Copyright 2000 Chicago Sun-Times, Inc.
Chicago
Sun-Times
June 26, 2000, MONDAY, Late Sports
Final Edition
SECTION: FINANCIAL; Pg. 45
LENGTH: 618 words
HEADLINE:
Airlines put on show to sell merger
BYLINE: Lynn Sweet
BODY:
If I had to bet on whether United Airlines
ends up buying US Airways, I'd say no at this point in a close call.
But
not because Congress so far is wary of the megadeal.
During seven days
of hearings in Congress over the last two weeks on the $ 11.6 billion
transaction announced last month, lawmakers' sentiments ranged from skeptical to
hostile. The public flogging of the carriers was to be expected, since lousy
airline service is a populist issue these days, and it cuts across party lines.
In an era of flight delays, members of Congress are frustrated fliers,
just like everybody else.
"I think we are where we had hoped to be at
the end of these hearings," James E. Goodwin, United's chairman and chief
executive, said Friday.
Goodwin, US Airways Chairman Stephen M. Wolf and
Robert Johnson, the chairman and CEO of D.C. Air, the spinoff carrier to be
created to placate anti-trust concerns, testified together at four hearings in
addition to meeting one-on-one with key members.
More massaging of
Congress is planned as the sales job for the deal moves on to the next phase.
Billionaire Johnson, founder of the Black Entertainment Network, told me
he wants to meet with 79 members by the summer recess and "focus on the opinion
makers and the opinion shapers." He was in Florida this weekend whipping up
support in cities D.C. Air will serve.
United's lobbying
army -- an impressive display of clout and access -- is
being supplemented by strategic local outreach, starting in North Carolina
because Charlotte, a hub for US Airways, likely would expand if the sale is
completed.
United probably would not mind if people thought a pro-merger
organization that debuted a week ago in Charlotte called the Global Aviation
Improvement Network -- GAIN -- was a grass-roots group
organically grown. GAIN's credibility, however, is somewhat debatable, because
United provided the seed money for the group, whose chairman is former Iowa Gov.
Terry Branstad.
Most important in determining if United is allowed to
acquire US Airways is the Justice Department, not Congress, reluctant unions or
shareholder lawsuits. The Transportation Department plays a lesser but
influential role.
DC Air has been the focus of much debate, and whether
Johnson got a sweetheart deal from the merging carriers. If that's all the
debate boils down to, it's a victory for United, because United need only find
an acceptable substitute.
The crucial question for United is whether the
Justice Department takes a narrow or expansive view of the blockbuster sale.
United wants the transaction considered in a vacuum, not in the context
of whether the sale triggers defensive moves resulting in the nation's six big
carriers becoming three jumbo airlines.
No less an expert than Alfred E.
Kahn, the father of airline deregulation, told Congress that he was concerned
about the "radical consolidation" if the sale was permitted. Kahn urged Justice
to look at the bigger picture.
Microsoft trust-buster Joel Klein, chief
of Justice's anti-trust division, signaled he may well do that because of
"significant competitive concerns" within the aviation industry.
Justice
is pressing a predatory-pricing case against American Airlines, and is
challenging Northwest's purchase of a controlling stake in Continental.
Perhaps the strongest argument United has is one it hasn't yet stressed:
the faltering fiscal health of US Airways, which Wolf told Congress has
operating costs so high that it never can be competitive.
If US Airways
is really in a fatal tailspin, United, the nation's biggest airline, can make
the case it is doing everyone a favor by coming to the rescue.
E-mail:
sweet@dgs.dgsys.com
LOAD-DATE: July 10, 2000
