight industrywide is the responsibility of the Federal Aviation Administration.


Source : http://abcnews.go.com/Business/wirestory?id=10928968

No comments:

Post a Comment