) -- The CEOs of
( UAUA) faced polite questioning from a Senate subcommittee Thursday as they presented their merger case to Congress for the first time.
"You've brought a lot of light to this issue by being here," said Sen. Herb Kohl, (D-Wis.) chairman of the Senate Judiciary Committee's antitrust subcommittee, in concluding the session, which lasted less than two hours. Despite various objections to the proposed merger, senators did not challenge the case made by United CEO Glenn Tilton, who focused on the airlines' historic lack of financial success.
The airline industry has had "the worst financial performance of any industry in the U.S. over the last 30 years" and "has been systematically incapable of earning even a modest profit," Tilton said, noting that airlines and related companies have filed 186 bankruptcies in 30 years. "Serial bankruptcy is not an acceptable industry strategy."
Addressing the issue of continued low-fare competition, Tilton noted that "
will continue to be the country's largest airline in terms of passengers, after our merger."
One point of objection was raised by Sen. John Cornyn (R-Texas), who worried that "the 3,000 Texans who work for Continental in Houston are in danger of losing their jobs
because even if the hub expands, these headquarters jobs may soon be gone."
Later during the meeting, Continental CEO Jeff Smisek said only a small fraction of the Houston jobs would be lost.
"I can't help but ask why the decision was made to move the headquarters to Chicago," said Cornyn, adding that Houston has a lower tax rate, lower commercial real estate costs, a lower cost of living and a positive business environment.
When Sen. Orin Hatch (R-Utah) questioned if the future of Continental's Cleveland hub is threatened, Smisek answered indirectly, saying that it "will depend not on us, but on demand. The best way to look at this is how
would those hubs fare if we were not to do the merger ... We are eking out a hand-to-mouth existence and as far out as I can see, we will continue to eke out a hand-to-mouth existence."
Most of the opposition to the merger came from two witnesses: Darren Bush, a University of Houston associate professor and member of the American Antitrust Institute advisory board, and Bill McGee, a consultant for the Consumers Union. Both said consumers would be disadvantaged in the merger because diminished competition would lead inevitably to higher fares.
Bush said the 2008 merger between
"reduced the systems from which customers can choose."
McGee said that past mergers have led to diminished service in cities such as St. Louis, Cincinnati and Las Vegas and to the creation of airlines that are "too big to fail."
He added that approval of a United/Continental merger would mean that "executives of
may soon appear before this committee seeking a merger with
." Kohl later agreed, saying, "Another one, perhaps between American and US Air, may soon follow."
Congress has no decision-making role in airline mergers, which must be approved by the Transportation Department, but congressional hearings often provide an accurate impression of public sentiment. Opposition is expected to be more pronounced at a House Transportation Committee hearing next month, because committee chairman James Oberstar (D.-Minn.) strongly opposes the merger.
-- Written by Ted Reed in Charlotte, N.C.