Powerful Congressional Chairman Says He'll Fight Delta Merger

WASHINGTON — House Transportation Committee Chairman James Oberstar doesn't have veto power over a possible Delta-Northwest airlines merger. But on Friday, the powerful Minnesota Democrat said he would use all of his considerable political clout to pressure the Justice Department to block it.

"I would and I will and I am fighting this merger," Oberstar said, who has long opposed airline industry consolidation. "Mergers are bad for aviation."

He said he does not expect to get into a battle with Atlanta-based Delta Air Lines Inc. over whether a merged airline should be based in Georgia or in his home state, where Northwest Corp. has its headquarters.

Both Georgians and Minnesotans "ought to be on the same page" fighting airline mergers, he said, because they cost jobs and harm consumers.

If Delta and Northwest were to join forces, "what you would have is a cascade of consolidation," Oberstar said. "The other airlines would have to defend themselves by creating entities as large or even larger" than Delta-Northwest.

One analyst said a riled-up Oberstar could indeed have enough political weight to affect the deal.

"Technically, he does not have veto power, but actually, he does, because he can put a lot of pressure on the deal makers," said Michael Boyd, president of the Boyd Group Inc., an aviation consulting firm in Colorado.

Political leaders from Georgia have said they would fight hard to make sure the surviving company's top executives work in Atlanta.

But Oberstar, whose committee has jurisdiction over civil aviation, plans to hold high-profile hearings to drum up broad political support to ensure that Delta and Northwest stay right where they are now.

While the Department of Justice alone has the power to review the antitrust implications of corporate mergers, Oberstar said that his committee could create intense political pressure by pointing out how a merger might cost jobs in cities such as Cincinnati, where Delta has a hub, or might help push airfares higher.

Oberstar, a widely respected aviation expert, opposes airline mergers in general — not just a Delta-Northwest deal — because he believes they reduce fare competition and diminish service to smaller communities.

He said that he would have fought nearly all mergers over the past decade or so, but was not in a strong enough position to do so while Republicans controlled the House from 1995 though 2006.

Last year, when he took over as the transportation committee's chairmanship, he began gearing up for a fight to kill US Airways Group Inc.'s bid to buy Delta. Congressional pressure helped frighten bankrupt Delta's creditors, who then backed away from the deal.

Wall Street investment bankers would do whatever they could to win over Oberstar, Boyd suggested, and protect the hefty fees they could earn from the deal.

"Oberstar could be bought off" simply by giving him the headquarters of the combined, and much bigger, airline, Boyd suggested. "If he gets the headquarters, you won't hear another peep out of him," he said.

But Oberstar vigorously disputed that, saying he would fight the merger no matter what benefits his state might be offered.

Doing otherwise "would be a dereliction of my responsibility," he said. "The national interest would not be served by diminishing competition."

Few lawmakers are in a better position to fight for their beliefs than Oberstar, who has made transportation the focus of his long career in Washington.

A native of Chisholm, Minn., Oberstar has been in the House since 1974, and on the Transportation Committee from the start. His vast experience on aviation safety and transportation funding has made him an exceptionally powerful lawmaker.

For example, during the 105th Congress, Oberstar was the senior Democrat on the Republican-controlled panel. In that role, he served as one of a handful of House and Senate negotiators who crafted a massive transportation spending bill. Despite being in the minority, he still had veto clout; no highway, bridge or mass transit project could get funded without his support.

Boyd said that to get around Oberstar's wrath, Delta and Northwest could create a "link" instead of full merger. That is, the two may remain separate companies, but work closely together, as Air France, a French carrier, and KLM, a Dutch airline, now do through a mutual holding company, Air France-KLM S.A., based in Roissy, France.

Air France and KLM are members of the SkyTeam Alliance, which already includes Delta and Northwest as sister companies.

Aviation consultant John Pincavage, based in Connecticut, said that if the two carriers do go ahead with a full merger, headquarters decisions will be driven by bottom-line concerns.

"Costs are going to drive where the headquarters are," he said. "If there are some great savings, they'll move the headquarters there."

One factor that could enter into the calculations is that under a contract signed last year, Northwest received about $215 million in revenue and rent concessions with the authority that runs Minneapolis-St. Paul International Airport. If the airline fails to maintain a hub and a headquarters in Minnesota, it might have to repay the money.

Pincavage said another cost motivation that might help Delta be the "survivor" company in a merger is that the Atlanta-based company is less unionized than Northwest. If Delta were regarded as the purchaser and Northwest were to cease to exist, the merged company may have fewer union problems, he said.

But Boyd said unionization might actually tip survivorship to Northwest. By allowing Northwest to come out on top, with headquarters in Eagan, Minn., it would head off the political trouble that unions might otherwise stir up in Washington.