This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Bush White House Could Benefit Airline Deals

An effort to merge Delta Air Lines (DAL) and Northwest Airlines (NWA) would clearly benefit from being reviewed while the Bush administration is still in office, says a recently departed Transportation Department official.

"The advantage to going now is that you have an administration that is not running for anything," says Andrew Steinberg, who stepped down last month after two years as the DOT's assistant secretary for aviation, in an interview. "Decisions can be made solely on the basis of merit. Nobody will be concerned, even at the political level, about the perception of challenging or not challenging a particular transaction."

Delta and Northwest are close to a merger deal, which could be followed by an arrangement to join UAL's (UAUA) United Airlines with Continental (CAL), sources say.

Perhaps adding to the likelihood of a Delta and Northwest pact, The Wall Street Journal reports that Delta CEO Richard Anderson told the board he would forego millions of dollars in compensation he could receive if a deal is reached.

"It would be helpful to get it done now," says Steinberg, who was previously chief counsel for the Federal Aviation Administration.

In particular, he says, Attorney General Michael Mukasey is "very independent, which is good from the point of view of the parties" seeking approval. By contrast, going forward, "some of the populist rhetoric you are hearing in the campaign for president would make me more concerned if I were thinking about a transaction, because of the perception that there is an anticorporate bias on the part of some of the Democratic candidates."

At the same time, Steinberg notes, the administration is only one factor.

"These decisions are heavily driven by a dedicated career staff which doesn't change, so it matters who controls the White House, but not nearly as much as people think." He also challenged the suggestion that no decision could be made during a transition between administrations, noting that the staff in the current administration will work right up until inauguration of the next president.

Typically, airline mergers are reviewed by both the DOT and the Justice Department, with the former making a recommendation to the latter. The Justice Department may prevent a merger during a waiting period, but once that period expires, it must go to court to contest the deal.

The Justice Department's primary concern is route overlap, Steinberg says. "They look at whether, in relevant markets, a merger is likely to produce a price increase over a horizon of about two years. In my experience, they don't care that the baseline from which prices would go up is below cost. I'm not criticizing them, but that's how they do their analysis."

At the same time, the department is strongly aware of recent growth by low-cost carriers, and of the impact of those carriers' pricing on markets, which "could help a merger pass scrutiny," he says.

Neither Delta/Northwest nor Continental/United appear to have significant overlap, Steinberg said. The latter deal may have some issues involving the trans-Atlantic and competing hubs at Newark Liberty and Washington Dulles, but Steinberg believes both mergers "are quite plausible and would not rule out any of them."

It may, however, be important which merger is first to be judged by the Justice Department.

"If there is more than one merger proposed, whoever gets to the finish line sooner has an advantage because once the market is more concentrated it becomes harder," Steinberg said. Still, "it's not like a race to the courthouse," he says, but rather a matter of which transaction is the first to be fully investigated.

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs