United, Continental grilled on merger in U.S. House

Posted June 16, 2010 at 4:24 p.m.

tilton.jpgUnited Airlines CEO Glenn Tilton, left, and Continental Airlines Inc. CEO Jeffery Smisek testify on Capitol Hill in Washington, Wednesday on the proposed United and Continental Airlines merger. (AP Photo/Haraz N. Ghanbari)

Reuters | Top executives of United Airlines and Continental Airlines sparred with
irritated U.S. lawmakers on Wednesday over their planned merger, drawing
a threat for closer industry regulation if the deal goes through.

United’s Glenn Tilton and his counterpart at Continental, Jeff Smisek,
received a frosty reception from the House aviation subcommittee, and
faced the sharpest public questioning yet on specifics of the deal.

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They later appeared before the House Judiciary Committee where lawmakers
raised similar questions about service, job protection and competition
in an industry that is consolidating at the top and fragmented at the

“United and Continental are repeating a strategic move that many
airlines before them have made that has brought sustained success to
none,” said Representative James Oberstar, who as Transportation
Committee chairman is influential on aviation matters.

Oberstar, who says the United/Continental deal will harm competition and
raise fares, said he would explore legislation to stiffen regulation if
the deal is approved. Oberstar voted for airline deregulation 30 years
ago, but said he did not envision an industry of mergers and

“When I cast my vote, I expected the antitrust laws to be vigorously
enforced, as did others,” said Oberstar, whose home-state airline,
Northwest, merged with Delta Air Lines in 2008. He also opposed that

If the deal is approved by antitrust officials at the Justice
Department, United/Continental operating as new United would join Delta
and American Airlines, a unit of AMR Corp , as the three largest
domestic U.S. carriers. They would hold a combined 35 percent share of
the market and new United would command about half of that.

Tilton and Smisek told the aviation and judiciary panels that the merger
was necessary to compete effectively with American, Delta, Germany’s
Lufthansa, and Air France/KLM .

“This is a brutally competitive industry. It is today and will be after
this merger,” Smisek said.

Congress cannot block the merger. The U.S. has approved two big mergers
and several alliances since 2005.

The Senate Commerce Committee will review the United/Continental
proposal at a hearing on Thursday.

At the tense transportation subcommittee hearing on Wednesday,
Representative Dennis Kucinich of Ohio, which some experts say could be
vulnerable to job and service cuts as a result of the merger, said he
would investigate Continental’s marketing alliance with United.

Kucinich, who chairs the domestic policy subcommittee, questioned why
Continental would tell regulators in 2009 they did not want to merge and
reverse the decision a year later.

“It is easy to see that the merger was Continental’s plan all along,”
Kucinich said.

Northwest and Delta also forged an alliance before their merger.
Continental backed out of merger discussions with United two years ago
over concerns about United’s finances, which have since improved.

Tilton and Smisek tangled with Representatives John Garamendi and John
Boccieri over safety, including outsourcing some United maintenance work
to China.

Smisek was grilled on pilot training following the February 2009 midair
stall and crash of a plane operated by Continental regional partner
Colgan Air near Buffalo that killed 49 people. Family members of some of
the victims of Flight 3407 attended the hearing.

Smisek called the crash tragic and regrettable, and said Continental was
not aware that the pilots of the ill-fated aircraft were undertrained,
as U.S. crash investigators concluded.

Smisek said individual airlines should ensure safe operations, but
training oversight industrywide is the responsibility of the Federal
Aviation Administration.


One comment:

  1. RegularGuy June 16, 2010 at 8:02 pm

    Window-dressing. That’s all it is.
    We’re in an election year, and just a little bit of ‘tough-talk’ lets each of the House mopes go back to their districts and tell overblown and embellished stories of how they are in Washington to ‘fight’ for their constituents.
    But it’s all just window dressing.
    The merger will be approved.