Many Voices Would Try to Influence Regulators in Delta-Northwest Deal

WASHINGTON — If Delta Air Lines Inc. and Northwest Airlines Corp. were to go forward with a merger, they would need to win the approval of the U.S. Department of Justice, which enforces antitrust law.

Congress, unions, competitors and consumers would play no direct role in deciding whether a merger deserves regulatory approval — but they could apply considerable political pressure to block or shape the deal.

Big airline mergers typically bring loud howls from lawmakers concerned about reduced air service for their districts. They also fire up labor leaders who oppose job cutbacks and consumer advocates who fear higher fares.

All that may affect an airline deal as it travels a path through Washington towards approval.

If the two carriers formally announce a merger, the Antitrust Division of the Justice Department would launch a review to determine whether to challenge the transaction under laws designed to preserve industry competition.

For advice, it would turn to the U.S Department of Transportation to examine a range of public-interest factors including routes, "code-sharing" marketing arrangements with other carriers, unfair practices and economic fitness.

The DOT also would examine the merger's impact on international routes and the trade position of the United States in the global air transportation system. In addition, it would conduct a "fitness" review of the combined airline's management condition and financial soundness.

Finally, DOT would review whether a proposed merger would protect the rights of consumers by providing them with reasonable notice and an opportunity to adjust to changes in their frequent flyer programs.

The findings then would be turned over to Justice, where officials would decide whether to launch a legal challenge to block the merger.

Investors who support mergers are urging the airlines to act quickly, fearing the next president may take a tougher stance on antitrust law than the pro-business Bush administration.

But there is precedent for an airline review to drag out over two administrations. During the Clinton administration, a DOJ review was launched when UAL Corp., which owns United Airlines, announced plans in May 2000 to take over US Airways.

The review was not completed until July 2001, when the Bush Justice Department concluded the acquisition "would reduce competition, raise fares, and harm consumers on airline routes throughout the United States." The carriers then called off the deal.

If the DOJ reviews a Delta-Northwest deal, it soon will hear from elected lawmakers. The key House and Senate committee chairmen are Democrats, who tend to be more sympathetic to workers than Wall Street.

At a recent press briefing, House Transportation Committee Chairman James Oberstar, of Minnesota, flatly proclaimed his opposition to any attempt by Atlanta-based Delta to merge with Northwest, headquartered in Eagan, Minn.

Oberstar said his position on any major airline merger is "hell no."

Oberstar fears that one big combination would trigger an avalanche of consolidations, resulting in higher fares and less service for many communities. He has promised to hold hearings to generate as much public outcry as possible to pressure the Justice Department into blocking the deal.

Congressional pressure was applied last year when US Airways proposed a hostile takeover of Delta. Many lawmakers were outraged, saying it would result in reduced service and competition east of the Mississippi River, where both carriers were based.

Initially, it appeared the deal might win the blessing of the Bush administration, because Transportation Department assistant secretary Andrew Steinberg told the Senate Commerce Committee: "We must allow failing firms to exit the business if market forces decide that assets should be reallocated to more efficient firms."

That statement reflected the general views of the Bush administration, which did not oppose American Airlines' acquisition of Trans World Airlines in 2001, America West Airlines' purchase of US Airways Group in 2005, SkyWest Airlines' purchase of Atlantic Southeast Airlines in 2005, or an agreement reached last year for the sale of Midwest Airlines to TPG Capital and Northwest Airlines.

But those smaller deals did not pose as much of a threat to jobs and service as did the US Airways-Delta deal. At the Senate hearing, lawmakers not only criticized the proposed takeover, but threatened new regulations for the industry.

Those political attacks helped chilled the enthusiasm of the creditors of then-bankrupt Delta. The deal ultimately fell apart.

Competitors, consumer groups and unions also could stir up political pressures to try to stop or at least shape the deal. Earlier this week, Bob Fornaro, chief executive of Orlando-based AirTran Holdings Inc., said in a speech at the Aero Club of Washington that he would not object to airline mergers.

But he would insist antitrust officials "require the transfer of gates, facilities and slots away from any large newly combined airline."

The AFL-CIO, a labor umbrella organization, held a meeting of its aviation union leaders to develop a strategy for responding to airline mergers.

"We will use any and all options — including deployment of legislative, political and capital strategies — to leverage the strength of working people to ensure this latest merger mania doesn't harm this industry, its employees, passengers and communities," AFL-CIO Secretary-Treasurer Richard Trumka said in a statement.

WHO'LL SOUND OFF

For Delta Air Lines Inc. to complete its proposed merger with Northwest Airlines Corp., it must seek the support of these key players.

SHAREHOLDERS

Investors must vote in favor of the merger for it to be completed.

JUSTICE DEPARTMENT

Lawyers within the Antitrust Division must review the transaction, and decide whether to challenge it under laws protecting competition.

TRANSPORTATION DEPARTMENT

Aviation experts at the department will examine many factors — such as domestic and international routes, marketing arrangements, potentially unfair practices and economic fitness — to determine if the merger serves the public interest. Their recommendations go to Justice Department lawyers.

CONGRESS

Members of the House and Senate have no direct role in a merger review, but key committee chairmen who oppose the merger have promised to hold hearings to examine its impact on air service, fares and employment. Their ability to pass new aviation regulations gives them considerable influence over airlines.

LABOR LEADERS

Unions will try to generate political pressure to stop the deal if their members will suffer. Fierce labor opposition can make any deal less popular in Washington, especially during an election year.

CONSUMER ADVOCATES

Groups representing travelers can call press conferences and testify before Congress if they think consumers will be getting a raw deal. Consumer groups can apply grassroots political pressure, making it harder for the Justice Department to approve a deal.