Senators questioned the benefit of airline mergers at a hearing in Washington on Wednesday, and some suggested that the government should become more involved in the industry that was deregulated in 1978. "When I say re-regulate, the whole world goes crazy," said Sen. Jay Rockefeller, D-W. Va., who heads the Senate Commerce Committee subcommittee on aviation issues. "However I am becoming increasingly convinced that some regulation may become an option to make sure small communities are not harmed by consolidation." Rockefeller said a merger between Delta ( DALRQ) and US Airways ( LCC) would likely lead to additional deals. He asked the CEOs of the two carriers whether they could work with the Transportation Department to find ways to serve "rural communities by means other than the classic market system." Delta CEO Gerald Grinstein and Doug Parker, the chief of US Airways, agreed that they could. But they agreed on little else, as they battled over US Airways' hostile $10.1 billion takeover bid. Consolidation appeared to have few fans at the session. The hearing room was packed with uniformed Delta pilots, who have strongly opposed a takeover. "Take a look behind me at all of the people from Delta who have come here today to let you know by their presence how strongly they feel about this," said Grinstein, in his opening remarks.
Meanwhile, Sen. Claire McCaskill, D-Mo., said former TWA employees suffered in the 2001 merger with AMR's ( AMR) American Airlines. She said many former TWA flight attendants are over 55, haven't found new jobs and have been forced to rely on retirement funds or charity. "I have a great deal of angst over what has happened to the former TWA employees," said McCaskill. Parker said there would be little in common between the Delta/US Airways merger and the TWA/American merger. The latter took place before the Sept. 11, 2001, attacks, a slowing business cycle and the rise of low-fare carriers led to 155,000 industry layoffs. "I do not believe it's a parallel situation," he said. "Our view is that by putting these two companies together, we make them stronger." He reiterated that a merger wouldn't lead to the layoffs of any front-line employees. Grinstein noted that when American executives said they would provide for TWA employees, "I am sure
they meant every word. I am sure they were as committed to it as Mr. Parker is. But it's a volatile industry." Additionally, Robert Roach, general vice president of the International Association of Machinists union, said aspects of the 2005 merger between America West Airlines and the former US Airways, including integrating labor groups, haven't been completed.
"Do they have the ability to merge an airline? That question is still open," he said. Witnesses also debated the proposed merger's impact on consumers. Andrew Steinberg, assistant secretary for the Transportation Department, indicated that mergers can create steadier carriers. "Healthy network carriers that earn healthy profits are good for consumers, because they preserve the breadth and scope they want," and can serve small communities while maintaining fare competition, he said. "There are some industries that are quite competitive where there are just a couple of companies," he said, citing UPS ( UPS) and FedEx ( FDX) as examples. But Mark Cooper, director of research for the Consumer Federation of America, said that UPS and FedEx leave many markets to the US Postal Service. "The postal service
moves an awful lot of letters that the other two guys aren't interested in moving," he said, an indication that he felt it would be harmful to allow mergers that remove major carriers.