and United Airline's parent
finished Thursday regular trading down after senior lawmakers introduced a resolution expressing "strong reservations" about the proposed merger between the two carriers, and proposed legislation that would increase federal regulatory powers over airlines should the merger be completed.
The two airlines have said they hope to gain approval for the $4.3 billion deal by the end of the year and complete it by early 2001.
The merger between United and Arlington, Va.-based US Airways, the country's sixth- largest carrier, still awaits approval from US Airways shareholders, the
U.S. Justice Department
and states' attorney generals. It faces strong scrutiny from regulators, and significant resistance from some senior legislators.
Minnesota Rep. James Oberstar, the senior
House Transportation Committee
and an outspoken opponent of the merger, made a warning late Wednesday. He said that if United Airlines, already the world's largest airline, was permitted to merge with US Airways, three "mega-airlines" could end up controlling more than 84% of the U.S. market.
Airline Competition Preservation Act of 2000
would take effect if that merger or others occurred, resulting in three or fewer carriers controlling more than 70% of domestic revenue passenger miles. The bill, introduced Wednesday, would give the
Department of Transportation
wider powers to protect consumers, allowing regulators to force airlines to lower fares or give up their gates at particular airports to new airlines.
In a separate action late Wednesday, Arizona Senator and Commerce Committee Chairman John McCain and Washington Senator Slade Gorton, who chairs the
, announced they had introduced a resolution expressing their disapproval with the proposed United-US Airways deal.
"Our concerns for the consumer are of such a significant nature that we are compelled to introduce this resolution," said Senator McCain. "We conclude that whatever air travelers stand to gain from the merger is outweighed by what they stand to lose."
United spokeswoman Susana Leyva said she was neither surprised nor concerned by the introduction of the resolution.
"We always fully expected that the Justice Department would conduct a thorough review of the merger," said Leyva. "We welcome scrutiny of the merger and we're convinced that the pro-competitive and consumer benefits are strong."
US Airways echoed those sentiments, claiming it is confident that the merger will bring "overwhelming consumer benefits and great opportunities for the communities we serve."
The airline also pointed out that the deal would result in the creation of a new carrier,
, as well as an "unprecedented guarantee" of job security for the more than 40,000 US Airways employees.
United faces some resistance to the proposed deal from its union employees. It has been in
contract negotiations with its approximately 10,000 union pilots and 44,000 union ground workers since contracts with each group ran out earlier this year.
In a letter earlier this month to the
International Association of Machinists
-- which represents mechanics, ramp workers, reservation and ticket agents, and baggage personnel -- international president R. Thomas Buffenbarger, bluntly stated: "Either the United negotiations prove successful. Or the merger dies. Period."
The United unit of the
Air Line Pilots Associations
has also expressed "strong concerns" about the merger, but says it could support the deal if issues surrounding pilot seniority and other labor-related matters are resolved. The union represents about 10,000 United Airlines pilots.
Despite lawmakers' voiced concerns over the proposed merger, Julius Maldutis, an industry analyst at
, said past mergers have actually helped increase competition in the industry.
If the standard test for industry concentration is used, Maldutis said the merger should be banned. "But looking at the record for past mergers, they have been largely unsuccessful and have provided market opportunities for new entrants."
Maldutis, who has analyzed airlines for more than two decades, said approximately 20 mergers were completed in the 1980s, while about 50 new airlines were started.
Maldtius remains very bullish on the airline industry in the long term. He rates UAL a buy with a long-term target price of $75. Maldutis maintains a hold rating on US Airways shares with a target price of $40. CIBC does not underwrite either airline.
Shares of Elk Grove Township, Ill.-based UAL closed down 7/8, or 2%, at 53 5/16 on Thursday. US Airways, meanwhile, closed down 3/8, or 1%, at 38 7/8.