Chiefs: United-Continental merger won't cut competition
United Airlines' proposed merger with Continental Airlines Inc. won't cut competition because discount carriers can begin service and win passengers, the chief executives of the two companies told a Senate antitrust panel.
"Increased competition from low-cost carriers has been dramatic," United Chief Executive Officer Glenn Tilton and Continental CEO Jeff Smisek said in testimony at a hearing of the Senate Judiciary Committee's panel on antitrust, competition policy and consumer rights today.
The two airlines overlap on 15 non-stop routes, and 13 are served by carriers such as Southwest Airlines Co. or JetBlue Airways Corp., Smisek and Tilton said. Those airlines "directly compete at all our hub airports," Tilton and Smisek said.
The executives are making their first appearance before Congress in an effort to persuade lawmakers their proposal to create the world's largest airline deserves support. The carriers may need to cede some flights to win approval for the first airline merger reviewed under President Barack Obama.
The merger would reduce the number of national network airlines to four from six two years ago, said Senator Herb Kohl, the Wisconsin Democrat and panel chairman. "At what point do we reach a tipping point for competition?"
Houston JobsSenator John Cornyn, a Texas Republican, said 3,000 Continental employees in Houston are "in jeopardy of losing their jobs" and competition would be cut on routes such as Houston-Washington. He questioned why Chicago would be the headquarters of the merged carrier and not "more business- friendly" Houston, where Continental is based.United parent UAL Corp. and Continental announced plans May 3 to merge in a stock swap valued at more than $3 billion. Tilton would be nonexecutive chairman of the carrier, to be called United, and Smisek would become chief executive. The carrier would use Continental's logo.UAL had declined 8.6 percent since the merger announcement through yesterday in trading on the Nasdaq Stock Market, and Continental dropped 6.4 percent on the New York Stock Exchange. The Bloomberg U.S. Airline Index of 12 carriers had gained 2.5 percent in the same period.The merged carrier will give employees "improved long-term career opportunities" and eliminating jobs of workers who deal with customers will be through retirements, attrition and voluntary programs, the two chiefs said in their testimony.Serving CommunitiesThe airlines "will continue to serve all of the communities that we serve today," Tilton and Smisek said.William McGee, a travel consultant for Consumers Union, told the panel that the merger will threaten thousands of jobs, suppliers and service at cities including Houston."What we've been witnessing in recent years is an incredibly shrinking airline industry" with the demise of brands including Pan Am, Eastern, TWA and Northwest, McGee said.Tilton told reporters May 25 that he is optimistic the U.S. Justice Department will approve the merger so that it can close as planned in the fourth quarter.United, based in Chicago, and Continental are the third- and fourth-largest U.S. airlines by passenger traffic.A Senate Commerce, Science and Transportation Committee hearing earlier today where both chief executives were scheduled to testify was postponed.