namely the task force on competition policy and any trust laws will come to order we're happy to see everyone here and  i want to begin by observing that today we're considering the issue of airline competition and the proposed merger between delta and northwest airlines i come to this hearing with an open mind i  began by reviewing the historical context of and each of us last since i started on this committee before anyone else in this a recent history of deregulation widespread deregulation and since airline deregulation first took effect some thirty years ago we've gone from highly competitive structure to an oligopoly most of this has occurred under the department of transportation's watch but the department of justice also has to come in for its share of responsibility as literally scores of airline mergers have been approved consumers have been prejudiced as delays are on the increase services in the cline and prices are rising and into a culture where business executives have opted frequently to the resort of bankruptcy as a means of avoiding their labor obligations while in hansing their own personal incomes all too often executives of chapter eleven debtors receive extravagant bonus and stock option compensation packages while workers are forced to accept pay cuts or even job losses and retirees lose hard won pensions and health benefits example good tilt o of united airlines a former chapter eleven debtor last year received thirty nine point seven million dollars compensation package during the course of the bankruptcy case however pension plans were hundred twenty thousand workers were terminated and many others had to make significant wage concessions so we live in a time where organized labor and the idea of collective bargaining are faced with some pretty stiff barriers to organization and collective bargaining aided and abetted unfortunately by an administration that almost always or usually sides with business on labor issues so it's no wonder the union membership is down to twelve percent of the population that the income disparity between the top earners and the middle class is at a record high that the vast majority of americans go into their retirement years with little pension and negligible savings and where fifty million americans don't have health insurance and another thirty five million are under insured it's no secret that if you allow workers to organize they usually can protect themselves but under the current national labor relations board that has not been happening too much this is the context in which we come together this morning ladies and gentlemen we have an added just division that approves mergers left and right frequently overturning judgments of the career staff at the department of justice the department has not attempt to block or modify any major merger over the last seven years including the department's hands off approach has even encouraged companies with questionable merger justifications to give it a try and some analysts have stated that the government has nearly stepped out of the n h us to enforcement business leaving companies to mate with whom they wish there has been a fifty nine percent decline in merger investigations over the past four years this is ministration compared to the last four years of the clinton administration and with respect to merger challenges the last four years reveal a seventy five percent decline to the last four years of the clinton administration so all i'm suggesting is that we need to consider where this merger will take us i'm concerned that if this merger is approved it will simply result in a cascade of other mergers such as continental united american and u s airways we might end up with a situation where we have three mega carriers operating through hubs competing with a handful of low cost carriers if the merger is rejected however we could end up with more carriers in bankruptcy thing more union contracts including pension and health care benefits and so in terms of today's hearings i believe we have the several questions  addressed first what is what is the rush or maybe more fairly is there to get this in heard disposed of and over with this is a momentous matter and we really need to ask whether giving this matter the adequate time it requires if that would not accrue to the benefit of the consumers and all the parties involved next how can we ensure that the flight attendants have a fair chance to organize themselves within the delta finally how will this merger impact the affected communities and most especially the flying public for some this merger has devolved into a question  which cities and regions will get more flights and that's understandable but i wonder how the larger flying public will be affected as a matter of fact i believe that we will need further inquiry by this committee on the subject so that we testimony from consumer groups and individual to my friends from cincinnati ohio for his comments the ranking member of this tennis force thank you very much mr chairman and i'd like to thank the distinguished gentleman from michigan chairman conyers for agreeing to hold this important hearing today we both have a particular interest in this merger given the hub locations of delta and northwest airlines and the potential impact that this proposed combination would have on our respective regions but it also obviously has implications across the entire country i'd also like to thank our witnesses for taking the time to discuss their insights and predictions with us  particularly the second panel mr morman who is from cincinnati and will be testifying on behalf of the cincinnati usa regional chamber of commerce delta airlines has a long history with a greater cincinnati northern kentucky area dating back to the one nine hundred forty s when it first started its passenger service and later in the one nine hundred sixty s with its jet service delta has supported development in our region fostering the creation of more than a hundred thirty  thousand jobs in the greater cincinnati area and facilitating a two point eight five billion annual economic impact on the region business growth and greater cincinnati northern kentucky has parallelled delta has expanded nonstop domestic and international service with greater cincinnati northern kentucky regional corporate customers now jenner rating more than half of delta's total revenues however this progress has not been without challenges delta along with many other airlines his experience financial and operational difficulties in the last several years with the surging price of oil fuel is now the number one operational costs that airlines  must address than just yesterday delta reported a first quarter loss of six point four billion dollars due to some extent for those those fuel prices also a write off but industry survival dictates that difficult business decisions need to be made such as the proposed merger between delta and northwest which would be the largest airline deal in u s history and arguably benefit  both companies operations yet free market principles tell us that competition is what makes markets thrive keeping prices low although i have to say that  the particular airport the greater cincinnati northern kentucky unfortunately the last couple years has had either the highest or close to the highest rates of any other airport in the world and one of one considers that our community historically as had relatively lower cost or at least middle of the road causing a lot of other areas it's been a real burden on a lot of folks and people literally have driven to louisville and indianapolis and dayton and  columbus because of those those air fares but consumers are demanding more look forward to discussing with our witnesses today the aspects of competition that will be would be protected arguably by the merger including fair pricing policies that protect consumer interests the benefits that the airline industry would realize as a all of the merger and any competitive effects that might result including barriers to entry  by new airlines and again i want to thank the witnesses for being here today we look forward to their testimony and i would like to yield my time to the ranking member of the full judiciary committee mr lamar smith of texas for his statement i thank the chairman from ohio for yielding and mr chairman my statement will be brief but i do want to thank the chairman for calling this hearing on competition in the airline industry vigorous unimpeded competition sustains our economy and keeps it strong it leads to innovative products that better our allies and keep prices low the judiciary committee has a long history of oversight to ensure that american markets retain healthy competition this hearing is evidence of the committee's continued leadership in considering mergers of large companies that can affect american consumers today's hearing gives us the opportunity to examine the proposed merger of delta and northwest airlines a combination that would create one of the world's largest airlines but one that would not dominate the industry the question that the department of justice must answer in reviewing this merger is whether the proposed transaction will lessen competition and thereby harm consumers we will hear today from the c e o s of both northwest and delta that this propose deal does not raise significant competition concerns because the two airlines do not have significant overlap in the number of cities that i think the number of overlaps is thirteen out of a thousand flights even if this merger is approved on the basis of its own merits i'm interested in how it affects the airline industry as a whole recent news articles suggested a number of airlines most notably united and continental are considering mergers in the wake of the delta northwest deal emeritus statement arm and i'll just make a very brief statement all politics is local and the concern that i have is the impact of this merger on the forty seven percent passive interest that northwest owns in  midwest airlines which has milwaukee's hometown carrier and a very popular carrier and my part of the country and i would hope that is this merger is consummated that it will do nothing to impede upon the service that this carrier  currently provides i thank the gentleman you're welcome my note that before we begin with our witnesses we have a  number of non testifying parties as they're called we welcome delta pilots association the northwest pilots association the airline pilots association and the air mechanics fraternal association their representatives and friends supporters are all in the hearing room as well i want to begin by introducing the c e o of northwest airlines and then i'm going to ask my colleague john lewis the distinguished member from georgia to introduce the c delta airlines i'm pleased to introduce mr douglas steenland who has served as northwest president since two thousand and one and then his chief executive officer since two thousand and four before joining northwest in the early nine hundred ninety s mr steenland served in the office of the general counsel of the department of transportation and the and the washington law firm bernie for another's he earned his bachelor's degree from calvin college in michigan his law degree with honors from george washington university and congressman lewis i recognize you introduce our other witness but thank you very much airlines delta's headquarters have been located in atlanta sixty seven years they have twenty five thousand employees in atlanta and which is located at hartsfield jackson atlanta international morning i'm doug steenland the chief executive officer of northwest airlines i appreciate the opportunity to appear here today to explain the benefits of the recently announced merger between northwest and delta and the fact that this merger will not lessen competition  particularly honored mr chairman to have the opportunity to appear before you on behalf of northwest we're proud to be detroit's hub airline i'd like to acknowledge my congressman congressman ellison we're proud to be the hub airline of minneapolis and i'd also like to knowledge congressman cohen and we're very pleased to be the hub airline of memphis so the airline industry today is at a crossroads it creates two choices for northwest one choice is to continue on the road now traveled as a standalone airline being whipped by incredibly rising oil prices which will cost northwest an estimated one point four billion more this year for its fuel bill facing competition from discount carriers that have now captured one third of the u s market and internationally facing heightened competition from a large well funded foreign airlines that have been allowed to consolidate and that are increasing their service to the united states under liberalized open skies agreement the other choice is to merge with delta to create a single stronger airline better able to face these challenges by combining the complementary end to end networks of two great airlines we will achieve actual benefits and build a more comprehensive global network most important merged airline will be more financially resilient and stable better positioned to meet customer's needs and better able to meet competition at home and abroad and better able to provide store secure jobs and benefits let me jump to one one aspect of these benefits and provide assurance to all of you here that as a result of this merger no hubs will be closed in the united states the hobbit the troy the hobbit minneapolis the how about memphis will be preserved i'd like in particular to point to the strong support that we received from this merger in michigan i'd like to call the a to call attention to the support of the detroit regional chamber and the support of robert mcconnell who's the wayne county executive in memphis we receive from the  support of the memphis shelby county airport authority in the memphis chamber and minneapolis we receive the support from the minneapolis chamber the st paul chamber and the metropolitan the metro coalition of chambers the merger will create over one billion in annual benefits that will help the merged carrier withstand volatile fuel prices and cyclical downturn all of these benefits will be achieved without harming competition the existing domestic and international routes of northwest and delta are complementary so the two carriers compete only to a minimal minimum extent let's start with international markets the question of whether there's any competition there has already been asked and answered by the u s government recently the u s d o t granted antitrust immunity to northwest delta air france and k l m and in doing so found no reduction in competition over the transatlantic from the combination of delta and northwest northwest doesn't serve latin america where delta is a strong player and delta has only minimal service to asia where northwest has been a historic competitor domestically northwest routes are concentrated in the upper midwest whil delta is strong in the south the east and the mountain west the most and for important fact regarding competition for everyone to remember today in today's hearing is that between northwest and delta domestically in the united states we serve approx we serve over eight hundred nonstop routes together and out of the total eight hundred we overlap on only twelve and on those twelve routes there was also substantial competition from other carriers furthermore the domestic airline industry has undergone significant competitive change over the last several years low cost carriers now dominate southwest airlines is the largest domestic airline and carries more domestic passengers than any other airline and will continue to do so after this merger in addition online technology such as orbitz travelocity and expedient have given consumers tremendous power and influence for congress and for  conyers congress and ellison congressman cohen if we go back in time we remember the merger between north central and southern which at that point created a republic which was the largest airline in the country in terms of destination served in one thousand nine hundred six northwest merger with republic which which created our hubs in minneapolis detroit and memphis i think we can confidently say today that but for that merger between north western republic neither carrier would be here today as a result we have strong vibrant hubs that support growing business communities and we have great consumer service as a result thank you mr chairman i appreciate the opportunity to provide the statement and look forward to any questions that you might have thank you so much for starting  there are couple hundred delta employees from all the rank and file of our company pilots flight attendants airport personnel and it's a privilege to be here on their behalf it's also a privilege to be introduced  y congressman lewis this really creates the first real u s global airline the world is changing rapidly we know that commerce is now conducted all around the world by all of the companies and organizations that you represent and we need to be in a position to compete against strong foreign flag carriers we need a global network and stronger financial footing because it's in the best interest of everyone here and the traveling public in america to have a strong airline industry in the united states open skies agreements around the world have resulted in foreign flag carriers being allowed to consolidate in the european union and other places around the world today foreign flag carriers carry more passengers to and from the united states between europe the us asia and the u s than u s flag carriers combined u s airlines have only five percent of the worldwide orders for a wide body international airplanes we aren't coming here to ask you for financial support we just want the ability to do what's in the best interest of our companies our employees our shareholders and the communities we serve this past week oil hit one hundred twenty dollars a barrel refining costs have doubled to  hundred thirty to thirty dollars a barrel basically we've had oil double in price in about a twelve month period these oil prices have driven five carriers into bankruptcy since the first of the year four of which have liquidated this merger distinguishes delta and northwest and it gives us the ability to compete and win vs foreign flag carriers and that means our employees our communities our shareholders will have a durable lasting airline when you think about the history of these two great airlines they're both the consolidate they're both the result of consolidation in this industry doug steenland relayed to you the history of  northwest delta is the amount of nation western airlines chicago and southern airlines northeastern airlines in the pan am international route authorities this combination really puts together two very complimentary airlines airlines that do not overlap overlap very little and when you think about where delta is strong delta strong in the southeastern united states central and south america europe africa the middle east  india northwest is strong in the upper midwest the midwest asia japan in the large cities south and west of tokyo the european union open skies in the continuation of the open skies policies require us to combine our networks in order to compete in an increasingly competitive global environment the merger provide stability for employees we have had them in the ma in our minds since the beginning of this transaction we value very much our employees the transaction provides ownership in the new company to the employees of both airlines we set aside a significant part of the stock in this transaction to be given to the employees upon closing we're committed to no front line layoffs and that's possible because this is not an overlapping merger it's an india in merger we're committed to fair and equitable seniority integration we're committed to protecting people's pensions and most importantly we want to give our employees the opportunity to continue to pay progression toward industry standard small communities and large communities benefit because there are no hub closures we will serve together more small cities in the united states with one hundred forty small cities in the u s receiving service we will create new service to three thousand new markets domestically and six thousand new markets internationally oil is a game changer this merger makes us stronger stronger at a time when oil prices continue to increase in the benefits in excess of one billion dollars that are created by this transaction in the strong balance the best cost the best strategy the best employees give us the opportunity to distinguish these two carriers from the last seven years seven years that have produced thirty billion dollars in collective industry losses in the loss of over one hundred fifty thousand good paying airline jobs customers will receive significant expansion better frequent flyer programs and most importantly this airline will have the capital and in the cost structure and they are the ability to make investments for customers it's good in the end for employees our customers and our communities and we appreciate the opportunity here today to answer your questions mr chairman if i may have introduced into the record written testimony in support of the merger from the deport detroit chamber of commerce the memphis name minneapolis st paul chamber of commerce in the airline pilots association of delta airlines were happy to receive it and to the record  let's begin our discussion gentlemen thank you for your statements there are several things that are going around  right now you know we had in the american airlines t w a merger no hubs will be closed and within two years they were closing h teetering on bankruptcy again there are i mean how bad will will the future be if you're not successful here where  positions that sounds you know it sounds like it sounds but what it what it what do you what do you think about all of these kinds of questions that are american airlines t to be a merger t w a had historically during deregulation been only in international carrier and it was it had a very very small domestic network and had been through bankruptcy three times when american purchased its assets and as a result the st louis hub was a was not a very viable hub at the time and i would distinguish that circumstance  near liquidation in fact in the end it was a liquidating chapter eleven because american just bought the assets versus the hubs that we have at these two carriers these two carriers have been through reorganization in the last year and as part of that reorganization both companies really scrubbed their hubs if you will in the strategy of both airlines and all of these hubs are economically viable hubs they both play important roles in the networks of both airlines and in the end it's the viability of the underlying economic viability of these hubs that makes them durable and we feel confident that all of the hubs minneapolis detroit memphis cincinnati salt lake city and atlanta will all continue to be strong viable hubs in the combined airline in fact the combination when you look at that map and you see the blue cities those are cities that just delta flies to northwest doesn't lot of those cities northwest flies uniquely to just the red cities so what it actually does is it out allows us to crosshatch these networks and hobbs gets stronger when they have more traffic flow and when you're able to take more unique cities and combine combine those unique cities to more of the hub you really build a stronger patchwork of service for customers in that way that's what makes that network durable responding to your other two questions mr chairman you know in the past airline mergers have largely happened between airlines that have been in significant and serious financial distress we here as richard just testified we've been through our restructuring in amongst the u s airlines northwest and delta have the best balance sheet we have the highest cash position we are as well positioned as any other airline out there now having said that when we emerge from our restructuring fuel is at sixty dollars a barrel today yesterday it closed  one hundred eighteen dollars a barrel so we and the rest of the u s airline industry are really in uncharted waters if the transaction is not permitted to go forward the biggest detriment will be that the benefits that we see that come from only being able to put these two carriers together which are going to be in excess of a billion dollars a year will not have at our disposal to be able to have help offset those significant oil price increases address the issue of layoffs and let's use the detroit airport as an example at detroit northwest is obviously the large carrier there as is delta delta is operates there from from atlanta cincinnati and salt lake all of our ticket counter employees all of our employees on the ramp all of our to usas the great staff we have there they're all going to be needed and they're all going to be continue to have their  employment opportunities because the level of flying at the troy will not go down if anything it will go up same thing about the about the delta flights that come into detroit so northwest employees at the delta employees at the troy can be confident that their jobs are in good hands as well as minneapolis as well as as well as memphis for the reasons that i just described now clearly when you talk about combining some headquarter functions there is some overlap to people perform the same jobs at the end of the day you might only need one and we will try to be as judicious as possible in sorting through that if needs be will look to see if we can find other alternatives if that's not available we'll look to early out programs in the light to try to make ranking member thank you mr chairman mr anderson last sunday the cincinnati enquirer printed highlights from a survey conducted by the national business travel association in the survey the survey results revealed that fifty four percent of their members and that's again business travelers believe that the customer service of what would be can't become the world's largest airline would be poor while forty one percent said flight frequencies to some markets would worsen how would you respond to the concerns expressed by these customers and they actually a minor standing is generate about half of  s revenues if you if you look at these two carriers in the performance of these two carriers this past year delta was the number one on time airline accord d o t statistics among the network carriers and we rank number two in the j d power survey among network carriers if you look at northwest in the most recent airline quality survey ratings it rated first among the network carriers both of these carriers have a long history of very solid operations i would submit to you that the number one driver of customer dissatisfaction in the airline business today is the air traffic control system if you look at what causes delays and cancellations we will always have a weather issue in this industry we will in our lifetimes we will not figure out how to fly in the bad weather and if we did i don't think i want to do it so setting aside whether the number one issue that we face as a country is the necessary investment in a new and modern air traffic control system but these two carriers have distinguished themselves in terms of performance and you know we take those kinds of things very seriously at delta and i know northwest takes those kinds of things and we believe that this consolidation will give us that capital in the balance sheet to be able to make the investments necessary to be able to continue to improve customer service if i could just if i could just add a one point on that congressman you know both northwest and delta do have a cooperation agreement in place today we've invested millions of dollars in terms of coordinating our various information technology systems and the like and usually those are the things that cause difficulties in a merged world we've already done that and we're hopeful that that will make this transition much much smoother thank you  me follow up if i can one of the arguments in favor of the merger is the fact that the rising fuel prices are making the airlines unprofitable would a combined delta northwest be able to exercise added market power in the purchase of fuel the simple answer is no there might be a few places where northwest purchased purchases fuel a little better than delta does and vice versa but in the big scheme that's really not where the savings comes from the savings comes from the the cost and revenue benefits by putting the two airlines together we've looked at that very closely we've done tremendous amount of analysis to make sure that we're confident in that conservatively speaking we think that's worth more than one billion dollars annually and we'll be able to realize that if not more but it doesn't come from basically giving us greater purchasing power in the fuel market together we're still not big enough to deal with the behemoth out there and unfortunately we are you know takers and just subject to the incredible increase in the price of fuel that's happened over the last six months ok thank you let me combine two questions mr anderson because i think i'm going to run out of time here shortly i want to make sure i get both of men one i had mentioned in my opening statement the concerns that i hear from my constituents back in cincinnati quite often and that being that they oftentimes drive to dayton or columbus or louisville or indianapolis just because they can get a better deal there on a particular flight there they're less expensive and therefore they they do that how if if what impact should the merger play in assisting them and not having to drive all the way to indianapolis which is one hundred miles away for example and secondly d what what are your thoughts relative to what might happen with respect to comair because they're very important obviously like to keep them when you look at the effects of this combination on the contest ability of the marketplace there won't be any change and it's just simply because in places where delta is strong northwest has little or no presence and vice versa so if you go to the cincinnati airport northwest probably has twelve flights a day we have four hundred flights a day so in terms of you know normally in competition and contestability analysis you're looking at overlaps in markets right so that you can combine the pricing of the two together in this case there's just no overlap in cincinnati so it's not going to have a detrimental effect on competition with respect to average fares if you look at average fares in cincinnati a lot of that is business mix we are fortunate in that in cincinnati we have strong companies there we've got general electric engines we have procter and gamble which is delta's largest customer in the world and they tend to fly more on more premium fares so it pushes up the business mix i would just note we actually went back as part of this testimony and analyzed pre deregulation fares in on average if you control for inflation airfares today to fly one mile or about thirty percent lower than they were in one thousand nine hundred seventy and that's been the dramatic effect of deregulation and remember back in deregulation when you had to travel somewhere if you were going across country or even halfway across the country you'd have three or four stops before you got to the end point now we have nonstop service or one stop service to virtually anywhere in the world at yields that in fares that are thirty percent lower than they were during regional carrier supporting delta's international operations in j f k so we've made a significant number investments in comair including new airplanes in the out that will remain unchanged after this transaction closes thank you very much steve cohen thank you mr chairman i have read the statements of the memphis airport authority and the chamber of commerce both of whom wholeheartedly endorse this merger i've also listened to the concerns of the pilots  union the flight attendants machinists etc who have concerns i know a little bit about the history of the industry and going back to southern airlines which i guess was part of the public at one point  merger memphis is very desirous of having a hub it's important for us as a business city fellow express i think is one of your largest users of northwest how much is federal express his presence in memphis and an important factor in deciding to keep service in memphis at the level it is now i think it's critical congressman fed ex is a fantastic company an innovat r and they are one of our our top five customers in the world as we carry their sales people their executives their pilots other of their employees throughout our global network i think the existence of our hub in memphis actually has allowed fed ex to grow and to expand they help us in terms of we share costs with the airport which makes the memphis airport a very attractive very good place to do business and fed ex is a critical customer and a great partner of northwest and will be a great partner of the merged airline going forward we've had a number of discussions with fed ex that are currently in process as to ways where we can further cooperate and we've identified a number of very interesting interesting opportunities that i'm confident will pursue in the future and so i presume mr anderson that fred smith would be like e f hutton well when fred speaks you listen good but in my prior life at north i spent many many days in memphis and were did did a lot of work with jim mcginty larry cox arnold perle mayor herenton in have been a big supporter of the airport and was actually instrumental in launching the service from memphis to amsterdam i guess ten years ago now and it's been really successful we partnered with the airport to build a federal inspection service facility and you know memphis is you know i spent a lot of time there and have a certain fondness for the amsterdam flight would remain i presume yes and would there be other possibilities of international travel from memphis well you know that's that's one of the things that we have to look at candidly much of the decision making being about fuel and when you do combine the networks the logical places that you go look particularly with the alliance arrangements that we have with air france and cayle him just like a dam works for memphis the corollary to that is paris because paris will be the hub of the combined northwest delta in europe and the hub of the combination in asia will be tokyo and so you logically look at those places but i cannot make that commitment one we've got to get the seven eighty seven to live number two we've got to have manageable fuel costs in the number three once we have this transaction closed then we can start acting as a single entity and really understand the economics of each each is each of our route networks are there are advantages to the memphis airport that let's just say for instance the cincinnati airport doesn't happen in size of runway climate and other peculiar benefits well both airport in fact if you look at all of these hub airports there we're pretty fortunate because they're all very well run and they all have plenty of capacity so we built the world runway in memphis and opened it about seventy six years ago atlanta just added a fifth a fifth parallel runway detroit has four parallels into cross winds minneapolis just built a new runway salt lake is starting a new capital plan is a very well run and very well managed airport in cincinnati is a very well run airport all these airports have plenty of capacity plenty of gates plenty a runway length in there all very well run with very good management idling time as important as far as fuel cost is memphis the lowest as far as the most efficient in terms of idling time clearly probably your taxi out and taxi in times that memphis are going to be among the lowest in the country and i think they're very low at cincinnati and salt lake too they tend to be higher in places like new york atlanta you know where you have more more more service memphis is the center of the delta delta and northwest for being here today it is a tough time to be in the airline business fuel prices are up profits are down and routes are being cut but through it all your approval ratings are still higher than congress so naturally we're here to question you about your business just how things work i'm going to ask you some local provincial questions about orlando about the merger and then and then the broader questions about the country in general i represent orlando the world's number one they cation destination mr anderson on march nineteenth of this year delta announced that it was slashing the number of seats  flies to and from orlando almost in half and eliminating nonstop service to seven cities as part of this nationwide retrenchment due in large part to fuel prices i understand  tell me what impact if any this proposed merger would have on your orlando operations in terms of routes ticket prices and jobs  first with respect to jobs we've made a commitment as part of that to our employees that delta while we're pulling ten percent of our domestic capacity in the back half of the year and this has nothing to do with the transaction we're talking about because of fuel prices we would not have any involuntary furloughs as a result of that so we have an early out and an early retirement program in place to have all that done voluntarily so there on the employment front it won't have an impact the issue that you see in orlando with respect to fares it's incredibly competitive market and i believe orlando because it's probably the numb for one one of the probably the number one vacation destination in the us maybe in the world  we've all taken our kids there all right and it is number one forty nine point three million tourists and so it will always be a very competitive competitive marketplace with respect to the decision we took our decision was purely about losses in the cost of fuel the transaction we're contemplating here will make both of us stronger whether it will i can't sit here and tell big impact in terms of ticket prices you don't see a big impact because there's already so much competition that exist in terms of routes coming back you're unsure i am unsure about operations and in terms of routes coming back that sort of thing northwest serves orlando from our three hubs so we operates flights there from detroit minneapolis and memphis i would anticipate  those cities will continue to have nonstop service to orlando as richard said it's it's a very competitive place and fares have always been reasonably priced as a result of the capacity as a result of fuel there may be some frequency adjustments but they will continue to be nonstop service from all three of those cities that you don't know if you will pick up some of those nonce flights that delta has had to drop for business reasons well northwest has always been a very well not to get too technical but a very hub centric airline so virtually all of our flights domestically either start or stop at our three hubs and we've never served orlando other than from one of on ticket prices with the merger versus without what impact is there on route options for consumers with the merger and without and what impact is there on jobs for airline employees with the merger and without and i'll leave that to both  e ticket prices the markets will still stay contestable because there's no overlap so ticket prices will be still be set by market forces in this merger won't have an effect in terms of the contestability of markets nationwide a second route options will be dramatically increased and they'll be dramatically increased because you're hooking these two and in networks and well you know it may not sound like a lot but passengers now will have another way to get from lincoln nebraska to key west florida and it's all those many new combinations that combining the red in the blue on that map will create that we will not be able to do on our own we will not be able to do it on our own and  respect to jobs we've made a commitment that no front line employees and i think doug will will have involuntary layoffs and i think doug described that we will have redundancies in the corporate staff and we're going to deal with that  respectfully as judiciously as we can but obviously when you merge two companies there are unfortunately redundancies that you're going to have to deal with over time and we'll do that in a respectful and gracious way concur on ticket prices southwest will remain the largest airline in the united states and low cost carriers will continue to largely set price with respect to route options by combining these two networks  actual present an opportunity for new service i think a perfect example was the memphis amsterdam flight we just talked about because northwest and kayla don't have a joint venture it's a virtual merger and but for that there would be no flight along those lines and i think we've answered the employment with respect to the employee question i would like to follow up a little bit what i heard you just say was that with respect to employees and staffing that it would really just involve corporate staff redundanc es correct ok so what does that mean does that mean management level positions on lay that's the only effect that this merger will have on employees correct during the merger negotiations why weren't union representatives given a place at the table well normally in a merger negotiation it's a negotiation between the two corporations and you all are familiar with a letter that you received from twenty six senators i believe earlier this week  asking questions about this as well asking about the engagement of employees unions in the merger process have you have you responded to that letter formally or would you like to respond to that here today sure the transaction is contemplated with respect to several issues one we've made a commitment with respect to no frontline lay off of them ploy number two we've set aside a substantial portion of the equity of the combined companies for the employees and that's not an option if it's an outright grant of stock so that they can share in the benefits that are created third we've committed in the merger agreement and and there's been legislation that's been passed and we've committed as a company together for seniority protection for employees and lastly with respect to the issue that the chairman raised about the airline pilots association where the airline pilots association the two groups of pilots issued a press release earlier this week where they've joined together again they've agreed to process on seniority integration and we've committed to sit down with them and work expeditiously to conclude the northwest delta pilot agreement prior to close with respect to with the exception of that last comment that you made when you were talking about the pilots association when you say that we have committed we have committed to doing this and you talked about mergers being discussions company to company who have you committed to doing that to who have you given that commitment to to all the employees provisions and they came out of a murder you're in the industry that became part of us air probably forty or fifty years ago and it's been sort of the recognized standard in the industry for seniority integration and last december when the f a a reauthorization bill was passed there were a number of other items that were included in that and among the other items that were included in that was a provision that that provided l l l p's under alleghany mohawk to employees in a in a in a merger and it applies to all employees in a merger second we wrote into the merger agreement and third the board of directors at delta adopted that as a commitment of the company long before this transaction was consummated let me let me turn to some of the issues raised by the association of flight attendants they have expressed concern that you're interfering with their attempts to organize delta flight attendants through a give a rip campaign  why are you engaging in such an intense campaign to head off those efforts we you know delta has a long history of working with its employees if you go back behind it prior to its bankruptcy it was always noted  one of the best places to work we've had some difficulties obviously through bankruptcy but but we do care a lot about our employees you know we would never engage in carrier interference in a campaign like that  support a democratic process we have both union employees the dispatcher's and our pilots and we have many nonunion employees many of whom are with me here today and you know we believe that we should have a democratic process and let people have free elections and does that mean that you are taking a position of neutrality we are as i said you know we support a democratic free election with with plenty of information for us for everybody because our employees you know have very firm views on both sides of the issue are you are you engaging in advocacy from one side or the other are you and are you in a neutral position we are we are being certain that we do not engage in any interference in the election and that we make certain that that that the election provides for free choice for all the employees in a democratic process ok but i don't think you're really answering my question are you neutral i'm neutral to the extent that we're we will always follow the n b a rules and we will be certain that the laboratory conditions that the prescribe are complied with the delta for a free election well i will take your answer not really answering my question as the answer but thank you thank you very much you're welcome we've been joined by congresswoman sheila jackson le sorry i'm our smith ranking member of texas is recognized and either one is fine thank you mr chairman i want to say at the outset i'm usually a little suspicious of mergers though in this case there does seem to be legitimate arguments in its favor as long as this one doesn't lead to other mergers of airlines that are less competitive or maybe i should say more any competitive  i have a couple of questions and the first one goes to how this merger would benefit consumers you've already responded that ticket prices will be set by the market there may be some impact on flights  first by creating a more resilient and financially stable airline that's able to invest in product enhancements new airplanes employee training all of the type of things that a profitable well funded company needs to do in this business  second by creating a single network so consumers will be able to fly on one airline over a much larger variety and geographic scope of destinations whether it's to asia whether it's to south america linking up those destinations we've tried for a long time and we've looked at whether we could northwest could affordably put in a flight from detroit to sao paolo brazil and on our own we couldn't do it but delta has a strong presence down and down in that part of the world and i think as time goes on and as these two networks get put together in the merged context i would think that that would be one opportunity that would present itself so there will be some expanded opportunities combining the frequent flyer program so it's now one so customers will earn a single set of miles they'll not have miles on one airline miles on another all of these will clearly make air travel for consumers better ok mr anderson do anything to add the one piece i would add to that is the alliance piece and think about the question about federal express federal express today has a lot of business in south america africa and other places around the  world that they can't reach on the northwest network so for corporations that do business globally three m in the twin cities they will now have access to parts of the world that they previously didn't have access in the same for the companies that delta serves like coca cola you know today coca cola can't really travel out of atlanta very much into japan or asia on our network because we don't have a very extensive network so it gives us the opportunity to give corporations that are that are traveling around the world doing business more options on the same network ok thank you my next question goes to the impact of the merger on employees and you both said a few minutes ago that you thought that the only people who would lose their jobs would be the executives and i have to tell you that seems a little hard to believe for instance you just mentioned that you would be unifying to frequent flyer system and it seems to me that employees that might be operating the reservation system or any of those types of support staff might well find themselves in positions where their jobs are duplicated by others are you absolutely sure that no one is going to lose their job except for corporate executives it just seems a little well there's mostly all the it's the headquarters it's the centrally the management jobs not the front line jobs how do you define management at what salary level would that begin well it's various salary levels but it's many of the traditional corporate overhead functions like finance accounting you know the functions that are in the corporate intact the expectation is that you'll have the same number if not more passengers so you'll need the same number of reservation what would you estimate is the total number of people who might lose their jobs had i mean it's hard it's hard to say that you haven't really done that bit of granular analysis yet you can already say that it's only going to be those in the corporate management you surely have an idea of how many people you're talking about under a  thousand it's probably some some number under a thousand but we haven't we haven't done the bottoms up ok you know we haven't on the level of bill you've been very generally as to what you would do for these folks who are losing their jobs can you be any more specific about severance packages or what you've done in the past well we've just right now delta has a voluntary program because as part of this fuel price run up we've reduced we need to reduce our full time employees by about two thousand people and we've put together a package where we've reduced the retirement age and we provide the rule of sixty basically you get lifetime passes and i believe it's a week of pay for every year service and we provide a health benefit in the disability benefit and we do that for both people with ten years or more seniority i believe and it's a package of cash  rail and i didn't want to miss the opportunity to query what i think has to be one of the major merger concepts and that is overall airlines let me first of all i want to acknowledge  distinguished gentleman former secretary coleman and former secretary slater for their service and their commitment to competition but also to the broadening of the transportation by way of aviation system in america and around the world to the distinguished gentleman that are here i believe again as i said that this is a reflection of what is to come and that's why i think decisions that will be made or the oversight that is being given by this committee is crucial my first question to both gentlemen is your commitment to help us push a passenger bill of rights as a contingent as a parallel  o your merger efforts you have indicated that they will not be a negative impact on consumers in fact you have indicated that more that your hubs will remain open that there may be  greater reach and i am very sympathetic to small regions or areas i'm in the fourth largest city in the nation maybe the third largest soon but i'm surrounded by rule taxes and as well louisiana and i realize the importance of the region itself i might add arkansas and a number of others that border the state of texas would you gentlemen commit to the passion bill of rights which talks about some of the issues that  anderson based on some of the proposals that have been advanced we would have no objection to being you know subject to those kind of requirements we need to serve our customers well we need to take care of them or in a customer service business  we've put provisions in our contract of carriage that are contractually enforceable actually wanted to make sure if we did if we did you know make a mistake that there'd be recourse and as long as these provisions are properly congresswoman you know we we have a responsibility to our passengers and our employees to take that very seriously we dealt the inspector general about eight months ago issued a series of recommendations the department of transportation inspector general issued a series of recommendations with respect to customer rights we endorse those recommendations and they are legally enforceable against delta today because we put them in our contract that can see would have no problem then as i am in five because i have a shot in time of questioning to c s push for it legislative initiatives through the united states congress which well to me the president would sign i  would have to do i'm not familiar with the bill but i can tell you that we are been very supportive of the inspector general in the d o t advancement there and i'm sure there are concepts there we would agree to get them and what i would advocate very strongly is that there is a very good initiative making its way through congress and i would almost want to have that in parallel and contingent to the if you will uniting effet of this merger let me m quickly have you answer again the question is can you assure us definitively that your flight attendants mechanics and others who are part of the structure of the airlines will not be fired the pilots contract is that going to be in place and also isn't the cost of jet fuel the underlying basis of the purpose of this main merger and what would it how would this help if we were how would a moratorium on jet fuel for example a moratorium on aviation taxes and fees help you not merge sampson yes first you know we've been clear that this merger is and is about in connection between the two networks and that front line employees would furloughed as involuntarily furloughed as a result of the transaction and we've made that clear the transaction creates a lot of benefits for everybody involved separate and apart from fuel prices we have course would love to have a moratorium on aviation taxes and would welcome that at any point in time but you're right about fuel it is really unbelievable the rise that we've had in fuel and it's having a very dramatic effect on the industry and we don't have we don't have an energy policy in this country and without an energy policy in this country  we're going to be faced as an industry with continuing difficulty and what we're trying to do here is come up with a creative way for these two airlines to be able to navigate through very difficult fuel environment to fuel fuel you know that the magnitude of the increase in fuel plus the costs that we have to pay for having that crude oil refined into jet fuel are also at record highs so if you see fuel being at one hundred eighteen dollars a barrel the price per barrel to refine it is in the thirty to forty dollar range so we are really paying close to one hundred fifty dollars a barrel for jet fuel which is an all time record record levels and we're paying for it with dollars so our foreign flag competitors that are paying for it with the euros it's the equivalent of about eighty dollars a barrel for them because they're using euro so we have a weak dollar so it's not just the run up in the price of fuel it's also the weakness of the dollar in addition to the crack spreads which is the cost of refining let me em i thank the witnesses chairman and i think a passenger bill of rights should really be a twin to any potential merger why is this merger different well you've got to put the u s air transaction in context this is not a hostile that wasn't a merger that was a hostile invasion and in any circumstance where you're in the position that delta was in and you have a hostile takeover you will do everything you can to defend your company and to defend your lawyers in your communities so one this is not a hostile takeover this is a merger by agreement second the reason why that transaction did not work was it was a merger of subtraction not a merger of addition because u s air and delta almost perfectly overlapped new york boston up and down the east coast they had a hub in charlotte hub in atlanta since it wasn't in the end it caused a lot of layoffs in reductions in operations because the value that you were to create there was going to come from basically pairing the two airlines down significantly in this instance there's very little overlap in salt lake city northwest has one gate and i think it may operate six flights a day we there's just not very much overlap between the two and if you go back to the c e o s mr grinstein testimony at that time he said specifically said you know ultimate hope is that once we get them together and we can really dig under the covers of profitability in the planning at both airlines you know our goal would be to add international service because each of these airlines has a long term goal of increasing the percentage of its of its flights to nearly fifty percent of the total we're both about forty percent of our traffic is international in the goal with this  alliance with this merger in our alliance with sky team is to be able to increase our international service and salt lake would surely be on that list you know i love the one thousand nine hundred six merger with western airlines that i think resulted in a large number of benefits how does this merger compare do you think with that when well you know i in one thousand nine hundred six i was just gradually you know i didn't i wasn't in the industry so i don't i don't know for sure what all the benefits were at that time but i can tell you in this case we collectively create in excess of a billion dollars in benefits and that's very important for these two airlines given the headwinds we face on fuel in the economy think you know we're we could end up in a world where we go from six major carriers three and i have some concerns about that as i think probably everyone does in particular what's going to happen to the market and the internet  because of this and possibly future mergers are you thinking about groups like expedia and travelocity saber and how they get information how the role they play in the future how you make  seats available and how the market works with them and through them with information to keep prices down well the the airline industry has the most perfect pricing in transparency to consumers there are a multipl of very powerful internet sites that are tied to all seats available in around the world expedia travelocity orbitz cheap tickets hotwire there are dozens of these sites and the airlines do not control the computerized reservation systems those are operated by independent companies and the internet more than any other more than any other business the internet provides consumers perfect transparency twenty four hours a day seven days a week in an unbiased way for flight decision and i think people didn't really realize that the internet was going to have such a profound effect you doing as c e o s or engineers the c e o of the company tells us sure that we will have those kinds of benefits it doesn't change those it doesn't change those business models you know we we pay for each booking and it's turned into a very important and powerful distribution tool around the world was jim and i see my times it's very good thing was just cause i was just going to add one comment and that is i don't think there is any other product or service that consumers buy where they can get on the internet they have some of the most powerful search engines that have ever been developed and you can push a button that says lowest political fare and displayed in front of you is the entire inventory of every possible way to get from point a to point b and this extraordinarily powerful search engine will hunt out what the lowest fare is and give the consumer that information which makes the consumer an extraordinarily powerful purchaser in this regard a thank you i am a big fan of what you've done with the industry's done in this regard i really hope that that will continue as we as we consolidate i think it was driven back thank you i'm pleased now to recognize the distinguished gentleman from california darrell i said thank you chairman gentlemen you know this committee is asked a lot of questions and they're all good questions and they're all local  and as a san diego and paying twice as much to fly from dulles to san diego as i would pay to fly from dulles to los angeles there's always going to be some local issues of deregulation has not been  logical in its selection of prices so i am concerned about competition going forward and that's what i'm going to talk about today as a non hub city what some call a cul de sac city even though we're a destination  you're you know i noticed you had yuma but you didn't have san diego on any of your maps so it's not that i'm offended it's just that i'm bigger than most of the cities that are on the displays i buy into most of what you say in your merger information i don't buy into the concept that having more different eclectic airplanes that it could be more troublesome to integrate is somehow an advantage and i appreciate the fact you got to spend every negative as a positive so we'll just leave that one for a moment tell me how you're going to compete domestically inside the u s in a way in which i'm going to see united american you're combined airline southwest and i'm going to assume for a moment not that these other airlines aren't going to survive but that that when i say those terms i'm talking about a consolidation that is likely to happen by other carriers wanting to be equally strong in the united states with your combined airline and southwest my understanding is you both have about nineteen percent domestic market share i need two to three more hopefully three more in other words five twenty percent ers to feel comfortable tell me how you're going to compete and i'm going to see you in every market that i see them in and i'm going to see three to five carriers in every market including a two million population city like san diego  why don't i start and i think this is a an excellent question you know northwest serves san diego via our hubs and we so when we think about it and we think about taking a customer from san diego to boston or san diego to washington d c or san diego to charlotte north carolina we think about all the myriad of opportunities that that customer has they can fly northwest over detroit minneapolis they can fly american over dallas or chicago they can fly united over denver and chicago they could fly continental over houston they could fly us air over phoenix and there's ample opportunities they could fly southwest  so there is meaningful competition we don't have a crystal ball we don't know what's going to happen next but the consolidation of these two carriers given their end to end nature is not going to impact the rigorousness of that competition at all plus i think this industry has demonstrated that there are virtually no barriers to entry that there are plenty of airport facilities plenty of gates there is capital that's willing to invest in this business whether from private investors or from aircraft manufacturers who want to sell their product and we have seen new enter an airline's come in time and time again in the low cost carriers today have one third of the demand right and i appreciate that you can't predict how united an american and others will divvy up the market or not divvy up the market my question though let me switch to another question do you think that we would be having an antitrust hearing if instead of looking at your two two thousand and seven results we looked at your two thousand and six position and correct me if i'm wrong i'm just using yahoo a company that turned its nose up at a forty two billion dollar all cash offer because it wasn't enough they they say in two thousand and six that delta had negative net worth of thirteen billion northwest was minus seven point nine four if i got this right negative twenty one billion your  earnings again were negative nine billion you know six and the years before were not as bad but they weren't good if we were looking at zero six results the wonders and mere miracles or bankruptcy would we be having this conversation aren't we to a great extent looking at zero seven when you cleaned up your balance sheet and became profitable when you look at the decision that you take when you're comparing th transaction to a standalone plan that standalone plan is built off of the plan a reorganization that came in emergency really not looking at two thousand and six you're really looking at the airlines as they both came out of out of the restructuring plan no what i'm saying is is that if we look at you and i realize everything was redone so i'm looking at it today but you know if we were look if we were back and you were both in bankruptcy in a prior period or just look it's the middle of two thousand and six realistically we'd be saying can we be asking you and this is the point that i'd like to make we'd be asking you i assume are you in fact do you have a plan to cut enough costs to survive and i assume we'd be asking both of you how you were going to make two failed airline successful airlines by comparison to your zero seven performance and that's sort of my question because i want to make sure that that the record is complete that we are looking at the best by looking at where you stand today six o seven out of bankruptcy we're looking at a best case scenario that you both of had in the last five years isn't that true if you if you look at those two thousand and six numbers congressman that you cited what's included in that are an awful lot of noncash reorganization expenses ok i have a lot i appreciate all that i just want an answer to the question because the chairman has limited time f a which is probably pretty well expired if i go back to zero five zero four ok i find the same just not as bad i'm the only member of congress that sits on a public board i am well aware of what we have to do  to meet f c c for what we publish what i'm saying is aren't we looking in two thousand and seven at the brightest most positive scenario in the last the previous five years you know do what they do in the three letters blame your predecessors if you need to but for god's sake answer yes yes yes the answer is yes thank you that's all i really wanted it was it was sort of a softball mr chairman thank you very much for your indulgence on that question you're welcome always y inquiring number of members of the committee a varied backgrounds that will we assure you will scrutinize your statements and papers submitted with great care and we'll start with mr boff international president of the international association of machinists the son of an eye member mr buffenbarger has been with i for over thirty years since then he's held various leadership posts including that of general vice president and he was elected to the office of international vice president in one thousand nine hundred seventy we have your testimony written and we would invite you to make your presentation at this point welcome to the hearing thank you chairman conyers and members of this committee for the opportunity to speak to you on behalf of airline workers throughout north america my name is tom buffenbarger international president of the international association  machinists and aerospace workers known as the i am the largest airline union in north america i have submitted my full statement for the record so i will only summarize my testimony here it is my firm belief and the belief of many others that airline executives are using a crisis of their own making to justify the establishment of what can only be called a monopoly the need to address overcapacity has been a favorite battle cry for airline management for decades and it won't be resolved by mergers if there were only two airlines left in the country i am convinced the o s would be complaining about overcapacity and looking to merge airlines also cite high fuel prices as a recent emerge but the cost of a gallon of fuel for two individual airlines will be the same as for one large airline consolidation is not the solution for this troubled industry more competent management is immediately after nine eleven airlines demanded government aid carriers then sought and won pension relief legislation but still abandoned their pension plans airlines also use the bankruptcy law to force employees and shareholders to make sacrifices to save the carriers if airline executives spent as much time running their airline is they do looking for bailouts this industry and our country's transportation system would be much better off this industry is in disarray and the executives in charge are only making things worse there is too much at stake to let executives and their legacy of failure try and solve the industry's problems it is time for airline passengers employees and the government to finally say no to airline executives some form of limited reregulation is necessary if this country has any chance for a safe reliable profitable and competitive air transportation industry re regulation is the only long term solution today however we must deal with immediate issues one factor the airlines will not admit publicly is that they expect this merger to eliminate the union representation rights of northwest airlines workers they want to use this merger as a weapon to eliminate the jobs and the rights of thousands of workers the machinists union will not allow this to happen i realize this hearing was prompted by the northwest airlines delta airlines merger announcement however we can't discuss that proposal without recognizing that this announcement will lead to additional merger attempts continental airlines united airlines american airlines and u s airways have all discussed various pairings in response to the delta northwest action continental airlines unlike northwest or delta would rather stay independent but is being forced to explore merger possibilities because the northwest delta combination would put it at a competitive disadvantage if allowed to proceed northwest and delta will form the world's largest airline creating the world's biggest corporate headache this will lead to other mergers likely cutting the number of major national carriers in half from six to three the wholesale reshaping of the industry will destroy competition and harm consumers on routes throughout the united states it would be difficult to find anyone outside of a small group of airline executives who expects to benefit from additional airline consolidation it is both insulting and a testament to these airlines arrogance if they think anyone believes they can combine these two companies without eliminating service and purging employees passengers originating or traveling to memphis detroit cincinnati minneapolis and the smaller communities served by airports in these cities are just some of the casualties that will lose service frequencies both delta and northwest have frozen or terminated their pension plans if a merger takes place and the combined carrier ultimately fails the pensions will be forced on to the pension benefit guaranty corporation the p b g c this will burden the p b j see with more than seven billion dollars in combined liabilities we all know the p b g c has already expressed concerns about such a scenario just over a year ago delta airlines was making the rounds in washington trying to block a merger proposal with u s airways delta said then that the competitive impact of the us airways proposal deal is that if the merger were to go forward it would trigger broad industry consolidation delta was right then and wrong now too much is at stake to take these airlines at their word one final point mr chairman since employees passengers and shareholders will lose in this merger who benefits doug steenland stands to gain as much as one thousand million dollars due to the ending of his employment at northwest richard anderson has said he would waive the fifteen million dollars in merger related compensation he could receive due to change in control but he could still realize tremendous benefits through a new employment contract  o of a much larger company a delta northwest merger will eliminate jobs reduce choices for passengers further deteriorate customer service trigger additional senseless mergers make millionaires even richer and most importantly do nothing to address the problems of a failing industry this merger and the ones that follow should not be allowed to proceed mr chairman i thank you for the opportunity to appear before you in this great committee and i will welcome any questions thank you thank you mr bevan badger you've got a to a slightly different start from the direction of the first panel opportunity and the invitation to present testimony today again my name is doug marman i'm the vice president for government affairs at the cincinnati usa regional chamber and i am pleased to report to you that the regional chamber is the fifth largest chamber of commerce in the united states approaching six thousand members representing more than three hundred thousand employees it is an honor to have the opportunity to speak to the task force today the issues upon which you are deliberating the proposed merger of delta airlines and northwest airlines is critically important globally competitive u s based airlines are important to the nation and its economic wellbeing as trade expands and international markets become more assessable more specifically ensuring that delta thrives is critically important to the cincinnati region its people and its prosperity the cincinnati region benefits significantly from the hub service afforded to us by delta in two very important ways first of all the hub is an economic driver the hub is responsible for an estimated thirty four thousand direct jobs in two point eight billion dollars per year in annual economic impact to have also provides the regional business community with nonstop access to nearly one hundred twenty domestic markets and to the top business destinations in europe i'm pleased to report that the hub is very important to us and that delta has provided assurances to us that the hub will continue to operate in a merged environment the assurances that delta has provided to us also include importantly that comair the regional head the regional jet service that's headquartered in northern kentucky will also to be continue to be utilized by delta as a major part of its operations perhaps nowhere is the impact of the more evident than on our regional economic development and business attraction efforts is our region compete in the global marketplace for jobs and capital investment we must identify and tend to our differentiators in making the case for job creation and capital investment in cincinnati usa one of our top advantages is assess ability and superior superior air service direct flights and saves same day back and forth service make a difference businesses realize this many businesses calculate that without same day service per trip costs double the region success in attracting foreign investment to the united states tracks very closely with the onset of international service at g between one thousand nine hundred nine and two thousand and three the number of foreign owned company companies in the cincinnati usa region more than doubled from one hundred fifty to over three hundred today that number stands at more than four hundred international businesses these are international businesses that are investing in the united states employing our workers importantly to congress and other government entities paying our taxes a one thousand nine hundred eight study from george mason university perhaps sums it up best cities that are not on the world's international air service map today are not going to be on the world's economic map tomorrow based on the chamber's preliminary assessment the merger of delta and northwest represents a combination of complimentary air service providers it appears to us that there is very little overlap in the routes offered by the two carriers in fact delta has reported to us that there are only four routes where the combined businesses would be the exclusive provider of mastic nonstop service beyond that our understanding is that the overall industry will remain competitive if the delta northwest merger moves forward in a post merger environment our understanding is that no single single carrier will have more than twenty percent share of the domestic market in fact  southwest currently carries more domestic passengers than delta and northwest combined before closing i would be remiss if i did not mention fares c g has historically among the national leaders in the high cost of air fares one top national ranking that our region would be more than happy to shed the chamber and indeed the entire community hopes that a new merged entity was a will result in some fair relief for our region's loyal customers mr chairman cincinnati usa region benefits greatly from a competitive economically sustainable and healthy delta if the company's path to competitiveness in financial stability requires a merger then our community realizes that a merger is in the best interest o conyers congressman shabbat again thank you very much for the opportunity to visit with me today i appreciate the attention you've given to our testimony and would be happy to answer any questions if you have some thank thank you very much  we now turn to dr clifford winston senior fellow at the brookings institute who specializes in transportation industry organization and regulation and over his twenty five and his p h d in economics from berkeley welcome thank you i appreciate having the opportunity to testify what i'd like to do is try to just distill my testimony in two three comments  about competition in the industry in take a broader look at appropriate public policy the first part of my testimony includes descriptive information about the airline industry there's a lot of data about this industry and we get a pretty good idea about how it's performing and how travelers welfare and industry profitability are affected and in a nutshell the industry should the data show that the industry is actually quite competitive which has been good for travelers but certainly the industry carriers are facing significant challenges the first way that we actually measure the intensity of competition is the number of equal size carriers at the root level and this is an important point that i think has been missed in previous testimony focus has been on the number of carriers at the industry level that's not workers compete they compete at the root level you could have ten carriers in the industry but if only two are on the route then that obviously makes a big difference if you have four carriers in the industry and four on the route then that's always a more competitive situation so focusing on the root level is absolutely essential what we see is there's been an increase in root level competition since deregulation and then it's been stable for them down in however obviously there's been a lot of entry and exit been going on so the identity of the carriers have changed and that has been probably the most crucial development in the evolution of this industry is this identity now consists of the growth of low cost carriers and they provide intense competition not only on the route but as potential competitors and what we call adjacent competitors just to give you an example of what an adjacent competitor is southwest provide service from b w y to oakland that that route and competition provides extreme pressure on united when they want to fly from dulles to san francisco their fare is affected so you don't even have to be on the route as a low cost carrier to have an impact on fares the combination of the steady appearance of root level competition in the identity of carriers has led to a significant decline in a steady decline in real fares actually real fears have declined sixty percent or so since deregulation not thirty percent as was said earlier  so travelers have clearly gained from the competitive situation but the problems now are facing the carriers profitability has been quite volatile and there's a lot of pressure now on their profitability because of increases in fuel prices now they have pressure to cut costs but there's now another phenomenon which we really have never seen before and again not mentioned earlier it's the increase in load factors that is the share of seats that are filled by paying passengers  that figure now is an all time high of eighty percent so we have a real problem the planes are filled up it's not excess capacity having to be excess capacity and eighty percent load factor can't put anybody anywhere unless you want to put them in the bathroom so the  difficulties how can you be making money when you're filling your planes and said you're still having problems mergers then this is my second point are understood is it in this context is a way for carriers to improve their financial situation now broadly in terms of the evidence the motivation for these is generally access for international routes where you don't get access because of regulation so by merging you can get access and really financial distress usually one of the carriers is under financial distress and the other one is needed to help them out now the merger between delta and northwest at least in terms of historical context of what mergers makes a lot of sense because here you see access to  you see carriers both having financial distress so i see greater access to international operations which expand their network and that would obviously improve their performance restructuring their network to track more business travel to funnel them through from domestic to international to estimate the destinations and reducing their costs retiring older aircraft and i think labor adjustments will be part of it now there are three comments that have been made in previous testimony and questioning about this merger concerns dr was that we need you to wrap up it is a moment and what i would say are the concerns about labor hubs and passenger bills of rights are not really appropriate in this context the market can deal with these issues and they've been doing so effectively in other with other carrier relationships and other industries and they're absolutely critical final point i would say in terms of competitive policies given concerns about mergers and in interesting ways of trying to help competition in the industry i would urge this committee and congress in general to push forward for more international deregulation and have it spread to domestic routes allowing both foreign car carriers desser our routes and our carriers to serve their routes thank you sorry for going over finally i'd like to introduce miss veda shook the an international vice president for the association of flight attendants and alaska airlines flight attendants nine hundred ninety one michelle has been involved in many aspects of union activism from promoting education and cultural awareness to negotiating industry leading agreements with her carrier she served as alaska master executive council president local founding president for local executive council thirty nine and  numerous union committees thank you michelle thank you thank you very much to you and to the committee for inviting us today and providing voice to the concerns of the tens of thousands of airline employees across the country this proposed merger has drawn significant attention from the media the public and here on capitol hill the intense focus being paid to what will create the largest airline in the world is appropriate and necessary it's unfortunate that since deregulation of my industry some protections are in place today for consumers and communities in the event of a merger yet there are virtually no protections for airline workers there's been little attention paid to the extreme people that mergers create for the thousands of airline employees who find themselves unemployed whose lives are disrupted or whose work may be outsourced this merger could seriously jeopardize the collective bargaining rights of all the northwest employees who have fought for and won the legal right to have union representation and contract protections in a merger virtually all the employees at northwest airlines have chosen to joining union delta on the other hand has only one major work group that's unionized and that's its pilots delta flight attendants have been working diligently to secure a better future through joining a f a a and eventually negotiating a legally binding contract their hard work paid off recently when they presented authorization card signed by over fifty percent of their workforce to join a f a in fact yesterday the national mediation board open the polls and voting will end on may twenty eighth we remain confident that this brave strong and proud group of delta flight attendants will come together and vote despite the extreme efforts of the company's voter suppression campaign welcome back in the context of this merger the company's voter suppression tactics take on added urgency this merger cannot be permitted to become a vehicle for union busting these executives have realized the opportunity that this merger presents not just a chance to prevent thousands of nonunion employees from gaining a union but also a chance to see you limit the unions that have already provided protection for their members in northwest so while delta flight attendants vote on representation the northwest flight attendants face a very real threat to their collective bargaining rights their proud tradition of union representation is threatened by management's use of this merger process to attempt to eliminate the northwest flight attendants contract in fact we view the current representation election among the delta flight attendants as the first line of defense to protect the over sixty years of collective bargaining for the northwest flight attendants this is due to the unique way that representation elections are governed by the national mediation board whereby in order for a representation of election to be considered valid fifty percent plus one of all eligible voters must turn out to vote in other words the delta flight attendants begin voting with one hundred percent no votes and must systematically turn more than fifty percent of those into votes representation in fact a person who by design or by passed city chooses not to cast a vote in an a election this is counted as a no vote encouraging management to focus their efforts on voter suppression in every election i ask the members of this committee to imagine our congressional elections being governed under the same onerous rules of primary concern is that these executives will use this merger to eliminate the rights of employees to have a seat at the table when the airline is fully merged with northwest and delta executives are not shy about their efforts to prevent the employees from forming unions as was intimated earlier in fact in a meeting with a f a a northwest leadership northwest management stated flatly there would not be a seat at the table for the flight attendants in merger discussions going on to state that the current delta was a nonunion company new delta had every intention of remaining non union and denying the bargaining rights that are essential in the face of this merger using this merger as an opportunity to destroy unions provides here these airlines and all who would follow with an opportunity to drive down wages work rules and benefits for all airline employees it can create a domino effect that will force even unionized carriers to match those drastic cuts in order to compete they will set industry standards back to levels we haven't seen in decades and if delta is a nonunion carrier as well as the largest carrier they will be poised to send motion an unprecedented remaking of the entire airline industry that will destroy airline jobs as a stable and secure middle class career once and for all i urge the members of the committee to send a strong and clear signal to north asked and especially to delta executives that they must not use this merger as a means to destroy the collective bargaining rights of the employees i further urge this committee to use its good offices to monitor monitor a its representation election progress is over the next five weeks so that they stop engaging in ruthless election elect excuse me ruthless election activities aimed at voter suppression and finally i hope that you will use your influence to persuade the management to become neutral in this representation election as a lie intended and is currently not happening with these executives are successful in their goal to keep the new delta nonunion we see this merger as the beginning of the end of the airline industry as a source of decent and respectable jobs i'm proud to be joined today by flight attendant representatives from delta and northwest two together today again presented mr anderson with a letter requesting delta excuse me with a letter requesting neutrality in the delta flight attendant election and unfortunately again he dismissed the request well much will be made over the coming months about the impact of this merger on consumers and communities i urge you to remember the hundreds of thousands of airline employees across this country keep us in mind is the river that review this merger and the impact that it will have on our lives and our families were the ones who have the most to lose we have the least protection and most importantly don't let them destroy the one thing we have protecting us our union it sounds like you're in a pretty bad position you're in and the attendant to me out of where i haven't been aware of this before but it sounds like they're thumbing their noses to and if they're doing that now i shudder to think what they're going to be doing after this merger goes through and my being too hard on them frankly i don't think you're being hard enough it was not just a thumbing their nose at the flight attendants today in fact i believe it occurred with your good governance today it's absolutely there absolutely not i believe the quote i saw earlier was that mr anderson said they would never engage in carrier interference i can't tell you i can't describe how massive their campaign is to try and make sure that the delta flight attendants don't vote it's really extraordinary and something i have never seen before  such a parent hostility toward working people who provide the very basis for the existence of the services of the airline mr chairman that's a very large question i would like to point out that in the year since deregulation we began the process when  congress and the industry leaders promised the american people that if we take a largely regulated industry and deregulated it we would have more airlines not fewer we would have more choices not less we would have better service to more locations not cuts lower fares better point to point service more community service none of that exists today we're here talking about consolidation and the and i recall during the tough years for the airlines as they found out deregulation brought a lot of pain on them they came to the flight attendants they came t pilots they came to the machinist and said we need your help you need to take cuts you need to reduce your demands lower your expectations for employment in the industry and by and far every one of these unions stood up took the pain to help their carrier survive in some locations we even took stock and bought stock in the companies and they still found their way manage their way into bankruptcy value of the stock that we had united airlines being a prime example and the same people that take us into bankruptcy and into mergers then are the same people that are here today saying consolidation is the way out will they failed it two trips to the plate and now we're looking at really strike three and consolidation and monopolization of the industry is not the answer and putting more pain on the employees is not the answer and just serving the american flying consumer is not the answer i think reregulation as i mentioned in my remarks it's the role of government to step in when the private sector fails to serve the interest of the public the role of government is to put balance back into the process and that's what we need today well we had to see testify here and we have to union representatives have testified i feel like calling them back frankly let's start all over and and see if we can sort some of out you're doing on this committee mostly with a bunch of lawyers and we're used to we're used to getting the business i mean we understand that self interest and monetary gain can drive people to say and do a lot of things i mean that's not unique this is this is what we do is sort o fiction from fact and try to make the best application of the rules that govern this great country economically and  otherwise do you stand to benefit i mean what's in it and they didn't tell me they were they were in for a double digit millions of dollars worth of increase in their own personal wealth is that accurate to say or will i have to eat these words tomorrow but negatives the pain on membership the loss of employees jobs the and no we do not make a dime a penny or a euro out of this may answer the question you had us before please if i may that sometimes what we see with these carriers and the c e o s and executives is they they're short timers and they'll come in they'll come out the hop from carrier to carrier and i personally don't stand anything to gain here but the flight attendants this is their chosen career it's not just a job it's their chosen career and they're in it for the long haul and if at the end of the day there's some guarantees for the flight attendants and there's some preservation there's some neutrality with this union election of course the flight attendants want to work for a prosperous carrier they want to maintain their career and i speak on behalf of working middle class families that we're trying to preserve middle class good jobs that we work very hard at and what we're trying to do is maintain that that level and that standard for middle class jobs so dr winston that's why we had you become a witness on this panel brookings thoughtful intellectual fair minded  what would you have a do here that would operate in the benefit of the consumers you know the one we don't have witnesses this is the guy that flies person that pays the bill person that gets stuck in the airport overnight and lots of other things were representing the best interests of this country in terms of this proposed merger what do you think how do you think we sort of this well this fall we're going to celebrate the thirtieth anniversary of the airline deregulation act and fortunately there is a great reason to celebrate and i base this not on advocacy but just the overwhelming evidence that has been developed not just by me in my  fares increase in the number of competitors at the root level which i stress is the important place where you need to assess competition the evolution of low cost carriers the increase in expanded flight frequency and most importantly all of this occurring with a continual improvement in airline safety now the concerns about labor are legitimate there's no question about that but i think to understand that you need to take a longer view about how the relationships between labor and certain airlines evolved and they've evolved since regulation during regulation airline fares were regulated and there was restrictions on entry and the fares that were existence generated above normal profits and we got into a relationship between care years and labor quote what they call rent sharing that's the jargon that is how do we divide up this excess pot ok now this developed over many decades and that is the way labor and carriers thought of each other as basically combatants in a big share of the pie and when deregulation came along it was a big change that share of the pie was gone as the industry became for far more competitive and there was quote going to be less profits or excess profits if you will to divvy up but the attitudes of the two didn't change because that's how they're used to dealing with each other to this day and you will hear people in this industry talk about things that went on in the one nine hundred sixty s that they haven't forgotten even though the industry was regulated then  was deregulated now but we see one fundamental difference and those are the new entrant carriers southwest low cost carriers they have very good labor relations they didn't grow up under this rent sharing mentality and i think that's really the key to the problem that new entrants jet blue air tran southwest they did not have this rent sharing mentality and had a more entrepreneurial relationship which i think is helped them in developing their relay burleson's and have a more constructive working relationship i can understand that the what we call legacy carriers delta northwest are among them and certainly united american others are included have this rent sharing mentality that leads to this bitterness but it's ultimately self destructive in the end the low cost carriers are just going to increase their share unless you can find ways to productively work out your of your relationships lead to a fish and seas but also have a contented workforce the legacy carriers will just lose more market share that's what's going to happen so i would suggest that although these are real concerns between the two participants they need to sort it out themselves they cannot use the government for their purposes this is i don't think your place i think your place is to make sure the labor laws and if there's any violation of those to again lead to good relationships because no carrier and i would stress is no carrier is successful with an unhappy workforce you're not going to be making money that way you'll just cut your throat if you have a reputation for not treating your labor well and i think the market is what's going to disappoint all of this you know what i'm going to do some interesting points and because my when the two c e o s were here and testifying heard their testimony and from your testimony i assume that you don't buy the fact that because of high fuel prices and competition and the economic realities of the airline industry that it's in the best interest of certainly the employees that you represent but others to actually have this merger go through is that in essence what what you're saying i was talking to the to you well thank you i i'm not an economist and what i would say is that we have not taken a position on this merger that's largely because we haven't actually been involved in the discussions we haven't we even though we've asked we have not been equal partners so we don't actually have all the data to be able to make an informed decision ok mr bout them are please rest assured congressman have it that we are opposed to this merger we have dealt for many years with the two gentleman you had previously when they worked for the same company and worked in offices and extort each other at northwest airlines we have a long experience with them and we have a long experience based on the fact that we took serious cuts at northwest airlines we took stock in return our members in the new model worked their tails off to the northwest successful and we were rewarded by years of courtroom challenge trying to collect the money on the stock that we owned and that's that's the type of relationship it's not on the employees side it's the fact that the management exercises extreme contempt for its workforce and we doubt seriously now that they have seen the light and view a good relationship with their employees is a very critical part of the success of their proposed merger we know what it's going to bring and it's going to bring more pain and it's going to disserve the flying public let me stop you there if i can get i've got limited time but there's the you know as one of the representatives from from the greater cincinnati area i know that when we heard about this and as we've been following this since the beginning one of our main concerns is obviously that in our community we maintain our hub there for the convenience of those that are flying we want the jobs to be kept in the area whether they're union or nonunion jobs we want the jobs to stay there we want the the local economy to can too new to thrive to the extent that it can in could you again reiterate your position relative to the impact that you believe the merger and the airport staying there the hub staying open why that is important to the economy  locally and what your opinion is about that mr chairman congressman shabbat the hub is vitally important to the regional economy in the cincinnati usa region and that is a fifteen county region of two point one million people that is northern kentucky southwestern ohio in southeastern indiana let me give you a case in point just last year ta ta consultancy services which is an indian based conglomerate located its north american headquarters for its information technology business in cincinnati the reason it did so was because of the outstanding air access that we have this is a thousand new jobs in the cincinnati usa region the multiplier effect will probably lead to at least fifteen hundred additional jobs because of the nature of the jobs that are being filled these are new jobs this is new wealth being generated in our community and it's directly linked to the hub service that we have because the consultants working for tata have direct access to the locations where their customers are situated and most recently just this week we received a call from a company in the southwestern part of the united states that is interested in expanding its operations interested in the cincinnati usa region is because there are six nonstop daily flights to their headquarters city i think those are just two very fine points to put on this but there are two examples of how vitally important the hub is attracting jobs to our region when you look at the growth that's occurred in our region we frequently do better than our competitive set of cities those are indianapolis louisville columbus and the reason we do better is because of the airport in the air service that we have it is vitally important to our competitiveness it attracts foreign investment as i indicated in our testimony that creates new jobs in our community it creates new wealth in our community and it creates new pet taxpayers in our region  you i had earlier mentioned the concerns that i have raised to me by my constituents relative to the fact that the rates are higher than we would certainly like to see  them at our airport especially because they have been the last two years the highest in the nation and that a lot of the folks in our area are literally drive to dayton columbus indianapolis louisville to take advantage of the lower rates there are those things that you hear as well and if so would you like to comment on that one of the top issues of concern that are surface to our chamber of commerce from the business community are the high fares that we  have i think the cincinnati community understands that we do pay a premium for the service that's offered to us there is a premium associated with nonstop service two hundred twenty destinations around the nation and eight international destinations our community has been loyal customers we have paid that premium i think our level of tolerance for pain that premium is reaching a tipping point if you will i think if there is a silver lining in the bankruptcy of delta in the potential merger merger is that delta has in their words rationalized the level of service at our airport that has reduced the number of flights it's taken out seat capacity and what we hope that the result of that is is an opportunity for other carriers to look at our community potentially to offer service so i think there's a high level of frustration but i do think we do have a glimmer of hope right now that there could be additional carriers interested in providing service for our region because of the reduced delta service and that may have some positive impact on the exorbitant fares that we pay now i certainly hope so because i know that you know i've heard the same explanation from delta relative to the convenience and being able to fly internationally etc we pay a premium but there's a number of communities that have that same ability and their prices are lower and i just don't buy it and i think they're higher than they need to be ought to be and anything we can do to bring those down i think we should work together to do airline industry generally and do you envision more bankruptcies if current trends continue yes let's let's not forget that two thousand and six two thousand and seven were modestly profitable years after huge losses following september eleventh so you know industry could really take an unanticipated twenty percent reduction in demand and be in good september eleventh up through two thousand and five there were huge losses in the industry and you said it got some way no matter things got a little better in zero six zero seven but certainly not even close to what they lost and now they're struggling and now we're starting down again and i'm just saying and so i want related to the fuel number of them i think are vulnerable thank you very much i thank the entire panel thank you very much ranking members return to steve cohen distinguish not issued a formal position statement on the merger but as we indicated in our testimony we do believe that if delta merging with northwest is what makes delta assist a sustainable financially viable corporation  because of our region's reliance on delta we think that that is a positive way to go so you're concerned that if they don't merge there's a possibility that delta could no longer be a viable airline well i would not go far so far as to say that i would say that we're looking for delta to make its decisions as to what can make it a successful financially viable company if there's not a merger would cincinnati have a hub we believe that we would we believe that cincinnati is a very important part of the delta network either in emerging vironment or not we have a smaller hub than we did at one point in time but we do believe based on everything that delta has told us that we would continue to be a hub operation do you have any reason to believe that cincinnati  this or in any way did it against each other as possible cities that might one of the other might lose a hub we have no evidence of that aside from our own suspicions because the proximity of the cities to you do have suspicions that methods were cincinnati could be with without a hub the merger goes through i would say we have suspicions but again we have been assured by delta in conversations with top officials that that is not their intention and not part of their plan in the merger that they do that they experience now i would be surprised i think i would i mean i don't know why again as i said before i don't think that this is the area where you should be assessing the merger but giv you've asked the question i think that the merger makes sense to have a fundamental restructuring of the network and i would expect to see changes whether it be hubs certainly routes and we have observed that in the past carriers have merged and subsequent to that they've abandoned all the routes they've got after the merger that's happened we know that but on the run and they said they weren't going to do that i'm sorry did they say on the front end they weren't going to abandon those routes i'm not aware that they ever did i don't know why they would i don't quite understand that part of it i mean you're doing this to fundamentally change the network but what you are doing to take advantage of international operations and that's going to be the key synergy to delta delta northwest in my view you have to take advantage of  their northwest operations in asia dulles and europe and you're going to think of trying to route traffic so that you can get a fair amount of that traffic abroad to me cincinnati memphis that's pretty close to have to hubs i don't know why it's not obvious to me why you have both of them but look there was economic reasons to have them in the first place they may still be viable but there's one thing also you have to think about how other carriers are going to react to this merger and i don't you know they might say to start going into some of these areas ourselves simply because we want some of that traffic going to being being that memphis does have that x and makes that the largest cargo hub in the world and being that memphis has the lowest one the most efficient airports and the best climate and great idling limited amount of idling time on the tarmacs is there any reason in the world why they would jettison cincinnati sedum fs now wait a minute here we did beat you in basketball this year you don't have to answer that question oh well i mean first of all one thing that you should point out about memphis memphis has something that almost no other airport in the country has ribs it's now that it's now a test airport for satellite service for satellite air traffic control that that federal express is using so our bases for our air traffic control system one of the test areas in the country is in memphis now whether that you know it's a low density airport to begin with so whether that's improving their their their arrival and departure is hard to say but that's an important advantage there the test case for that with fed ex but so i mean that's one thing that you've got to keep in mind about their service in terms of you know whether whether the cincinnati hub or the memphis hub is a more viable airport it depends on what happens on the international part of the operations if they see that now that we have a more attractive operations in asia they may say look we want to expand memphis because it's going to hook up better with asia if for whatever reason they think well you know now with our designs on getting more activity going on in europe cincinnati would work well for us from that perspective they may want to beef up their flights there so you know there are many things are going to be changing i think just sort of looking in a static sense here them to get here's the map and this is what's going to happen i think it's going to be very misleading we've learned from other mergers and networks are going to change but it depends on all these factors and particularly complicating it is the international aspect of it which is a major part of this merger and historically has not been a major part of the other me michaud have the northwest attendants taken a position you know well we represent the flight attendants in northwest airlines and no they've not formally taken a position what what's important in this discussion is that again we need to be equal partners and be involved in this discussion right now we're focused on the delta flight attendants who are currently their election started yesterday and then beyond now will do whatever it takes to make sure that the northwest flight attendants protect their collective bargaining ri you look at the commercial people had a poll online this morning about this newspaper and by far the clearest answer now this is the public which is not necessarily experts as mr winston is or others felt that the answer would be that they would promise they keep the hub and then they'd merge and then the hub would disappear by far that was the response and that's a concern you have to look i believe those in article some i told me about from one of the senators in missouri maybe senator  flight attendants that are based in memphis for northwest airlines and that is absolutely chatter on the street is what is going to happen between cincinnati in memphis it's a very real concern well i appreciate the we have competing predictions of what the future is going to be like and we have different views of what will happen if the m occurs and it's it's not it's not clear to me that the deregulation of thirty years ago has been of that it was cracked up to be initially as a matter of fact and discussions with a number of members including  members of the other but of the our senators who regret some of their initial enthusiasm about the whole deregulation and so dr winston i want you to know that there is a anothers side to this thing consumers magazine recently wrote about it in connection to air travel i'm going to ask unanimous consent and put it into the record but what we're really looking at is employers and the employees that the that why written here is a multi billion dollar change why wouldn't you let a few union representatives sit in on the meeting so that they could show some support for it i mean it's hard to be kept outside the door and then when we get ready and let's everybody get aboard and their question might be in washington during this coming period of time is we don't know what it is we're getting on board for we don't know where we're going we don't know if this is just another trail of broken political and economic promises and somebody will look back into the hearings of two thousand and eight in washington and say wow they didn't live up to any of that stuff or maybe very little and and then when you when you show the again i mean human nature is human nature this is peculiar to the airline industry or the airline exacts but when you've got a  deal on the table that you might be enriched by double digit millions of dollars it might affect your thinking a little bit maybe a lot so that's where we come in our question isn't what's good for the airline industry per se or the airline executives in particular what what's  good for the american people the consumers the average people that have that fly and what are the services going to be like and will they be served by people who have a collective bargaining agreement where their wages and working conditions and south and and pension benefits and health benefits are reasonably negotiated i'm nervous about here's one organization with a union here's another and without a union and they don't like like they are they really are going to ever change much i mean with or without the merger they don't seem to be for unions why what's what's the problem here and this is what a hearing is good for we want to get down if we can you know and talk to each other about this because in the end have to come back to the full the task force comes to the full committee the full committee goes to the floor and people are going to be saying well what did you learn  on april twenty fourth well we learned that this was a wonderful opportunity for things to get better if we took a couple of the biggest and put them together and then we had another panel in which we got a almost completely different picture and we haven't talked about whether a merger would really reduce competition on this and this panel we've been talking about eval increase competition mergers rarely increase competition i mean as a general principle mergers reduce competition as a general principle and w competition is reduced it seems to me the consumer loses benefit the consumer doesn't gain by a company getting bigger so these are some of the can the things on my mind and i like to just go down the line and have you give us any final comments mr marmont how would how would approach a merger and how some of the employees would see that i think what i could say is that our experience in recent memory at least has been that delta rationalized the size of its hub in cincinnati when it did so it said that it would retain the maximum number number of employees that it could and to our understanding they did we continue to have somewhere around seven thousand delta employees working in our region they said that they would continue to utilize the com services they are continuing to utilize comair which employs probably another six thousand or so people in our community so we i think have no choice but to take them at their war at their word and when they assure us that their plans call for continuing our hub for continuing to continue to employ the number of people that they do to continuing to offer the extent of service that they do i think we have little choice but to take them at their word except that that that that is what their business when i said i think that the tensions and hostility between labor and management are not didn't just begin yesterday i think they've began many decades ago so it's not surprising that there are different views speak and i think that's really the heart of it that's obviously a concern that just mistrust on the part of labor and management acting in a way that doesn't seem to be engaging directly and acknowledging that mistrust but as i said i think that's been going on for many decades with some of these carriers it saddens me that i don't see deregulation is positive and i think one of the positive things that it did was open the industry up and suggest there are alternative ways very hard to predict how the mergers will evolve and i think that management really shouldn't lock itself in a box and sort of say i don't know what they did say that you know we're not going to change routes we're not going to cut labor i think that they're in a position where they have to  know they're fighting for survival this is you know been very tough period for them and i don't see that any company is successful you know by annoying labor and irritating labor ultimately they will fail fortunately though in this  deregulation we have others to take their place their failure is just going to be lead to an increased share of the low cost carriers and other carriers who are legacy carriers can work that we can work things out so you know i see the tension but i see that the value of markets is in many ways correcting a lot of these problems and giving you a backup if things fail here but i'm hoping that they don't share your hopes let me ask you the  suppose we had a little bit of reregulation suppose we brought back a little what would be so bad about the do you have anything specific in particular what specifically regulation you have in mind right you certainly there is a role for government to step in as they did prior to one nine hundred seventy eight when when also the cost the fuel was regulated and managed by the government and levelled the playing field for the airlines which meant then they had to use their brilliant business minds to figure out better ways to compete i think the way we we structure who actually manages the industry let's talk about that for just a minute right now we had to gentlemens addresses in the first panel none of whom originally came out of the industry one was a prosecutor who came into the airline industry the other one i'm not quite sure what his background was but his predecessor was in the food industry and the guy before that was in the hotel business and at united we have an oil man running the company what we need in the airline business are people who understand and have worked in the airline business and how do we deliver a good value good quality good service to the flying public and at the same time understand the role of the airlines in america isn't about individual corporate competition it's about providing a public service to the best interests of this country you know everything we do regulated beginning with the airlines has been the code word for destroy the trucking industry the electric power industry the last communications bill on television i saw my cable rates were going to go down immediately upon signing of the bill they skyrocketed up we've deregulated the financial institutions to a great degree we're in a lot of problems again today i think congress needs to take a serious look at what the regulation really means what's the role of government in our lives and something like public transportation not just airlines but rails on the roads in the high you know all the stuff we do we need to understand that when the private sector can't deliver reasonable expectation to the consuming public that it's their role the role of government to step in and level that field and put some common sense back into practice so i would say field is the first place to start how we manage the air traffic control system memphis is a test bed because it has a large cargo hub and how do we integrate commercial you know flying people versus packages and how can you use the new satellite system to make that integrate even better those are the those are those are things that offer a little hope but the real issue of reregulation is something i would love to visit about this industry airlines and i would offer even a more complete answer to all the other things we ought to be taking a look at we haven't forgotten you but i just want to let dr winston react to this because it was you that quite appropriately brought up the fact that we've had a sub prime mortgage meltdown which is now going into effect in millions of people literally all the financial markets in the world and that  is a question of how did this thing get so completely out of hand and guess what one of the answers being suggested there was no regulation or oversight of many of the parties that were using predatory lending tactics who were putting in skewed credit ratings they were this to me suggests a case for regulation jaleel to the gentleman i thank the gentleman for yielding the gentleman brings up the subprime mortgage crisis and i can't let it go and commented upon that one of the solutions  this committee was a joint bipartisan effort between the chairman and myself and i might note that one hundred percent of the republicans who voted for it are present here in the committee today problems my view is the opposite that is even with the best of intentions one needs to think through again all the subsequent steps that will occur after you put in the regulation let's let's take supply shocks that is supply reductions with price last less supply eventual the pressure to quote take them off and all of a sudden through the roof because supply a been cut back eventually though the market did sort itself out and you know following the price shocks of the late seventy's early eighty's prices went down markets do have disturbances would be wrong to say and misleading to say markets always perform perfectly they don't there are shocks all right and we learn from that the issue is who learns quicker and who learns more effectively markets or government let's go to subprime do we really know what caused that i mean at this point i think there's obviously a lot more understand that we need to get with the really truthful information problems or we're a fair number of people more than people want to meet saying look we knew what we were getting into we took a risk risk didn't work out and we're caught from that honestly what could government regulation have done and if that's the case then how can we continue to count on government in playing in that that kind of visionary responsive role at the same time i would suggest that this is something certainly the financial markets will learn  from and i think just one has to go through very carefully before sort of crafting regulations and blaming markets for things to actually isolate what's responsible for what and whether in fact regulations will truly have the effects that that we think they're going to have i would quickly add that also by the way the comment i can't resist on the passenger's bill of rights i think ultimately that's going to do more harm than good well so much for your liberal check check my voting record that's a good idea i think i would invite you to check minus oil but really probably know return to miss shook thank you once again i would just like to thank you for the opportunity today as obviously i previously mentioned that we haven't been given a seat at the table from the northwest perspective side and also from the delta side so it's a very good opportunity today to provide voice to the flight attendants so i'd like to thank you for that i like to invite you congressman next time you're flying through cincinnati i would love to  put you together with some cincinnati flight attendants and see the barrage of information that is being flooded their way in this representational action and i would respectfully say to mr mormon when we have to take delta at their word i'd like to give you a sampling of what the flight attendants have to face every single time they check in for work there's huge posters on the wall there's pop up screens and they check in on the computer there's supervisors everywhere there's glossy leaflets there's a splitting video it's just it's incredibly overwhelming all with the delta logo all over it so i would i'm very serious in that request at that to give you some reference on what on what they're up against and i want to just also address mr winston that i believe it's somewhat of an oversimplification to pit labor and executives against one another and that is not at all what i'm talking about today we're talking about delta flight attendants coming together to collectively have a brighter future working with their management we're talking about the northwest airlines being peers there are management and having a seat at the table so this is from my reference i come from an airline that would be considered a legacy carrier we have decent and respectable built on mutual respect our relationship with management and i just wanted to make sure that i addressed that and again thank you very much for the opportunity that we experienced a time like this before i was born but my parents certainly lived it called the great depression and what brought us out of it was a regulation of the world we live in not lively than the first and the committe