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S. HRG. 111–657 

THE UNITED/CONTINENTAL AIRLINES MERGER: 

HOW WILL CONSUMERS FARE? 

HEARING 

BEFORE THE

SUBCOMMITTEE ON ANTITRUST, 

COMPETITION POLICY AND CONSUMER RIGHTS 

OF THE

COMMITTEE ON THE JUDICIARY 

UNITED STATES SENATE 

ONE HUNDRED ELEVENTH CONGRESS 

SECOND SESSION 

MAY 27, 2010 

Serial No. J–111–95 

Printed for the use of the Committee on the Judiciary 

( 

(II) 

PATRICK J. LEAHY, Vermont, Chairman 

HERB KOHL, Wisconsin 

DIANNE FEINSTEIN, California 

RUSSELL D. FEINGOLD, Wisconsin 

CHARLES E. SCHUMER, New York 

RICHARD J. DURBIN, Illinois 

BENJAMIN L. CARDIN, Maryland 

SHELDON WHITEHOUSE, Rhode Island 

AMY KLOBUCHAR, Minnesota 

EDWARD E. KAUFMAN, Delaware 

ARLEN SPECTER, Pennsylvania 

AL FRANKEN, Minnesota 

JEFF SESSIONS, Alabama 

ORRIN G. HATCH, Utah 

CHARLES E. GRASSLEY, Iowa 

JON KYL, Arizona 

LINDSEY O. GRAHAM, South Carolina 

JOHN CORNYN, Texas 

TOM COBURN, Oklahoma 

BRUCE A. COHEN, Chief Counsel and Staff Director 

MATT MINER, Republican Chief Counsel 

SUBCOMMITTEE ON ANTITRUST, COMPETITION POLICY AND CONSUMER RIGHTS

HERB KOHL, Wisconsin, Chairman 

CHARLES E. SCHUMER, New York 

SHELDON WHITEHOUSE, Rhode Island 

AMY KLOBUCHAR, Minnesota 

EDWARD E. KAUFMAN, Delaware 

ARLEN SPECTER, Pennsylvania 

AL FRANKEN, Minnesota 

ORRIN G. HATCH, Utah 

CHARLES E. GRASSLEY, Iowa 

TOM COBURN, Oklahoma 

CAROLINA HOLLAND, Democratic Chief Counsel/Staff Director 

JACE JOHNSON, Republican Chief Counsel 

(III) 

C O N T E N T S 

STATEMENTS OF COMMITTEE MEMBERS 

Page 

Cornyn, Hon. John, a U.S. Senator from the State of Texas ............................... 2 

Kohl, Hon. Herb, a U.S. Senator from the State of Wisconsin ............................ 1 

Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont, prepared 

statement .............................................................................................................. 85 

WITNESSES 

Bush, Darren, Associate Professor of Law, University of Houston Law Center, 

Houston, Texas on behalf of the American Antitrust Institute ........................ 7 

McGee, William J., Consultant, Consumers Union, New York, New York ........ 9 

Smisek, Jeffery, Chairman, President and Chief Executive Officer, Continental Airlines, Houston, Texas .......................................................................... 6 

Tilton, Glenn F., Chairman, President and Chief Executive Officer, United 

Airlines, Chicago, Illinois .................................................................................... 4 

QUESTIONS AND ANSWERS 

Responses of Darren Bush to questions submitted by Senator Kohl .................. 29 

Responses of Bill McGee to questions submitted by Senator Kohl ..................... 36 

Responses of Jeffery Sisek to questions submitted by Senator Kohl .................. 40 

Responses of Glenn F. Titlon to questions submitted by Senator Kohl .............. 49 

SUBMISSIONS FOR THE RECORD 

Bush, Darren, Associate Professor of Law, University of Houston Law Center, 

Houston, Texas on behalf of the American Antitrust Institute, statement .... 55 

Cush, David, President & CEO, Virgin America Inc., Washington, DC, statement ...................................................................................................................... 73 

Lee, Sheila Jackson, a Representatives in Congress from the State of Texas, 

prepared statement .............................................................................................. 86 

McGee, William J., Consultant, Consumers Union, New York, New York, 

statement .............................................................................................................. 94 

Tilton, Glenn F., Chairman, President and Chief Executive Officer, Jeffery, 

Smisek, Chairman, President and Chief Executive Officer, United Airlines, 

Chicago, Illinois, joint statement ........................................................................ 101 

Woolfson, Aaron, TelSwitch Inc., Stockton, California, statement ...................... 112 

(1) 

THE UNITED/CONTINENTAL AIRLINES 

MERGER: HOW WILL CONSUMERS FARE? 

THURSDAY, MAY 27, 2010 

U.S. SENATE, SUBCOMMITTEE ON ANTITRUST, COMPETITION POLICY, AND CONSUMER RIGHTS, COMMITTEE ON THE JUDICIARY, Washington, DC. 

The Subcommittee met, pursuant to notice, at 2:15 p.m., in room 

SD–226, Dirksen Senate Office Building, Hon. Herb Kohl, Chairman of the Subcommittee, presiding. 

Present: Senators Kohl, Klobuchar, Hatch, and Cornyn. 

OPENING STATEMENT OF HON. HERB KOHL, A U.S. SENATOR 

FROM THE STATE OF WISCONSIN 

Chairman KOHL. Good afternoon to one and all. We welcome you 

here today. Our hearing today will examine the latest salvo in the 

recent wave of airline mergers, the merger between United and 

Continental Airlines. This merger will combine the two airlines 

that rank No. 4 and 6 in terms of domestic revenue into one of the 

world’s largest airlines. 

The two airlines’ CEOs claim that the deal was ‘‘built to pass’’ 

antitrust scrutiny because the two airlines’ routes do not overlap 

substantially and the low-cost carriers will constrain their ability 

to raise prices. However, fundamentally this merger will reduce the 

number of national network airlines. 

Two years ago we had six. After this merger we will have four. 

So we need to ask the question: At what point do we reach ‘‘a tipping point’’ for competition? 

At the outset, I should stress that we consider this merger with 

an open mind and do not reflexively oppose or support the merger. 

We are mindful of the difficulties faced by the airline industry 

today. In the last decade, the airline industry has faced unprecedented challenges from the devastating tragedy of 9/11 and crippling increases in fuel prices to bankruptcies and a drop in travel 

due to the economic downturn. 

We all have an interest in seeing a profitable airline industry so 

that hundreds of communities all across America can continue to 

see frequent and reliable air service so essential to economic 

growth. 

At the same time, we must recognize the problems also faced by 

air travelers today. Consumers are understandably frustrated by 

crowded flights, disappearing leg room, frequent delays, and puzzling prices. Once free services that passengers took for granted, 

2 

like checked bags, telephone reservations, and blankets and pillows, today are available only for a fee on most carriers. Is this decline in service an inevitable consequence of the industry’s need for 

profitability? 

So we must ask critical questions: How will the loss of competition between these two national systems impact airfares and service? Will a combined United/Continental be a stronger competitor 

to the previously merged Delta/Northwest? Or will the large network airlines remain dominant in the airline industry today across 

the country and internationally? Will the low-cost carriers be able 

to step in and fill the competitive void? Or will they feel less competitive pressures to keep fares low or compete by offering things 

like free checked bags? And how will small and medium-size cities 

fare after this merger at the very time that they most need frequent and inexpensive air service for their economic health? 

So at this point, we recognize that both you, Mr. Tilton, and you, 

Mr. Smisek, have a special duty to your shareholders to create the 

most viable and the most robust airline possible. This is the foundation of our free market economy. On this Subcommittee, however, we also have an additional responsibility, which is to the public: to protect consumers and to ensure that travelers are protected 

by true competition among airlines. 

We need to be sure that the announcement that we have all 

heard flight attendants say at the end of a flight, ‘‘We know that 

you have a choice among airlines,’’ does not become as obsolete as 

airlines like Northwest, TWA, PanAm, America West, and now perhaps Continental. 

Before asking Senator Cornyn for his remarks, I would like, 

without objection, to enter into the record the statement of Representative Sheila Jackson Lee of Texas. 

[The prepared statement of Ms. Jackson Lee appears as a submission for the record.] 

Chairman KOHL. Senator Cornyn. 

STATEMENT OF HON. JOHN CORNYN, A U.S. SENATOR FROM 

THE STATE OF TEXAS 

Senator CORNYN. Thank you, Mr. Chairman, for convening this 

important hearing. Last year, when I talked to Continental Airlines 

representatives about the possibility of a merger with United, we 

were told that it would not be good for Houston and that Houston 

and Cleveland would be some of the biggest losers in terms of jobs. 

Of course, at that time there was a different objective in sight. 

It was the Star Alliance which Continental pitched as an alternative to a merger. A merger, Continental explained then, was not 

in the best interest of its shareholders, employees, or the communities it serves. An alliance was an alternative, we were told, that 

would provide much of the benefit of a merger without the labor, 

integration, and financial risks. In arguing for membership in Star 

Alliance, Continental’s representatives told us that a merger would 

have a very negative impact on jobs in Houston where, of course, 

Continental is headquartered. 

Now we are hearing a different point of view. Continental wants 

to merge with United. Now Continental argues that a merger with 

United would benefit Houston in the long run because Houston will 

3 

be the largest hub for the largest airline in the world. I hope over 

time this forecast of long-term benefits to Houston comes true. But 

right now, three things appear to be clear. The 3,000 Texans who 

work for Continental in Houston are in jeopardy of losing their 

jobs. This risk extends further to the many contract workers and 

support personnel whose jobs depend on Continental’s Houston offices. Even if the hub expands, these headquarters jobs may well 

be gone. 

Second, the merger will have an impact—and I would like to 

hear from the witnesses on this topic, and the others that I have 

mentioned—on competition, especially with regard to routes to and 

from Houston. Mr. Smisek was kind enough to meet with me yesterday, and we talked a little bit about the issues I have just 

raised, as well as this one. But my information is—and certainly 

the witnesses are free to correct me if I am wrong—that the new 

United will be the only airline flying nonstop from Houston’s Bush 

Intercontinental Airport to Washington, D.C., Los Angeles, and San 

Francisco. On each of these routes, the merger eliminates a competitor and leaves Houston-based travelers with fewer choices. 

And I cannot help but ask—and I would love to hear the witnesses’ testimony—why the decision was made to move the corporate headquarters to Chicago. There is a certain well-known 

Chicagoan who now lives and works in Washington, D.C., down at 

the other end of downtown. But I look at Houston, and Houston 

has a lower tax rate, lower commercial real estate costs, lower costs 

of living, and certainly a business-friendly environment. And so I 

would be interested to hear the considerations that were in play in 

determining that the corporate headquarters of a merged United 

and Continental would leave Houston and go to Chicago. 

Of course, Continental has a proud history as a Houston-based 

airline, and I hope the airline’s deep ties to Houston survive this 

merger. I look forward to working with my colleagues to minimize 

any harm that this merger does to airline competition and, thus, 

the consumer in terms of the price they pay for tickets. We will 

look to ameliorate and minimize the impact on the airlines’ employees if at all possible. I would be interested in your proposals to do 

that from your perspective. And certainly I am interested in avoiding and minimizing any harm this may do to the Texas economy. 

Our unemployment rate in Texas is 8.2 percent. We are grateful 

that it is not as high as the national average, but the prospect of 

seeing Texans unemployed as a result of this merger is not a happy 

one. 

Thank you, Mr. Chairman. 

Chairman KOHL. Thank you very much, Mr. Cornyn. 

We would like now to introduce our panel of distinguished witnesses. Our first witness to testify will be Glenn Tilton. Mr. Tilton 

is chairman, president, and chief executive officer of United Airlines. Before joining United in September of 2002, Mr. Tilton was 

vice chairman of the board of directors of Chevron Texaco. 

Next we will be hearing from Jeffery Smisek. Mr. Smisek is 

chairman, president, and chief executive officer of Continental Airlines. In 1995, he left private practice at Vincent and Elkins and 

joined Continental Airline as senior vice president and general 

counsel. 

4 

Next we will be hearing from Professor Darren Bush. Professor 

Bush is an associate professor of law at the University of Houston 

Law School, and he has written and consulted extensively on issues 

concerning the intersection of antitrust and regulated industry. 

Finally, we will be hearing from Bill McGee. Mr. McGee is a consultant on travel investigations for Consumer Reports and other 

Consumers Union publications. He is former editor-in-chief of Consumer Reports’ travel letter and has received numerous awards for 

his journalism work. 

Let me ask all of our witnesses now to stand, raise your right 

hand as I administer the oath of office. Do you affirm that the testimony you are about to give before this Committee will be the 

truth, the whole truth, and nothing but the truth, so help you God? 

Mr. TILTON. I do. 

Mr. SMISEK. I do. 

Mr. BUSH. I do. 

Mr. MCGEE. I do. 

Chairman KOHL. Thank you. 

First we will be hearing from Mr. Tilton. 

STATEMENT OF GLENN F. TILTON, CHAIRMAN, PRESIDENT 

AND CHIEF EXECUTIVE OFFICER, UNITED AIRLINES, CHICAGO, ILLINOIS 

Mr. TILTON. Thank you very much, Chairman Kohl, Senator Cornyn, members of the Subcommittee. I appreciate the opportunity to 

testify today on the merger of my company, United Airlines, and 

Continental Airlines. 

Our merger creates a more viable and sustainable enterprise at 

a time when the status quo for this industry is clearly unacceptable. Strong U.S. commercial aviation will be a key enabler of our 

country’s economic recovery. As leaders, we know well the role that 

aviation plays nationally and in the communities that you represent in creating and driving commerce and tourism, jobs and contributing to the national economy. 

That said, for an industry that plays such an important role, we 

are, nevertheless, an industry with losses of some $60 billion and 

150,000 jobs in the last 10 years, delivering the worst financial performance of any major industry in the United States over the last 

30 years. 

Both before and after deregulation, the industry has been systemically incapable of earning even a modest profit, let alone a reasonable return on the significant investment we have made in aircraft, facilities, and technology. In this 30-year period, the industry 

has suffered 186 bankruptcies, with devastating impact on employees, investors, and suppliers, and the communities we serve. 

One thing upon which we can likely agree regardless of our differing perspectives, serial bankruptcies is not an acceptable industry strategy. We must create economic sustainability for this industry through the business cycle. Our objective at United has been 

consistent: to put our company on a path to sustained profitability. 

Without profitability, we cannot provide a stable environment for 

employees. Without profitability, we cannot grow or maintain service to communities, large or small. We cannot invest in customer 

service, nor can we create value for shareholders. To be profitable, 

5 

we must successfully compete in the global marketplace of today, 

not the market of 10 years ago, not the market of 20 years ago, and 

certainly not the market of 30 years ago. 

Domestic competition has intensified, and low-cost carriers are 

today very well established. Southwest Airlines will continue to be 

the country’s largest airline in terms of passengers after our merger. Consumers will continue to benefit from the prevalence of lowcost carriers and fare transparency that ensures intense, fierce 

competition across this industry. 

International competitors have merged, and powerful new entrants continue to gain ground. Just 10 years ago, the world’s two 

largest airlines measured by revenue were American and my company, United. Using that same measure, the largest airlines today 

are Lufthansa and Air France/KLM, with more than half of all 

trans-Atlantic capacity and more than two-thirds of all trans-Pacific capacity being served by foreign carriers. 

Our two companies, United and Continental, have taken significant action to improve our performance in this highly competitive 

environment. As network carriers, we provide service and compete 

in both the international and the domestic market, and at the same 

time connect small communities into our route networks. We are 

realigning our base businesses to better match current and future 

market realities, using every opportunity at our disposal to 

strengthen our companies by maximizing our existing alliance and 

our international joint ventures. 

Our proposed merger is an important and, indeed, a logical next 

step toward profitability. Building on our improved base businesses, our combined airline will continue to operate more efficiently, better manage costs, and realize market opportunities by 

fully optimizing our nearly 700 aircraft across our combined network. 

Carriers compete vigorously on both price and on service, and 

our merger does not change this reality. Over the last decade, ticket prices have declined, adjusted for inflation, by some 30 percent, 

with fares to small communities also declining. The revenue 

synergies we expect to achieve from this merger are driven by better service and our combined expanded network. They are not 

based on fare increases. This is excellent value for consumers who 

now have more access to more destinations across the globe. 

Importantly, our merger enhances and strengthens service to 

nearly 148 small communities and metropolitan areas. The expanded network will provide collateral economic benefit for those 

communities and will result in better travel options for consumers 

who rely on our networks. Low-cost carriers have not traditionally 

served these important communities. 

The global commercial aviation business has fundamentally 

changed, and that means that we must evolve to continue to be 

globally relevant and provide connectivity for the many customers 

in the communities that we serve. 

When Jeff and I announced our merger earlier this month, perhaps Chicago’s Mayor Daley said it best when he endorsed our 

transaction by saying, and I quote, ‘‘That is what this merger is all 

about. You respect the past, you understand the present, but you 

always look to the future.’’ 

6 

Thank you very much for the opportunity to testify, Mr. Chairman. 

[The prepared statement of Mr. Tilton appears as a submission 

for the record.] 

Chairman KOHL. Thanks a lot, Mr. Tilton. 

Mr. Smisek. 

STATEMENT OF JEFFERY SMISEK, CHAIRMAN, PRESIDENT 

AND CHIEF EXECUTIVE OFFICER, CONTINENTAL AIRLINES, 

HOUSTON, TEXAS 

Mr. SMISEK. Thank you, Chairman Kohl and Senator Cornyn. I 

want to also thank this Committee for the opportunity to discuss 

this merger. 

I want to make four basic points. This merger is good for employees, it is good for communities, it is good for consumers, and it is 

good for competition. Let me start by talking about employees first. 

The volatility and instability of the airline industry have had 

harsh effects on employment. Before 9/11, Continental had over 

54,000 employees. Despite being the only carrier to have grown, the 

only network carrier to have grown since 9/11, we have less than 

41,000 employees today, and we have lost over $1 billion. And 

United, United had over 100,000 employees before 9/11 and has 

about 46,000 employees today. 

After we merge, our employees will be part of a larger, financially stronger, and more geographically diverse carrier. This carrier will be better able to compete in the global marketplace and 

better able to withstand the external shocks that hit our industry 

with disappointing regularity. 

Because of how little we overlap, the merger will have minimal 

effects on the jobs of our front-line employees. We are committed 

to continuing our cooperative labor relations and to integrating our 

workforces in a fair and equitable manner and negotiating contracts with our unions that are fair to the employees and fair to 

the company. 

United has two union members on its board of directors, and the 

board seats allocated those unions will remain when we combine 

the companies. 

The merger will also enable us to continue to provide service to 

small communities—communities that you represent. 

The turmoil in our industry has been devastating to many small 

and medium-size communities. As you know, low-cost carriers have 

not and will not serve small communities as such service is inconsistent with their point-to-point business models that rely largely 

on local traffic. As a result, over 200 small communities are served 

only by network carriers. As a merged carrier, we plan to continue 

to provide service to all of the communities we currently serve, including 148 small communities. 

This merger will be good for consumers as well. The combined 

airline will offer consumers an unparalleled integrated global network and the industry’s leading frequent-flyer program. It will 

have the financial wherewithal to invest in technology, acquire new 

aircraft, invest in its people, and invest in its product. We will have 

a young and fuel-efficient fleet, and our new aircraft orders will 

permit us to retire older, less fuel efficient aircraft. 

7 

Continental brings to the merger its ‘‘working together’’ culture 

of dignity and respect and direct, open, and honest communication. 

This culture creates a workplace where people enjoy coming to 

work every day and, therefore, deliver great service. United brings 

to the merger talented employees who are delivering industry-leading on-time performance. 

The merger will also enhance competition. Continental and 

United have highly complementary networks, creating over 1,000 

new domestic connecting city pairs, expanding integrated network 

service to hundreds of destinations, and improving access and services to millions of consumers. Our networks are so complementary 

that we have only minimal nonstop overlaps, each of which faces 

significant competition after the merger. Additionally, over 85 percent of passengers traveling nonstop on either Continental or 

United in the U.S. today have a direct low-cost carrier alternative. 

Moreover, low-cost carriers compete at all of our hubs and at airports adjacent to our hubs, like Hobby and Midway. 

As a result of the robust competition in the U.S., airline fares 

have declined by more than 30 percent over the past 10 years on 

an inflation-adjusted basis. We also face significant competition 

from foreign air carriers, which themselves have merged to create 

attractive global networks, such as Air France/KLM, the Lufthansa 

group of companies, and British Airways/Iberia. 

The merged Continental/United will enable us as a U.S. carrier 

to provide enhanced competition against these large foreign airlines. In sum, the merger will create a strong, financially viable 

airline that can offer good-paying careers and secure retirement to 

our co-workers, great customer service and an unparalleled network to consumers, and reliable service to communities. The merger will provide us with a platform for sustainable profitability and 

position us to succeed in the highly competitive domestic and global 

aviation industry, better positioned than either airline could be 

alone or as members of an alliance. 

Thank you very much. 

[The prepared statement of Mr. Smisek appears as a submission 

for the record.] 

Chairman KOHL. Thank you very much, Mr. Smisek. 

Mr. Bush. 

STATEMENT OF DARREN BUSH, ASSOCIATE PROFESSOR OF 

LAW, UNIVERSITY OF HOUSTON LAW CENTER, HOUSTON, 

TEXAS, ON BEHALF OF THE AMERICAN ANTITRUST INSTITUTE 

Mr. BUSH. Thank you, Mr. Chairman, Senator Cornyn from the 

great State of Texas in which I reside, and other distinguished 

members of the Committee. I want to thank you for giving me the 

opportunity today to speak about the potential anticompetitive of 

the proposed merger of United and Continental. I speak today on 

my behalf and on behalf of the American Antitrust Institute, but 

not on behalf of the University of Houston. And I speak in my capacity as a former trial attorney at the Antitrust Division of the 

Department of Justice, as an economist, and as a law professor who 

has studied this industry extensively. 

8 

It has been approximately 2 years since the Committee held a 

similar hearing on the merger of Delta Air Lines and Northwest 

Airlines. Since that hearing, little has changed for the better in 

this industry, except that the pressure to consolidate has increased 

in the wake of this previous merger, and the pending transaction 

reflects what I believe to be the start of yet another merger wave. 

Rather than rehash my written testimony, I want to signal to 

you not the things that might be problematic with the merger specifically, but also more broadly things that are problematic in 

bringing an antitrust case against any transaction, any merger before a court. 

With any merger, the ultimate question posed by the Department of Justice or the Federal Trade Commission is whether the 

proposed merger will harm consumers. The analysis is far more 

complex, but the gist is to determine whether there is anticompetitive harm and whether or not anything about the transaction or 

the nature of the industry mitigates that harm. 

With respect to the anticompetitive harms in the airline industry, we typically examine nonstop city-pair markets, typically 

routes between the hubs of the merging airlines. Here you will see 

reductions in service from three to two and in many instances two 

to one. In those instances, consumers face a monopoly, no choice, 

restricted output, increased fares. 

I understand the notion taken from the great antitrust case, U.S. 

v. Philadelphia National Bank, that speculative benefits in international markets do not cure domestic anticompetitive conduct. 

There is also an effect of the merger on competition in connection 

markets. For example, connections from origins or destinations east 

of Colorado in the Midwest to east coast destinations may only 

have as reasonable connection options the hubs of the merging 

firms and the hubs of Northwest and Delta. This means that the 

connection markets in the Midwest are already constrained or are 

increasingly going to be constrained. 

In many instances, United will be—or is currently a potential 

competitor to Continental. One example might be the nonstop service from Intercontinental to LAX, which United currently does not 

serve. However, United serves as an important disciplinary mechanism even if it does not currently service that route because it 

could potentially serve that route, therefore disciplining fares within the market. 

Air passenger service may also be diminished. Northwest’s merger with Delta already served to reduce the number of systems from 

which customers can choose. This merger may create or enhance 

dominance at many cities throughout the United States, including 

Newark, Houston, Chicago, L.A., Washington, Denver, and Cleveland. Competition for millions of passengers traveling to and from 

these cities may decrease, resulting in higher fares or reduced service. In many instances, low-cost carrier competition does not reduce 

that concentration or mitigate it in any way. As we have seen from 

many instances in the airline industry, there is a potential for retaliatory strikes against low-cost carriers when they enter major 

hubs. 

These issues, at least as raised in the DOJ’s excellent press release in the U.S. Airways investigation, are fully understood by 

9 

agency staff. I reserve judgment as to whether such issues are fully 

understood by the current administration. It is not clear whether 

the prior administrations understood them given the free pass received by the Northwest/Delta merger. In its press release in 

Northwest/Delta, the DOJ stated that ‘‘two airlines currently compete with a number of other legacy and low-cost airlines in the provision of scheduled air passenger service on the vast majority of 

nonstop and connecting routes where they compete with each 

other.’’ The implication of this statement was that in some markets 

there would be a substantial loss of competition, but the DOJ statement never identified how many or which markets were to be sacrificed for the sake of these proclaimed efficiencies. 

The press release continued: ‘‘In addition, the merger likely will 

result in efficiencies such as cost savings in airport operations, information technology, supply chain economics, and fleet optimization.’’ And ‘‘Consumers are also likely to benefit from improved 

service made possible by combining under single ownership the 

complementary aspects of the airlines’ networks.’’ 

This does not tell us anything about the basis upon which the 

DOJ rendered its decision. It does not tell us anything about what 

anticompetitive markets were examined. It only talks about the 

speculative nature of efficiencies. In that sense, efficiency seems to 

be king in the airline industry and in antitrust without regard for 

anticompetitive effects. 

I would like to continue this discussion about that. I know my 

time has expired. 

[The prepared statement of Mr. Bush appears as a submission 

for the record.] 

Chairman KOHL. Thank you, Mr. Bush. 

Now we will hear from Mr. McGee. 

STATEMENT OF WILLIAM J. MCGEE, CONSULTANT, 

CONSUMERS UNION, NEW YORK, NEW YORK 

Mr. MCGEE. Thank you, Chairman Kohl, Senator Cornyn, members of the Committee. I appear before you today as a consultant 

on travel and aviation issues for Consumers Union, the nonprofit 

publisher of Consumer Reports. I thank you for the opportunity to 

express our deep concerns about the proposed merger between 

United Airlines and Continental Airlines. 

When the U.S. airline industry received a $5 billion bailout in 

2001, it was argued that airlines were essential to America’s economy, infrastructure, security, and defense. Consumers Union 

agrees. Yet what we have been witnessing is an incredibly shrinking airline industry. With this merger, in less than 20 years, we 

will have seen the demise of seven major brands in the United 

States: PanAm, Midway, Eastern, TWA, America West, Northwest, 

and now Continental. 

While others can speak to adverse effects on labor, the travel and 

tourism industries, and a host of suppliers, I will focus my comments on the potentially adverse effects upon passengers. 

In February 2001, the General Accounting Office reported on airline consolidation and identified several potential threats to consumers. We cannot fully predict with absolute certainty how the 

United/Continental merger ultimately would affect consumers, but 

10 

we can examine the recent historical record to see how passengers 

were affected by American’s acquisition of TWA’s assets in 2001, 

U.S. Airways’ reverse merger with America West in 2005, and Delta’s acquisition of Northwest in 2008. 

Unfortunately, the record for consumers is not good. We have 

identified key problems that emerged. More details are available in 

my written testimony. 

One, less choice and fewer flights. Historically, we have not seen 

a merger among major carriers that has not led to reductions in 

service. United/Continental states it will maintain ten hubs, eight 

of them in the continental United States. What we do know is that 

other mergers between major airlines eventually led to hub closures and flight reductions, despite promises to the contrary. Consider that TWA’s former hub in St. Louis saw a reduction in total 

passenger traffic from 23 million in 2002 to 12 million in 2009. 

America West’s former hub in Las Vegas has shrunk as well. And 

although the full effects of the Delta/Northwest merger have yet to 

be seen, Delta’s hub in Cincinnati is already experiencing cutbacks. 

Meanwhile, consumers on many routes are losing the opportunity 

to ‘‘vote with their feet’’ where there is no effective competition. 

Two, loss of service. It seems apparent the United/Continental 

merger would mean some cities, particularly smaller cities, would 

lose nonstop air service, if not all air service. The more mega mergers that are approved, the higher the probability that additional 

cities will lose service. 

Three, higher fares. A July 2008 report from the GAO concluded 

that mergers and acquisitions can be used to generate greater revenues through fare increases. Some analysts argue low-cost carriers 

will fill the void; but, A, there is no guarantee they will do so; and, 

B, even when a low-cost carrier enters a former hub, prices fall 

only on selected routes, not on all routes. 

Four, reductions in service quality. Airline mergers tend to be 

contentious. In this case it involves two mature companies. United 

was founded in 1926 and Continental in 1934. So, therefore, a 

clash of corporate cultures is virtually guaranteed, particularly 

after layoffs. These sterile corporate terms—downsizing, rightsizing, outsourcing, offshoring, furloughing—really mean two 

workforces will experience more trauma and jockeying for position 

on blended seniority lists. Inevitably, this will lead to employee morale issues and slowdowns due to melding of policies, procedures, 

and technologies. 

Five, fewer startups. Greater concentration of market share has 

a negative effect, according to a 2001 DOT report that noted instances in which incumbent airlines drove new entrants out by cutting fare and flooding the market with capacity, only to later increase fares and reduce service. 

Six, less resistance. Since deregulation in 1978, we have repeatedly seen how one major carrier will initiate a fare increase and 

then watch if rivals will match. If enough key players resist, then 

the fare hike will be withdrawn. This same principle has applied 

to introducing airline fees. In a smaller industry with fewer players, the likelihood of an arrival carrier resisting a new fee or airfare increase will dissipate. 

11 

Seven, widespread disruptions. With greater concentration, the 

United States faces a much greater threat of travel disruptions. 

Imagine the nationwide effects of a labor action or FAA grounding 

at a combined United/Continental, which analysts estimate would 

control nearly a fifth of all domestic airline seats. Even a 24-hour 

loss of service would have severe consequences. 

Eight, too big to fail. Just as we have seen with banking and 

other businesses, we are now seeing the airline industry evolving 

into an oligopoly of 800-pound gorillas. Those who previously decried any form of assistance to financially struggling carriers would 

reverse that argument, claiming a mega carrier such as United/ 

Continental would be too big to fail. And they will be right. A shutdown would have immediate and adverse effects throughout the 

country. 

Nine, raising the stakes. Since the approval of the Delta/Northwest merger, some proponents of the United/Continental merger 

argue that fair is fair. That is why executives from American Airlines may soon appear before this very Committee seeking a merger with U.S. Airways, which, of course, just merged with America 

West in 2007. Ironically, this sudden leapfrogging in the airline 

ranks has not been due to genuine growth but to reductions in 

service. It seems only fair to ask what the end game is here. At 

what point will this merger mania subside? 

Today we are told the domestic airline industry can only support 

three large network airlines. How long before we are told that 

number has been reduced to one? Before further consolidation is 

approved, Consumers Union feels there should be more discussion 

about the airline industry’s ultimate goals and how those goals affect U.S. consumers. 

Thank you. 

[The prepared statement of Mr. McGee appears as a submission 

for the record.] 

Chairman KOHL. Thank you very much, Mr. McGee. We will now 

conduct a round of questioning of 8 minutes before I turn to other 

Senators. 

Mr. Tilton, United’s proposed merger with Continental is the second major airline merger in the last 3 years. In 2008, Delta and 

Northwest Airlines merged, and many industry observers are now 

predicting that another one perhaps between American and U.S. 

Airways may soon follow. So what were once six major network airline competitors at the beginning of 2008 will now be four, perhaps 

someday soon only three. Consumers may be left with little or no 

competition on many routes, with the remaining large airlines 

carving up the country. 

In your view, Mr. Tilton, what is the minimum number of legacy 

airlines necessary for a competitive market? Is it three? Is it two? 

Is it one? What is the tipping point, Mr. Tilton? 

Mr. TILTON. Thank you very much, Chairman Kohl, for the question. I think that the term ‘‘legacy airline’’ is instructive. Legacy 

airlines are working hard to get to the point where we are no 

longer referred to as legacy anything. This is an industry that is 

in need of innovation. It needs to embrace change. 

I do not know what the disposition of strategy will be for either 

of those two companies. I know that certainly they have both said 

12 

the consolidation would be of benefit to the industry as a whole. 

One of those two companies has said, I think quite clearly, that 

they do not perceive the need to be part of the merger activity. The 

other has said that it may well be a benefit to them. I think that 

the Senators know that our company was engaged in conversations 

with that particular company prior to the re-engagement of conversations with Continental. 

I think it is left really to the strategy and discretion of the individual company and the hubs that they serve. This is a hyper-competitive business with very, very low barriers to entry. New entrants such as Virgin America or JetBlue are being created where 

opportunity is perceived to exist in this industry on a continual 

basis. I suspect that given the opportunity for aircraft manufacturers to put their product into service, into this marketplace, they 

will continue to do so. In the event of the failure of one of those 

new entrants, the assets are simply moved on into the possession 

of another airline, which is a unique quality of this business. 

So I do not think that there is any worry here that competition 

is going to be lessened by the combination of two companies who 

do not overlap in the main and are committed to using the combined network to increase frequency of service rather than reduce 

it. 

Chairman KOHL. Mr. Bush, what is your opinion about Mr. 

Tilton’s argument that this merger will have no negative impact in 

terms of competition and prices and quality of service? How do you 

feel about that? 

Mr. BUSH. Not too well, Mr. Chairman, and here is why. I think 

that you cannot discount the competitive effects, even in the number of markets where you do have hub-to-hub service. You will be 

restricted to one carrier in many cases, two carriers in another. I 

think of the slogan of Aeroflot, the monopoly airline in the Soviet 

Union: ‘‘You have made the right choice.’’ There is only one choice 

here for consumers. 

I also take with great skepticism the notion that this merger will 

enhance efficiencies in any way. We have had consolidation in this 

airline industry for quite some time, and we have not seen any 

change. Instead, what we have is a cycle of economic violence 

where we start with a merger which leads to some sort of economic 

crisis, then some sorts of bankruptcies, followed by further consolidation, and the proclamations that there will be greater efficiencies. 

If you continue to do the same thing over and over again and it 

does not produce any different results, then why do we expect that 

it is going to be better next time? It is like two people getting married with high credit card debt thinking that getting married will 

create some efficiencies yet will somehow change their pattern of 

behavior. That is not innovation. 

I also do not think that low-cost carriers will mitigate any of the 

anticompetitive effects of this transaction for several reasons. One, 

we have a history in this airline industry of low-cost carriers entering routes and the majors adding capacity and reducing fares and 

the low-cost carriers scurrying away. With rare exception, low-cost 

carriers are not all that great at entering hub-to-hub routes and 

quite rightfully fear, and so do the financers who back these LCCs. 

13 

We also should note a great question for the Department of 

Transportation. What does it take to be an LCC? There is a great 

deal of startup costs. Six months’ operating losses have to be on 

hand. You have to have cash on hand. You have to secure the 

planes, train the pilots, get the gates. Low-cost carrier entry is not 

easy and will not mitigate the anticompetitive effects of this transaction. 

Chairman KOHL. Mr. Tilton, in your press release when you announced the merger, you estimated that the merger would result 

in net annual savings by 2013 in the amount of $1 to $1.2 billion, 

including between $800 and $900 million in incremental annual 

revenues and $200 to $300 million in net cost synergies. On the 

revenue side, Mr. Tilton, your testimony says that the $800 to $900 

million in increased revenues will not come from higher fares, so 

where will you get that $800 to $900 million of additional revenue? 

Mr. TILTON. It will come from the network efficiencies that Mr. 

Bush suggests do not exist. When we combine our two networks together and then apply our 700 aircraft optimally to that network, 

we are able to gain significant efficiency from the difference between our two fleets. If Jeff and his company are flying a 757 on 

a route that would be better served if it were regauged up to a 767, 

we have the 767 in our fleet and Jeff does not have it in his, then 

the flexibility that we gain by being able to use that aircraft in a 

better service for that particular hub is part of the synergy creation 

across our network. 

We simply bring these two networks together. We combine the 

fleets. We optimize the use of the fleets. We take those aircraft in 

both our regional service and our mainline service, and we are able 

to fly those aircraft to communities that one of us serves rather 

than the other in an optimal way. And it simply is a flexibility or 

an efficiency, Senator, that we do not have today independent of 

one another. 

Chairman KOHL. I hear what you are saying and it may be true, 

but those are savings. That is not a revenue increase. 

Mr. TILTON. Well, it is revenue the way that we account for. We 

account for revenue, so it may be an efficiency in the revenue performance of the airline, but it is not a cost reduction. It is an efficiency improvement or enhancement to the network, nor is it a fare 

increase. 

Chairman KOHL. I would like to turn now to the Ranking Member on this Committee, Senator Orrin Hatch from the State of 

Utah. 

Senator HATCH. Well, thank you, Mr. Chairman. 

For Mr. Tilton and Mr. Smisek, when evaluating any airline 

merger, the first and most obvious question from the antitrust perspective is whether the merger will result in an increase in fares 

or a reduction in flights. I would like to take a moment to focus 

on the latter, the number of flights. 

According to your statements, a merged airline will maintain ten 

domestic hubs. Is that right? 

Mr. SMISEK. We will have eight mainland domestic hubs, Senator. 

Senator HATCH. OK. Some have argued that this approach will 

simply not be cost-effective and that at some point one or more of 

14 

these hubs will be downgraded, eliminating options for the consumers in those markets. Now, this is particularly likely if there 

are market redundancies between the two hubs. The scenario that 

sticks out the most and has gotten the most attention is the potential overlap between the Cleveland and Chicago hubs. 

Is it unreasonable to argue, as some have, that the Cleveland 

hub will see a reduction in service due to its proximity to the Chicago hub? And what about the Newark and Washington hubs as 

well? 

Mr. SMISEK. Well, let me address that, if I could. I think the best 

way to look at this is how those hubs would fare if we were not 

to do the merger and let me use Continental as an example. We 

have built over the years a carrier of which I am greatly proud. I 

think we do a very good job, and we get awards for greater customer service. We are, however, Senator, eking out a hand-tomouth existence, and as far out as I can see, we will continue to 

eke out a hand-to-mouth existence. By merging with United, we 

will be creating a carrier that, with the network we will have, 

which is fundamentally not overlapping, the ability for us to attract 

and retain business travelers and general consumers as well and 

our frequent flyer program, we can create a carrier that will have 

a future and a future profitability, which is good for communities 

and good for us to be able to continue air service. 

With respect to Cleveland, I know how important good air service 

is to the city of Cleveland. I have met with Mayor Jackson. It used 

to be my OLI city where I used to go up and do relations between 

Continental and Cleveland. I know the community well; I know the 

people well. I know how important the air service is. And we will 

continue to provide good air service to every community that we 

currently serve. 

The future air service is going to be dependent not on us but on 

demand. And if you can tell me where the economy is going or you 

can tell me what external shocks we will suffer, then I can help 

predict that. But it is very difficult to know that at this point. We 

are always responsive to demand. We work very closely with local 

officials, with local businesses, particularly in Cleveland, because 

we want to continue to generate the demand that will permit us 

to continue to provide high-quality air service to Cleveland. 

Senator HATCH. Well, I can tell you right now, if we keep spending like we are here in Congress, the economy is going to go into 

the—I do not want to say it, but it is not going to go into a good 

position, we will put it that way. 

Did you have any comments, Mr. Tilton. 

Mr. TILTON. I would simply say, Senator Hatch, that the domestic hubs for United—Dulles and Chicago, Denver, San Francisco, 

Los Angeles—are extraordinarily important markets. Depth of 

market is important for any hub to continue to be a hub. Those 

markets have significant business travel demand in them, so I do 

not think there is any jeopardy whatsoever to those hubs, including 

the Dulles hub, Senator, that has done remarkably well for United 

Airlines since our restructuring. 

Senator HATCH. OK. Mr. Bush, in your testimony, you argued 

that the entry of low-cost carriers into airline markets is unlikely 

to mitigate the negative impact this merger will have on competiVerDate Nov 24 2008 12:37 Oct 26, 2010 Jkt 061688 PO 00000 Frm 00018 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\61688.TXT SJUD1 PsN: CMORC
15 

tion. I would like to explore that just a little further because, as 

I understand it, the market share of low-cost carriers has almost 

doubled in the last 12 years, moving from less than 20 percent in 

1998 to almost 40 percent today. Indeed, their share of the market 

has grown steadily without any significant decline or even plateau. 

Now, this has taken place even as the airline industry has become more consolidated. If that trend continues, it seems fair to me 

to assume that low-cost carriers will eventually and at a time in 

the not too distant future control a majority of the market. Now, 

if that is correct, isn’t it reasonable to conclude that competition, 

particularly the price competition that the networks receive from 

low-cost carriers, will negate many of the harms you and others 

have predicted about this and other network airline mergers? Or 

are you arguing that the penetration of low-cost carriers into the 

market will soon be on the decline if more consolidation takes 

place? 

Mr. BUSH. I will answer that with a simple yes, I am arguing a 

bit of both. Here is the issue: The issue is that when low-cost carriers enter markets, with rare exception they are not looking to 

take on hubs. They are looking for easier-out airports, like Midway. 

Southwest makes it a moment of pride to say we are not going to 

go into congested airports. When you have time-sensitive passengers, typically business passengers, they prefer certain airports 

to others, and in that sense they will not choose the low-cost carrier. 

Certainly in certain hubs low-cost carriers have made entry. The 

big story in the airline industry is AirTran at Atlanta, and what 

the airline industry learned from that, if you are—sorry—a legacy 

carrier, is, Oh, my goodness, that cannot happen to us. We cannot 

have a low-cost carrier right next to us as a side-by-side hub carrier. And airlines that are legacy carriers take great pains to avoid 

that kind of issue by capacity responses, pricing responses. They 

have frequent flyer programs. The larger the network, the easier 

it is to drive out low-cost carrier competition. 

Senator HATCH. Do either you, Mr. Tilton or Mr. Smisek, have 

any—— 

Mr. TILTON. I suspect, Senator Hatch, that Southwest Airlines, 

were they here, would likely take some exception to the characterization of their growth strategy as it has been described by Mr. 

Bush. As I said, they are the largest carrier in the United States. 

After our merger, they will still be the largest carrier in the United 

States today. And in sharp contrast to legacy carriers, they have 

shown a steady, steady pattern of growth. They have shown an 

ability to accommodate change in their strategy. They are building 

a more complex proposition to customers, which includes frequent 

flyer and loyalty schemes and even connections to international 

carriers, both North and South, with codesharing ventures with 

Mexico and Canada. 

They compete in L.A., one of our important strategic hubs, in a 

very vigorous way, I would suggest to Mr. Bush, and they continue 

to grow in a very satisfactory way for them in an important hub 

for us—in Denver. 

Chairman KOHL. Go ahead, Senator Hatch. 

16 

Senator HATCH. I can only be here—I have to get to the Intelligence Committee, but let me just ask one last question. It is fairly 

long, but I would like to ask to Mr. Tilton and Mr. Smisek. It is 

something that concerns me. 

Mr. Bush and others have argued that further consolidation 

among the network carriers could negatively impact downstream 

and upstream markets specifically among those industries that 

compete to provide products and services to airlines. I would like 

to hear your response to those arguments, and to paraphrase the 

argument, because airlines tend to contract with outside vendors 

and suppliers for a number of services, those vendors will see their 

bargaining power reduced if there are fewer purchasers on the 

market. 

In his written testimony, Mr. Bush mentioned the possibility of 

the new merged airline exerting undue pressure to extract favorable terms from the air travel websites like Orbitz or Expedia. You 

could presumably add vendors like food services, equipment manufacturers, and others to the mix, I suppose. It seems intuitive that 

eliminating buyers in these markets, which is what happens when 

these mergers take place, can harm competition. 

Are these legitimate concerns? And I would just ask you why and 

why not. 

Mr. TILTON. So, Senator Hatch, this is an industry that has lost some $60 billion over the last 10 years. It is an industry that envies the margins that the vendors that Mr. Bush is worried about 

have for their businesses. I am always a little surprised at the presumption of power that is ascribed to a business that has suffered 

186 bankruptcies since deregulation and is having a difficult time 

paying its economic rent. 

Any sharing of our expenses that I could get from our vendors 

beyond that which I already have I will vigorously pursue, and I 

doubt very seriously that it will go to the viability of those vendors. 

Senator HATCH. Thank you. 

Thank you, Mr. Chairman. 

Chairman KOHL. Thanks, Senator Hatch. 

Senator Klobuchar. 

Senator KLOBUCHAR. Thank you very much, Chairman. Thank 

you for holding this hearing. Two years ago, I remember I was not 

yet on this Committee, but you allowed me to sit in and ask questions on the hearing about the Northwest and Delta merger. And 

during those hearings, we discussed how that merger would decrease competition, our concerns about that merger. I cared a lot 

about it since Northwest Airlines is in my home State—was in my 

home State. And I remember part of the discussion we had during 

that hearing was that that merger could usher in a wave of consolidation in the aviation industry. And I think that that prediction— 

I remember making it at that hearing—appears to be head on. And 

so my focus today is really going to be about two things that matter 

to people. One is fares and one is jobs. 

And I wanted to start, I suppose, with you, Mr. Tilton and Mr. 

Smisek. One of the advantages that has been sold about this merger is that there is no overlap between your flight networks. This 

is what you have said. Even so, I think Mr. Bush has talked about 

the effect that this could have on consumers, elimination of flights, 

17 

decreased services, and potentially increased fares as we have less 

competition. Could you comment on that? 

Mr. TILTON. In our opening statement, Senator, we both mentioned that this merger is not predicated or calculated on fare increases. The benefits of this merger are efficiencies that we would 

gain by combining our networks and being able to use our combined 700 aircraft more flexibly across the combined network, a 

fleet that we cannot now share, and that includes actually the deployment of our regional jet contracts as well. 

So from a fare increase perspective, as Jeff said in answer to a 

previous question, this is an intensely, fiercely competitive industry, regardless of what you might hypothesize—— 

Senator KLOBUCHAR. But don’t you think there are certain parts 

of the country where there is less competition where you do not see 

the benefits of this competition and you have higher fares? 

Mr. TILTON. Well, from the perspective of my company, Senator, 

we are competing across our network by Southwest Airlines and 

low-cost carriers to the tune of about 85 percent of the total network. So we are disciplined on fare increase possibilities very effectively by competition. So there is not an instance across our hubs. 

There is not an instance—and I think the financial record of the 

industry clearly shows this—where we have significant pricing 

power at our sole discretion. 

Senator KLOBUCHAR. Mr. Bush, do you want to comment on this 

about the fares? I just tend to see that in a lot of our rural areas 

or towns that tend to be more dominated by one airline. As we get 

more and more consolidation, we get less fare competition and 

higher fares. 

Mr. BUSH. That is precisely correct, Senator. When you have— 

and this is why I mentioned the issue with connection markets as 

well. These smaller communities are not ones that are typically 

going to be served by low-cost carriers, for example. Those will not 

mitigate the market power that would be inherent in these connections, and in particular in certain city pairs, hub-to-hub markets as 

well. 

The other issue is that when we had this hearing a couple years 

ago about Northwest/Delta, you had the same sorts of arguments 

with respect to the benefits of the transaction. I recall very specifically this notion that there would be fleet rationalization. I recall 

very specifically that that would somehow yield a billion dollars’ 

worth of savings and that we have what seems to be Groundhog 

Day here again, that we have the same argument. 

I am curious as to why we think that these efficiencies will somehow pass on to consumers and that this will somehow benefit these 

markets when there has been no indication that these efficiencies 

have saved the airline industry in the past. We have had merger 

upon merger upon merger, and the airline industry is not better. 

We can ask why that is, and the answer is probably because the 

airline industry has chosen, rather than innovate—there have been 

technological efficiencies which have driven fares down. Do not get 

me wrong. But they have not chosen to innovate their way out of 

these problems. Instead, they have chosen to merger their way into 

more problems. 

18 

Senator KLOBUCHAR. I want to just switch—and I can do some 

questions on this for the record—to just this jobs issue. One of the 

things when Richard Anderson was here from Delta, when we had 

that hearing, he actually made some commitments about keeping 

certain hubs open in our State, keeping certain jobs there for Delta 

and has worked very hard to keep those commitments. And I guess 

just on behalf of some of the workers that are here, Mr. Tilton and 

Mr. Smisek, are you willing to commit to some numbers—actually, 

Delta put numbers out there last time—and a commitment or at 

least a general assurance that reductions will be minimal? 

Mr. SMISEK. Senator, we believe that this merger will have very 

little effect on our front-line employees because of the 

complementarity of our routes. I will not speak so much to the 

Delta/Northwest transaction, but we have a great deal less overlap 

than they did. 

With respect to headquarters jobs, there will be some reduction 

in headquarters jobs, but that is a fairly small number of jobs compared to the jobs that will be both preserved and I believe over the 

long term created as we create an enduring and profitable enterprise. 

With respect to your concern on service to small communities as 

well, I think small communities are better served by this merger 

than they would be absent this merger because their service depends—they are dependent on network carriers for that service. As 

Mr. Bush has conceded, low-cost carriers will never serve those 

markets. It is antithetical to their business model. We are the only 

carriers that can and will serve it because we need to gather those 

customers and bring them through our hubs. They are far better 

served with carriers that have a future, that are stable, that can 

withstand the shocks to our industry, that can invest and innovate, 

invest in their products and in their people, than they would be 

having us drift along at the very edge of existence day by day eking 

out a hand-to-mouth existence. 

Senator KLOBUCHAR. So just on the first topic of jobs, you believe 

that the reduction in workforce would be minimal? 

Mr. SMISEK. I think it will be small compared to the 86,000 people or 87,000 people that we will jointly employ. I believe in the 

long run there will be job growth because with the power of this 

network and our ability to attract and retain high-yield business 

travelers, just as, for example, yesterday Continental announced a 

new route from Houston, Houston to Auckland, which is facilitated 

by this merger, by the traffic flows that we will get from this merger as well. 

Senator KLOBUCHAR. One of the challenges of this merger will be 

integrating employee programs, especially pensions. In 2006, 

United had to take the painful step of defaulting on its pension obligations, which hurt many employees. And I want to make sure 

that the merger will not create another situation like that. Could 

you comment on how this merger will affect the pension obligations 

of both companies, Mr. Tilton? 

Mr. TILTON. Well, actually, as Jeff said, this merger will put us 

in a position to be able to have the appropriate conversations with 

the various unions who represent our workers across the two companies. They will be competing for representation rights. In some 

19 

instances, our employees are represented by different unions. We 

have agreements with our respective unions that are slightly different, but in the main, we will be talking to our represented employees, our front-line employees, about a means by which they can 

benefit in, benefit from the synergies that we ascribe to the merger. 

Absent the merger, Senator, we will not be in a position to be able 

to do that with $1.2 billion in new dollar value to the companies, 

and the companies, as Jeff said a moment ago, would have a lesser 

economic future, undoubtedly, with which we would then be in a 

position to discuss with our employees that lesser economic future 

than the one that the merger provides. 

Senator KLOBUCHAR. So you think that this will not negatively, 

adverse—— 

Mr. TILTON. This will not negatively adverse. 

Senator KLOBUCHAR. OK. Thank you. 

Chairman KOHL. Thank you so much. 

Senator Cornyn. 

Senator CORNYN. Thank you. 

Mr. Tilton and Mr. Smisek, what I think the contradiction that 

we are seeing and feeling is this. Certainly we respect your business acumen and your recognition of the hard economic realities of 

your business, and I do not think anyone begrudges your trying to 

do your job and be accountable to your board of directors and to 

your shareholders. I will stipulate to that. 

What concerns me is the suggestion that in the process of reducing competition on certainly some routes where there is very little 

competition already that the consumers will not see an increase in 

their costs. It seems to me that anytime you reduce competition in 

this way, the costs for the consumer are likely to go up. Obviously, 

there is a negative impact if not on the—I think you called it, Mr. 

Smisek, the front-line jobs, but the 3,000 people who work at the 

corporate headquarters in Houston I think are going to feel this 

pretty significantly. And, it seems to me, when you have reduced 

competition, the quality and the incentives for high-quality service 

are diminished. 

So while I understand, Mr. Tilton, you said that a lot of the benefits you see with this merger are going to be based on efficiencies— 

Mr. Smisek mentioned that to me as well yesterday—isn’t it true 

that, for example, in the Houston to Washington, Houston to Los 

Angeles, Houston to San Francisco route, Cleveland to Denver, 

where in each of those routes there are three airlines that fly nonstop, by eliminating one of those three competitors by consolidation 

here, there are going to be two choices for consumers, which enhances the likelihood that you will be able to raise prices, which 

will cost consumers more money and that the benefits of more robust competition will be lost? Can you help me reconcile these? 

Mr. SMISEK. Sure, I would be happy to and would ask Glenn to 

join in. 

In terms of the routes that you are describing, the competitors 

are low-cost competitors, and low-cost competitors not only do they 

comprise 40 percent of the market today and have continued to 

grow and have been profitable, but they exert a powerful disciplining factor on our ability to raise prices. And we have the inability to raise prices before this merger. After this merger, we will 

20 

have an inability to raise prices. The fact is that this is a brutally 

competitive industry. It shows in our results, billions and billions 

of dollars of losses for the industry since 9/11, a billion to Continental alone. And this merger, sir, I believe does not reduce competition. 

Senator CORNYN. Well, Mr. Smisek, let me just interject there. 

For example, if I want to fly from Houston to Washington, D.C., 

this chart, which I understand we got—I think we got it from you 

or your associates—lists Continental, Southwest, and United as the 

carriers that fly nonstop. So when I am in Houston and I want to 

come to Washington, D.C., after this merger, I will have two 

choices. I will fly on Southwest or I will fly on the consolidated 

United and Continental. Explain to me why that does not drive up 

costs for the consumer? 

Mr. SMISEK. Sir, there is something well documented in the economic literature—I think Mr. Bush can attest to it—called the 

‘‘Southwest effect.’’ When Southwest is in a market, I can guarantee you there is a discipline in the pricing. Not only Southwest 

but Frontier, Virgin America, JetBlue, there is a plethora of lowcost competition across this industry. 

Mr. TILTON. Let me if I could, Senator. 

Senator CORNYN. Please. 

Mr. TILTON. So perhaps tying up some segments of the conversation, one of the things that we have seen most recently, both Jeff 

and myself, at Continental and United, is the emergence of the new 

Delta into markets such as Chicago where previously Delta had 

perceived that it would be uneconomic for them to test the Chicago 

market, but now with the combination of Northwest and Delta, 

they have decided that the Chicago market is a market of some attraction to them and they will add another network carrier into 

Chicago, which had historically been if not the sole province of 

United and American, hotly contested between those two carriers, 

but also Northwest to a lesser extent connecting to the Senator’s 

State. Now, from the east coast of the United States, the newly 

strengthened Delta is providing competition along our hub structure that it had not previously—had apparently been unable to do 

or had not been emboldened to do. 

So this is anything but a cartel. Irrespective of how many ‘‘legacy 

carriers’’ there are going to be, we prefer to refer to them as ‘‘network carriers’’ given the unique role that they play in the marketplace. 

The other thing that I would offer that I do not think Mr. Bush 

mentioned—if he did, he mentioned it in passing—is costs inevitably rise in this business, regardless of the carrier. They rise for 

AirTran, they rise for JetBlue, they rise for Southwest. The way 

that they mitigate those costs in their business model, Senator, is 

they grow. And to be perfectly candid with you, they have to grow. 

They have to continue to grow or costs will catch up with them. 

So low-cost carriers are going to continue to grow because that 

is the essence of their business model. 

Senator CORNYN. It is not like the farmer who suffers losses 

every year but tries to make it up in volume. 

21 

Mr. TILTON. No, they do not try to make it up in volume. They 

grow and they try to grow in a way that, frankly, continues to be 

contributive to their profitability in the main. 

Senator CORNYN. I could not help myself when I met Mr. Smisek 

in my office— he was nice enough to come by, and we talked about 

why Chicago, and he told me he only owned one sweater, and I told 

him, well, that is, you know, another good reason to move the 

headquarters to Houston. It is a business-friendly town, low taxes, 

no income tax in Texas, right, Mr. Smisek? No state income tax. 

But in all seriousness, what was the rationale for moving the headquarters to Chicago as opposed to Houston? 

Mr. TILTON. So, Senator Cornyn, as you may know, I have spent 

two tours of duty with Texaco in Houston. I was the president of 

Texaco Refining and Marketing in Houston. I was the president of 

Texaco USA in Houston. You know that my new company, Chevron, has a significant presence. You may know that the Continental 

employees are in the Chevron building. So I have every appreciation for the benefits of doing business in Houston, Texas. And that 

is why we will have a significant presence in Houston, a significant 

head office, headquarter presence. I would hypothesize just that, 

that the technological functions of the new company, such as information technology, would be very, very logically headquartered in 

Houston simply because of the tremendous resource that the Houston technological economy provides for recruitment in that segment 

of the business. 

So we will continue to keep a commitment to Houston, and we 

will be a significant employer in Houston, and that hub is going to 

continue to grow. So from a Bush perspective, it is going to continue to be a significant employer, the new company will continue 

to be a significant employer. 

In the intervening years between our first discussions relative to 

the possibility of a merger that were actually mooted by $172 jet 

fuel and a collapse of the credit markets, in the intervening 2 

years, we made a commitment to a new operating center in the 

Willis Tower in Chicago. And as time progressed, I assured the citizens of our city, the leaders of our city, and the representatives 

here in this city of our State and our city, that that amounted to 

a commitment to the city of Chicago regardless of what we might 

do. And as you know, Senator, we were in discussions with another 

company when Jeff reengaged, and in that context, in that transaction, had that come to pass, the headquarters of the new company would have been in Chicago. 

So from my perspective, it was simply something I was not willing to take off the table. 

Senator CORNYN. Well, let me ask one last question, if I may, Mr. 

Chairman, and I will ask this on behalf of all of the Members of 

Congress who fly on United and fly on Continental. Will you retain 

your flight to DCA? 

Mr. SMISEK. Emphatically. 

Mr. TILTON. Guaranteed. 

Senator CORNYN. Thank you, Mr. Chairman. 

Chairman KOHL. Thank you very much, Senator Cornyn. 

Trying to cut through to some extent as much as we can all the 

complexities of what is being done in the industry and underVerDate Nov 24 2008 12:37 Oct 26, 2010 Jkt 061688 PO 00000 Frm 00025 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\61688.TXT SJUD1 PsN: CMORC
22 

standing, as you have said, that you are just trying to get ahead 

of the curve if you can because you have lost so much money over 

the years, isn’t one of the basic intentions, hopes, and goals, to get 

to the point as soon as you can when you are able to charge customers what you need to charge them to make a buck? Isn’t that 

what it is all about? 

Mr. SMISEK. Well, Mr. Chairman, it is not so much in raising 

fares from our perspective, but we are in a global business. We are 

a global airlines. We compete with large foreign airlines. We compete heavily for high-yield business traffic. From Continental’s perspective, we are becoming marginalized every day. That is why we 

joined Star Alliance, which has been beneficial to us. It has been 

necessary, but not sufficient to restore us to profitability. A large 

portion of the revenue synergies of this transaction are predicated 

on improving the mix on board our aircraft, not so much the price 

of any given ticket but the mix of more business travelers, because 

business travelers, because of their necessity to travel quickly and 

at the last minute, are willing to pay a higher fare. And that business mix will be beneficial, and rather than having those business 

travelers fly on Air France/KLM or fly on British Airways/Iberia, 

they will fly on the combined Continental/United and that will help 

restore us to profitability. 

Chairman KOHL. What you said is, yes, that is right, we are trying to get to the point where our mix of travelers will get us more 

money. 

Mr. SMISEK. Making a profit would be a good thing. 

Chairman KOHL. And, you know, I understand where you are 

coming from. I have been in business all my life. And I think we 

are getting confused in some of the very involved conversation here 

using words that are important and meaningful, but they tend to 

some extent to obscure what we are talking about here. You want 

to put yourself in a position, as you should, where you are able to 

get as much as you can in a marketplace from a traveling consumer, not because you are trying to gouge them but because you 

are trying to make some money. And one of the ways in which that 

is traditionally, classically, inevitably done in business is to deal 

with the competition in a way that allows you to do that. I mean, 

this is Business 101. Isn’t that right, Mr. Tilton 

Mr. TILTON. Yes, I think it is, and I think the thing that it would 

be—it would be a worthwhile discussion, uncomplicated discussion, 

with Messrs. Bush and McGee, is that the American consumer 

today receives tremendous value, extraordinary value from this industry, I mean exceptional value for money. Fares have declined 30 

percent since deregulation adjusted for inflation. Spectacular value. 

The hubs serve a purpose that is really unique to the provision of 

service to small communities. No hubs, no point-to-point 

connectivity from Minot, North Dakota. It simply does not happen. 

So the combination of business models, Senator, in this business, 

network carriers, hubs, of great economic benefit to the host city 

hub, tremendous economic benefit to a city such as Chicago on a 

collateral basis, on a full economic GDP basis, and point-to-point 

carriers which have grown tremendously create business model 

choices and, indeed, even configuration choices. AirTran offers busiVerDate Nov 24 2008 12:37 Oct 26, 2010 Jkt 061688 PO 00000 Frm 00026 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\61688.TXT SJUD1 PsN: CMORC
23 

ness class. Southwest does not. A tremendous choice for the consumer. 

In Milwaukee today—in Milwaukee today—which I am sure you 

are very keenly aware of—there are three low-cost carriers vying 

for the customers’ affections in that city: Midwest, Southwest, and 

AirTran. And my company is vying for the opportunity to connect 

those people in Milwaukee over O’Hare to Tokyo. It is a different 

business proposition. Regardless of that, the citizens of Milwaukee 

are very well served today as a function of that hyper-competition 

for their business. 

Chairman KOHL. I understand. 

Mr. TILTON. And we would like to make a profit doing it. 

Chairman KOHL. What you are trying to accomplish, you and all 

the other airlines, is to have a situation come about—and I think 

this merger is part of that thought—where there is only so much 

competition around so that you can all still make some money. And 

inevitably that means that some of these others have to go by the 

wayside. There may be, you know, a somewhat more sophisticated 

way to do it, but there are too many airlines competing for the 

available business, which force you to drop your prices below profitability. And this is in the national interest here. We are not talking 

here to denigrate what you are doing in any way. Until that happens, you are going to continue to lose money. So you desperately 

go about trying to be as efficient as you can, and that is to your 

advantage. But ultimately you need to be in a position so that you 

do not have so many competitors vying for that dollar, which they 

are forcing you to charge prices that are below your ability to make 

some money. Is that right, Mr. Tilton? 

Mr. TILTON. I think the point that Jeff was making, Mr. Chairman, is we are resigned to the hyper-competitiveness of the domestic market. The domestic market is going to continue to be hypercompetitive, and I frankly do not think that that is going to 

change. The domestic market for a network carrier serves a different purpose than it does for the three carriers that I mentioned 

in Milwaukee. The domestic market for the network carriers is a 

provider of passengers in the main to the international market. 

Where the network carriers have the opportunity to realize your 

ambition for us, making a profit and covering our costs and being 

able to return something to our various stakeholders—our employees, our shareholders, and our communities—is through really our 

ability to compete with the now more competitive, as we have already said, Air France/KLM, Lufthansa, and the trans-Pacific carriers, as we should, because that is our role. That is really what 

we do. The fact that we have lost competitive position in those foreign markets, in those international markets, to carriers who continue to also have new entrants, such as Emirates and Etihad from 

the Middle East, is really where we are going to compete. We are 

going to compete in the long-haul market. You know, we are now 

going to be, Jeff was going to be, United now will be, we are going 

to be the launch customer for 787s. We are going to be the launch 

customer for 787s. Jeff has ordered 25, Glenn has ordered 25. At 

the end of the day, if we cannot make this work, Boeing is not 

going to sell us any 787s. We are going to put them into service 

and serve those long-haul international markets as a function of 

24 

our ability to gather up customers and feed them into the hubs 

across the United States, all eight of them. That is how we are 

going to make money. 

Chairman KOHL. All right. Before we go any further, we would 

like to acknowledge the presence of Sheila Jackson Lee, the distinguished Congresswoman from Texas. We are honored by your presence here today. 

Senator Hatch. 

[No response.] 

Chairman KOHL. I would take comments from anybody, but I 

still want to put out the point of view that what drives your customer attractiveness today is price. There are other things, but 

price is relentless in your ability to attract customers. And your 

price is determined by your competition. If there were not any competition in Milwaukee, Mr. Tilton, the price would go up considerably. We understand that. That is just the way it works. And that 

is the way it works with you all. And you push, as you need to 

push, and hopefully to wake up one day and have much of your 

competition evaporate so that you would be in a position not to 

gouge the customer but simply to charge him or her an amount of 

money that will enable you to make a profit. As long as there are 

competitors next door at the next gate charging less than you, you 

have got a big problem. If that competitor is gone, you do not have 

such a problem. 

Now, how we get there I do not know. Someday do we have to 

have maybe just one or two airlines that are regulated by the Government and, you know, you are allowed to make a reasonable 

profit like utilities? Does that make any sense to you fellows, offering the best service you can to customers but not at a loss? 

Mr. SMISEK. Senator, no, sir, that does not—I think that consumers have benefited tremendously from airline deregulation. I 

think Glenn has summed up very well who we are. We are different from low-cost competitors domestically. We are a global airlines serving a global market, competing against large foreign airlines. We can do that effectively. We can do that as long as we have 

the ability to invest in a product like the 787, flat-bed seats, 

AVOD, all the things that we need to do to attract and retain highyield business travelers. Both United and Continental are principally a business airline. We are attractive to a broad range of 

consumers, but we are principally business airlines. It is a differentiated product. We do a very good job of it. This merger will put 

us in a position to create a network that will be far more attractive 

to corporate travelers than either of our networks could be alone. 

And I believe we will generate sufficient synergies to not only restore us to profitability but be able to sustain that profitability, 

which, of course, is good not only for this Nation but certainly for 

our employees and the communities we serve and ultimately for 

consumers as we offer them a broad global network. 

Chairman KOHL. All right. Any other comments? Mr. McGee, 

what would you like to say? 

Mr. MCGEE. Yes, Mr. Chairman. I wanted to agree with Mr. 

Tilton before when he was speaking about the different models in 

the domestic airline industry. There is no question that the business model of a low-cost carrier is much different than the network 

25 

or legacy carriers, and I think that speaks to what we are talking 

about here today, what we are talking about in merging and combining two legacy airlines that in many ways compete head to 

head. If we lose that competition, I think we are going to see two 

things. One is based on the historical record where we have seen 

it before. One is that in some cases low-cost carriers will probably 

come in and on those specific routes fares will drop. But because 

of the very business model of low-cost carriers, they are not as 

ubiquitous as legacy airlines. 

For example, St. Louis, as I mentioned before, the former TWA 

hub, has lost almost 50 percent of the flights that it operated 9 

years ago. In certain cases, Southwest came into St. Louis, and it 

was good news for the citizens of St. Louis because on those routes 

fares went down and service was restored. But on many other 

routes, they lost service. They certainly lost nonstop service on 

some routes, and fares went up on routes where there was no 

meaningful competition. 

So it is how we sort through these two very different business 

models. Southwest and other low-cost carriers are usually very, 

very deliberate and specific about where they fly, as was pointed 

out earlier. And that is very different than the model of a hub-andspoke airline that says, OK, we are now going to be focused in this 

area and, you know, we are going to spread out from there and 

cover a broad geographical region. 

So when we keep referring to the decrease in fares, I think two 

points should be made. One is that decrease in fares has been driven by low-cost carriers, but it is also very specific. It is not in all 

routes. There is tremendous imbalance in terms of fares. Certain 

areas of the country, as the Senator noted, particularly in the 

Northwest, in rural areas, smaller cities, fares have not gone down 

because, you know, they are not served by JetBlue or Virgin America. 

And then the other point to make is that over the last 2 years, 

we have seen another form of fare increase in the form of the fees 

that the airlines have instituted. The Department of Transportation recently noted that in 2009 airlines generated $7.8 billion in 

the very fees that you referred to before for things like calling reservations, checked bags, now even talking about in some cases 

carry-on bags. That is a 42-percent increase over 2008, and we 

would argue that in many ways that is another form of a fare increase. 

Chairman KOHL. Well, what is going to be, in your opinion, the 

impact of this merger on those fees? 

Mr. MCGEE. Well, again, wherever we have seen less competition, we have seen less resistance for airlines to resist measures 

like this. We see it—you know, as I mentioned briefly in my testimony, there is a certain checks and balances with more competitors. Many, many times over the years we have seen fare increases 

nationwide or almost nationwide. An airline will raise fares, and 

then the industry sort of holds its breath for 48 hours or 72 hours 

to see who matches, who does not match. We keep talking about 

reducing the size of the pool of airlines that have the ability to 

match or not match, introduce fees, not introduce fees, resist fees, 

and it applies not just to fares and fees, but also even to service. 

26 

For years, Continental resisted an industry-wide trend by being the 

only airline to offer meal service in economy class. Eventually, you 

know, they were unable to do that. American resisted the trend to 

reduce seat pitch, the distance between seats, and offered more leg 

room, and that failed. Currently Southwest is resisting the fee efforts in many ways, particularly with baggage fees. 

Whether or not they will be successful long term, we do not 

know, but what we do know is that with fewer major carriers to 

resist such efforts, obviously that will have an effect on consumers. 

Chairman KOHL. Any other comments, gentlemen? Anything at 

all? Mr. Bush. 

Mr. BUSH. Just a couple things, Mr. Chairman. I want to go back 

to this notion that low-cost carriers are going to be able to discipline the merger and the anticompetitive effects of the merger. In 

particular, I think Mr. Tilton had mentioned the Southwest effect 

in certain of the routes where we are consolidating from three to 

two or two to one. And Southwest, if we consider the Southwest effect, it is in the city pairs—we were talking about city pairs, like 

flying from Houston to Washington. But, in fact, there is another 

type of antitrust market that we really talk about when we do 

these kinds of investigations, and that is an airport pair—Intercontinental to National. When I flew out, it was a $1,400 ticket 

from Intercontinental to National, which speaks to something 

about fare increases. If I flew from Hobby to Baltimore on Southwest to BWI, it was $900. So there is disparity between, you know, 

competition on city pairs and airport pairs. 

Now, Southwest could potentially discipline even a greater fare 

increase from Intercontinental to National, but it is not a parallel; 

it is not one to one. So, yes, there is a Southwest effect. It does not 

discipline completely anticompetitive effects of the transaction, nor 

does it discipline in all markets. 

Chairman KOHL. Mr. Tilton? 

Mr. TILTON. So it seems to me that it strains credulity to argue 

in favor of consolidation that has taken place in this industry as 

if it were constructive consolidation, and we all know that there 

were liquidations. Those companies did not consolidate of their own 

free will. They failed. And those brands are not around any longer, 

in the rather glib way in which they were described to have joined 

with another carrier. They failed, and they were absorbed. That is 

precisely what happened, very unfortunately, to TWA in St. Louis. 

As I said in my prepared remarks, serial bankruptcy is not a 

strategy for an industry that is going to benefit any constituent— 

not consumers, not employees, not shareholders, and not consumers. And to give testimony without regard for the systemic economic failure of this industry that is as important to this country 

as it is, there is not one single thing that can benefit from the continued economic fragmentation and fragility of this industry. Not 

one thing. 

Chairman KOHL. No argument, but doesn’t that at least provoke 

the argument that we would be better off with fewer airlines, nationally regulated, with rules and regulations to force them to offer 

certain levels of service and allow them to make certain amounts 

of reasonable profit? 

27 

Mr. TILTON. Senator Kohl, at the point of 1978, I was young in 

my career in the oil and gas industry and not worrying about being 

able to pay the economic rent of the industry. So I have come from 

an industry that was sufficiently robust to have a discussion of a 

very different sort relative to consolidation, and consolidation in 

that industry was about being able to afford the multi-billion-dollar 

capital investments that the industry is required to make to an industry that has a very difficult time turning on the lights. 

My understanding is that, even pre-deregulation, this was an industry that did not fare well. It did not do well pre-deregulation 

either. Certainly the consumer, you know, the constituent represented by the two gentlemen to my far left, has fared very, very 

well post-deregulation. Certainly the consumer has fared extraordinarily well. The proliferation of new business models, the proliferation of choice, I really only point to Milwaukee as an excellent 

example, and the choices abound. Transparency of fares. When I 

first came into the industry, my question relative to bags is why 

we ever transported them for free. And certainly at $172 jet fuel, 

I could not fathom why we were transporting them for free. And 

yet we competed very vigorously by an airline across 83 percent of 

our network that makes it a point of advertisement that they will 

transport them for free. So you have got tremendous choice. 

So I believe that this market can sort itself out, but I do not believe in the veiled guided hand of comments that have been made 

to the left as to we ought not re-regulate it but we ought to sort 

of regulate it. 

Chairman KOHL. Mr. Bush. 

Mr. BUSH. I hear this argument a lot about ruinous competition. 

I have read about it in the economic literature quite extensively, 

and it is usually an impetus for antitrust immunity. The notion is 

that somehow competition will kill us all. 

If that is the case in an industry, one has to question the underlying economics of the industry, because everywhere else in the 

world and in every other product market one can typically think 

of, competition actually helps consumers and actually helps innovation and actually helps foster economic growth. 

It is kind of puzzling that this industry, which I do not consider 

very competitive—unless I compare it to railroads—would be considered in such a fashion that would be ruinous to have competitors. Therefore, what we need to do is consolidate, and this is what 

industry spokespeple have said, this is what CEOs have said. It 

makes sense to reduce the number of competitors so we can engage 

in what is called yield management. We can eliminate the lower 

fares and stack our planes with higher-paying, time-sensitive business passengers. I do not see why that is a reasonable argument 

that ought to win the day. 

Chairman KOHL. Last comment, Mr. Tilton. 

Mr. TILTON. The business models are all very different. The business models are compelling for the consumer. I am competed on 83 

percent of the domestic market by Southwest today. Our two companies will compete. We will continue to be competed very vigorously not only by Southwest but also by Midwest, also by AirTran, 

also by JetBlue, also by Virgin America. The consumer in this 

28 

country is blessed, and deregulation has really made it possible for 

them to have the cornucopia of choices they have. 

Chairman KOHL. Very good. I think you have brought an awful 

lot of light and information to this whole issue by your presence 

today. We want to thank you for being here. With that, we will conclude the hearing. Thank you again. 

[Whereupon, at 3:47 p.m., the Committee was adjourned.] 

[Questions and answers and submissions for the record follow.] 

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