In his Nov. 21 speech, Oberstar stated his belief that “the main point of a United-US Airways merger is to permit United to expand its network substantially.” Oberstar noted that United is already the nation’s largest carrier with system revenues of almost $2 billion a year more than American, the second largest domestic carrier.

“The merger must be rejected if we are to continue to have adequate competition in the airline industry,” he said. “Fewer choices, higher fares and a deterioration in service is not what Congress contemplated in 1978; yet it is the likely result if a United-US Airways merger is approved by the DOJ [Department of Justice].”

Oberstar went on to say that were the proposed merger to be approved, “we would soon be reduced to an industry of three major competitors. Airline competition history has long revealed that, whenever the established major carriers control the markets, the tendency is for the carriers to follow each other’s fare changes so that fares are identical and passenger choice is limited. These tendencies would be magnified if there were only a few major airlines … If there are mergers and the incumbent carriers are even larger, they would be even more likely and more able to destroy new entrants.”

“The United/US Airways merger would be anticompetitive and anticonsumer,” stated ASTA President and CEO Richard M. Copland, CTC. “The merger will substantially increase U.S. airline concentration, especially on routes between the hubs of the two airlines. United and US Airways recognized this problem from the beginning, which is why they proposed the so-called DCAir divestiture. But the DCAir proposal will not address the anticompetitive problems posed by the United/US Airways merger.

“First, the proposed purchaser, DC Air, cannot offer any significant economies of scale or access to a broader network. It also faces enormous obstacles in developing a start-up airline at a slot-controlled

airport. The consumer benefits will likely prove to be short-lived,” he continued. “Second, under the proposed arrangement, DCAir will remain highly dependent on the merged United/US Airways for its planes, pilots and management. Finally, even if the DCAir proposal could be reconfigured to establish a more independent competitor and eliminate continuing dependence on and entanglement with United/US Airways, it would address only a portion of the broad competitive issues raised by the United/US Airways merger.”

Copland further pointed out that if the DOJ agrees to accept divestitures as a condition to approving the United/US Airways merger, it must ensure that the acquiring firm is capable of, and committed to, operating the divested assets as part of a strong, efficient airline that is independent of the merged United/US Airways.

Said Copland, “At a minimum, the DCAir assets should be sold outright to a well-funded, efficient and independent airline that has (1) a strong reputation for performance, dependability and customer service, and (2) access to a broad, complementary network that would increase efficiency without raising any competition issues. The Departments of Justice and Transportation should require no less.

“These federal agencies should be mindful of the Senate Commerce Committee’s September resolution objecting to the proposed merger, stating that ‘the potential consumer detriments from the proposed merger outweigh the potential consumer benefits,’” he concluded.

“ASTA is convinced that a mega-merger of this sort is not in the best interest of consumers. What happened to United’s commitment to hold the line on prices for two years? We understand they just increased fares again,” stated Copland. “Think about the recent disruption in air service caused by United’s labor problems. What would be the magnitude of the havoc that would be created by labor problems if this airline were to become even larger?”

ASTA opposes all major airline industry mergers and consolidations on the grounds that decreased competition in the marketplace would be a detriment to the traveling public and travel agency community and force other carriers to follow suit in order to compete.