http://www.startribune.com/business/27673114.html?elr=3DKArksLckD8EQDUoaEyq= yP4O:DW3ckUiD3aPc:_Yyc:aUnciaec8O7EyUsX NWA-Delta merger seen as unstoppable By LIZ FEDOR, Star Tribune August 30, 2008 U.S. Rep. Jim Oberstar vociferously opposed the merging of Delta Air Lines = and Northwest Airlines even before it was proposed in April. But even he no= w concedes that it's a "foregone conclusion" among Washington and industry = insiders that federal regulators won't block the combination. The Minnesota Democrat and the Northwest ground workers union have continue= d to argue that a merger would hurt air travelers and workers. But a conflu= ence of factors -- including high oil prices, the lack of a broad-based coa= lition of opponents and the fact that no other big airline mergers are pend= ing -- has left most industry watchers expecting government approval of the= merger within the next few months. "Some of the early concern was that this [deal] would set off a wave of mer= gers. That clearly didn't happen," said Patrick Murphy, an aviation consult= ant who previously dealt with competition issues as a Department of Transpo= rtation administrator. Continental Airlines poured cold water on the consol= idation movement in late April when it chose not to merge with United Airli= nes, which is battling its unions and is on shaky financial ground compared= with Continental. Murphy testified during a merger hearing that there is healthy competition = among carriers in the U.S. market. Many U.S. senators peppered Delta CEO Ri= chard Anderson and Northwest CEO Doug Steenland with questions about the me= rger. But Murphy said, "I didn't see any senators falling on their swords a= nd saying, 'This deal can't happen.'" In the weeks following congressional merger hearings, the price of oil cont= inued to break records, reaching $147 a barrel. "The argument about fuel price problems has taken the edge somewhat off the= merger" deal, Oberstar said in an interview. Instead of raising more quest= ions about how the merger would affect fares and routes, some members of Co= ngress have joined with airline executives to fight speculators who, they a= rgue, have forced up oil prices. And the tenor in the industry went from co= nsolidation to survival as airlines scaled back flights, fleets and workers= . "Concern in Congress focused less on the particulars of the Delta-Northwest= merger than on the question of whether it would be the first of a series o= f dominoes falling," Northwest general counsel Ben Hirst said last week. The reality that the Justice Department is reviewing only one big merger "a= ccounts for how peaceful the scene is" in the political arena, he said. Delta and Northwest have satisfied the regulators' second major request for= data about their current businesses. Hirst said there continues to be dial= ogue among the parties, especially between the government's and the airline= s' economists. Although "the Justice Department has not indicated that they are leaning in= any direction," Hirst said the carriers are confident that the department = will allow the merger to occur. To stop it, federal regulators would have t= o seek an injunction, and they would have to make a legally compelling case= that the merger would substantially reduce competition. Indeed, if an airline merger was ever built for federal approval, it is thi= s one. The carriers both provide nonstop service on only 12 of their more t= han 800 domestic routes. The merger also would marry Delta's network in Eur= ope with Northwest's prominence in Asia. "This is really the opportunity for the U.S. airline industry to compete on= a global basis," Anderson said when he testified before a Senate Commerce = Subcommittee. "When we look at the traffic in the United States today, the = majority of the traffic carried to and from Asia, Europe, the Middle East a= nd Africa is carried on foreign-flag carriers." Oberstar, chairman of the House Transportation and Infrastructure Committee= , said that around Labor Day he may "prod the Justice Department to look fu= rther, to look deeper and be more anticipatory about what happens after the= y approve this merger." He's concerned that other carriers will use the Del= ta-Northwest merger as a model for how they can get their own deals cleared= for takeoff. Diverging unions Northwest unions have taken different tacks in reacting to the merger. Nort= hwest's pilots union withdrew opposition to the merger in June after Delta = and Northwest pilots negotiated a new contract that gives them 4 to 5 perce= nt annual pay raises over four years. Meanwhile, Northwest flight attendants have shifted their focus from immedi= ately demanding job protections and wage increases -- a demand unmet by Del= ta executives -- to attempting to unionize Delta attendants, who earlier th= is year voted down a union. "It doesn't appear that we'll be able to stop the merger," said Kevin Griff= in, president of the Northwest branch of the Association of Flight Attendan= ts (AFA). So in mid-August, Griffin sent a letter to Northwest attendants to inform t= hem that a joint AFA campaign has been launched "to secure union representa= tion at a combined carrier," under the banner "Two traditions, one global a= irline." That left leaders of the International Association of Machinists and Aerosp= ace Workers, which represents ground workers, fighting largely alone. The u= nion has urged Congress to use political pressure to try to block the merge= r, largely because it forecasts job losses for Northwest employees. Some Minnesota politicians also are fearful of how many Minnesota jobs may = be lost through a merger. Under the proposed deal, Delta's Atlanta headquar= ters would be retained and Northwest's Eagan headquarters -- where about 1,= 000 people work -- would be closed. "We don't have what it takes to avoid this merger," said Steve Murphy, chai= rman of the Minnesota Senate Transportation Committee. "I would hope that w= e can work through this and get commitments to keep as many jobs as possibl= e in Minnesota and keep as much [flight] capacity here as possible." Minnesota's U.S. senators, Democrat Amy Klobuchar and Republican Norm Colem= an, also have raised concerns about preserving jobs and service. Coleman said he has "yet to receive detailed information from either Northw= est or Delta officials as to the potential negative impact on jobs as a res= ult of the merger." Loan covenants between the Metropolitan Airports Commission and Northwest r= equire the airline to keep its headquarters and hub in the Twin Cities as w= ell as certain employment levels in Minnesota. Delta's Anderson, once the CEO of Northwest, has pledged to maintain a hub = in the Twin Cities and said that no "front-line" Northwest employees in Min= nesota will lose their jobs as a result of the merger. But the MAC could require the new Delta to pay $230 million in a lump sum t= o retire Northwest's bond debt when the Eagan headquarters closes. Under th= e current agreement, Northwest would pay off that debt by 2022. Klobuchar supports a MAC renegotiation of the conditions on that debt, beca= use it would allow Minnesotans to extend airline job and service commitment= s for several years. "I will continue to push for the best deal we can get,= " Klobuchar said. Sen. Murphy said that he's been "angry and frustrated" by the expected loss= of the headquarters, but said the Minnesota Legislature can't stop it beca= use "we don't have much of a fire to put their feet in." Liz Fedor =E2=80=A2 612-673-7709 =C2=A9 2008 Star Tribune. 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