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COMPETITION IN THE AIRLINE INDUSTRY 

HEARING 

BEFORE THE

TASK FORCE ON COMPETITION POLICY 

AND ANTITRUST LAWS 

OF THE

COMMITTEE ON THE JUDICIARY 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TENTH CONGRESS 

SECOND SESSION 

APRIL 24, 2008 

Serial No. 110–106 

Printed for the use of the Committee on the Judiciary 

( 

Available via the World Wide Web: http://judiciary.house.gov 

(II) 

COMMITTEE ON THE JUDICIARY 

JOHN CONYERS, JR., Michigan, Chairman 

HOWARD L. BERMAN, California 

RICK BOUCHER, Virginia 

JERROLD NADLER, New York 

ROBERT C. ‘‘BOBBY’’ SCOTT, Virginia 

MELVIN L. WATT, North Carolina 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

MAXINE WATERS, California 

WILLIAM D. DELAHUNT, Massachusetts 

ROBERT WEXLER, Florida 

LINDA T. SA ́ NCHEZ, California 

STEVE COHEN, Tennessee 

HANK JOHNSON, Georgia 

BETTY SUTTON, Ohio 

LUIS V. GUTIERREZ, Illinois 

BRAD SHERMAN, California 

TAMMY BALDWIN, Wisconsin 

ANTHONY D. WEINER, New York 

ADAM B. SCHIFF, California 

ARTUR DAVIS, Alabama 

DEBBIE WASSERMAN SCHULTZ, Florida 

KEITH ELLISON, Minnesota 

LAMAR SMITH, Texas 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

HOWARD COBLE, North Carolina 

ELTON GALLEGLY, California 

BOB GOODLATTE, Virginia 

STEVE CHABOT, Ohio 

DANIEL E. LUNGREN, California 

CHRIS CANNON, Utah 

RIC KELLER, Florida 

DARRELL ISSA, California 

MIKE PENCE, Indiana 

J. RANDY FORBES, Virginia 

STEVE KING, Iowa 

TOM FEENEY, Florida 

TRENT FRANKS, Arizona 

LOUIE GOHMERT, Texas 

JIM JORDAN, Ohio 

PERRY APELBAUM, Staff Director and Chief Counsel 

SEAN MCLAUGHLIN, Minority Chief of Staff and General Counsel 

TASK FORCE ON COMPETITION POLICY AND ANTITRUST LAWS

JOHN CONYERS, JR., Michigan, Chairman 

RICK BOUCHER, Virginia 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

MAXINE WATERS, California 

STEVE COHEN, Tennessee 

BETTY SUTTON, Ohio 

ANTHONY D. WEINER, New York 

DEBBIE WASSERMAN SCHULTZ, Florida 

STEVE CHABOT, Ohio 

RIC KELLER, Florida 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

BOB GOODLATTE, Virginia 

CHRIS CANNON, Utah 

DARRELL ISSA, California 

TOM FEENEY, Florida 

LAMAR SMITH, Texas, Ex Officio 

PERRY APELBAUM, Staff Director and Chief Counsel 

SEAN MCLAUGHLIN, Minority Chief of Staff and General Counsel 

(III) 

C O N T E N T S 

APRIL 24, 2008 

Page 

OPENING STATEMENTS 

The Honorable John Conyers, Jr., a Representative in Congress from the 

State of Michigan, and Chairman, Task Force on Competition Policy and 

Antitrust Laws ..................................................................................................... 1 

The Honorable Steve Chabot, a Representative in Congress from the State 

of Ohio, and Ranking Member, Task Force on Competition Policy and 

Antitrust Laws ..................................................................................................... 3 

The Honorable Lamar Smith, a Representative in Congress from the State 

of Texas, and Ranking Member, Committee on the Judiciary ......................... 4 

The Honorable F. James Sensenbrenner, Jr., a Representative in Congress 

from the State of Wisconsin, and Member, Task Force on Competition 

Policy and Antitrust Laws ................................................................................... 6 

WITNESSES 

Mr. Douglas Steenland, President and CEO, Northwest Airlines 

Oral Testimony ..................................................................................................... 8 

Prepared Statement ............................................................................................. 10 

Mr. Richard Anderson, Chief Executive Officer, Delta Air Lines 

Oral Testimony ..................................................................................................... 34 

Prepared Statement ............................................................................................. 35 

Mr. R. Thomas Buffenbarger, International President, International Association of Machinists and Aerospace Workers 

Oral Testimony ..................................................................................................... 79 

Prepared Statement ............................................................................................. 81 

Mr. Douglas Moormann, Vice President, Economic Development, Cincinnati 

USA Regional Chamber 

Oral Testimony ..................................................................................................... 83 

Prepared Statement ............................................................................................. 85 

Mr. Clifford Winston, Brookings Institute 

Oral Testimony ..................................................................................................... 88 

Prepared Statement ............................................................................................. 90 

Ms. Veda Shook, International Vice President, Association of Flight Attendants, CWA 

Oral Testimony ..................................................................................................... 97 

Prepared Statement ............................................................................................. 99 

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING 

Prepared Statement of the Honorable Steve Cohen, a Representative in Congress from the State of Tennessee, and Member, Task Force on Competition 

Policy and Antitrust Laws ................................................................................... 5 

Prepared Statement of the Honorable Keith Ellison, a Representative in 

Congress from the State of Minnesota, and Member, Committee on the 

Judiciary ............................................................................................................... 6 

Page

IV 

APPENDIX 

MATERIAL SUBMITTED FOR THE HEARING RECORD

Prepared Statement of the Honorable Sheila Jackson Lee, a Representative 

in Congress from the State of Texas, and Member, Task Force on Competition Policy and Antitrust Laws ........................................................................... 119 

Prepared Statement of the Aircraft Mechanics Fraternal Association ............... 121 

Article entitled ‘‘Fear of Flying? Life Since Deregulation - 2008’’ from 

unbossed.com ........................................................................................................ 126 

(1) 

COMPETITION IN THE AIRLINE INDUSTRY 

THURSDAY, APRIL 24, 2008 

HOUSE OF REPRESENTATIVES,

TASK FORCE ON COMPETITION POLICY

AND ANTITRUST LAWS

COMMITTEE ON THE JUDICIARY, 

Washington, DC. 

The Task Force met, pursuant to call, at 10:36 a.m., in Room 

2141, Rayburn House Office Building, the Honorable John Conyers, 

Jr. (Chairman of the Task Force) presiding. 

Present: Representatives Conyers, Lofgren, Jackson Lee, Cohen, 

Johnson, Sutton, Wasserman Schultz, Ellison, Smith, Chabot, Cannon, Keller, and Issa. 

Also present: Representative Lewis of Georgia. 

Mr. CONYERS. Good morning. The Judiciary Committee, namely 

the Task Force on Competition Policy and Antitrust Laws will 

come to order. We are happy to see everyone here. 

And I want to begin by observing that today we are 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 begin by reviewing 

the historical context of antitrust laws, since I started on this Committee before anyone else in this room, at least. And I wanted to 

put the discussion that we will have in some kind of context. 

We have had a recent history of deregulation, widespread deregulation. And since airline deregulation first took effect some 30 

years ago, we have gone from a 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 decline, and prices are rising. And we have fallen into 

a culture where business executives have opted frequently to the 

resort of bankruptcy as a means of avoiding their labor obligations 

while enhancing their own personal incomes. 

All too often executives of Chapter 11 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: Glenn Tilton, CEO of United Airlines, former Chapter 

11 debtor, last year received $39.7 million compensation package. 

2 

During the course of the bankruptcy case, however, pension plans 

for 120,000 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 is no wonder that union membership is down to 12 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 50 million Americans don’t have 

health insurance and another 35 million are underinsured. 

It is 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 antitrust division that approves 

mergers left and right, frequently overturning judgments of the career staff at the Department of Justice. 

The department has not attempted to block or modify any major 

merger over the last 7 years, including some of the largest, most 

controversial mergers among direct competitors. Remember Whirlpool-Maytag, AT&T-BellSouth, XM-Sirius. The department’s handsoff 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 antitrust enforcement business, leaving companies to mate with whom they wish. 

There has been a 59 percent decline in merger investigations 

over the past 4 years of this administration compared to the last 

4 years of the Clinton administration. And with respect to merger 

challenges, the last 4 years reveal a 75 percent decline to the last 

4 years of the Clinton administration. 

So all I am suggesting is that we need to consider where this 

merger will take us. I am concerned that if this merger is approved 

it will simply result in a cascade of other mergers, such as Continental-United, American and US Airways. We might end up 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, negating more union contracts, including 

pension and health care benefits. 

And so at today’s hearings, I believe we have several questions 

to address. 

First, what is the rush? Or maybe, more fairly, is there a rush 

to get this in and 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 will accrue benefits for 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 organization? What 

3 

guarantees can we give the Northwest pilots that they will not be 

disadvantaged by the merger or have their seniority diminished? 

And, finally, how will this merger impact the affected communities and, most especially, the flying public? 

For some, this merger has devolved into a question of which cities and regions will get more flights. And that is 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 can obtain testimony 

from consumer groups and individual passengers who could not be 

with us here today. 

So I am feeling better now that I have got that off my chest. 

[Laughter.] 

And I turn to my friend, Steve Chabot, from Cincinnati, Ohio, for 

his comments, the Ranking Member of this Task Force. 

Mr. CHABOT. Thank you very much, Mr. Chairman. 

And I would 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 would also like to thank our witnesses for taking the time to 

discuss their insights and predictions with us, particularly the second panel, Mr. Moormann, who is from Cincinnati and will be testifying on behalf of the Cincinnati USA Regional Chamber of Commerce. 

Delta Air Lines has a long history with the Greater CincinnatiNorthern Kentucky area, dating back to the 1940’s when it first 

started its passenger service, and later in the 1960’s with its jet 

service. Delta has supported development in our region, fostering 

the creation of more 130,000 jobs in the Greater Cincinnati area, 

and facilitating a $2.85 billion annual economic impact on the region. 

Business growth in Greater Cincinnati-Northern Kentucky has 

paralleled Delta’s expanded nonstop domestic and international 

service with Greater Cincinnati-Northern Kentucky regional corporate customers now generating more than half of Delta’s total 

revenues. 

However, this progress has not been without challenges. Delta, 

along with many other airlines, has experienced financial and operational difficulties in the last several years. 

With the surging price of oil, fuel is now the number-one operational cost that airlines must address. And just yesterday, Delta 

reported a first quarter loss of $6.4 billion due to some extent for 

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 our 

4 

particular airport, the Greater Cincinnati-Northern Kentucky, unfortunately over the last couple of years has had either the highest 

or close to the highest rates of any other airport in the world. 

And if one considers that our community historically has had relatively lower cost or at least middle-of-the-road costs in a lot of 

other areas, it has 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 airfares. 

But consumers demanding more look forward to discussing with 

our witnesses today the aspects of competition that would be protected, arguably, by the merger, including fair pricing policies to 

protect consumer interests, the benefits that the airline industry 

would realize as a result of the merger, and any anti-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 now like to yield my time to the Ranking Member 

of the full Judiciary Committee, Mr. Lamar Smith of Texas, for his 

statement. 

Mr. SMITH. I thank the gentleman 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 lives 

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 CEOs of both Northwest and Delta 

that this proposed deal does not raise significant competition concerns because the two airlines do not have significant overlaps in 

the number of cities that the two serve. In fact, I think the number 

of overlaps is 13 out of 1,000 flights. 

Even if this merger is approved on the basis of its own merits, 

I am interested in how it affects the airline industry as a whole. 

Recent news articles suggest that a number of airlines, most notably United and Continental, are considering mergers in the wake 

of the Delta-Northwest deal. Such consolidation is something that 

the Committee should monitor closely. 

I would like to thank our witnesses today, Mr. Chairman. We 

have two great panels. 

And I will yield back the balance of my time. 

Mr. CONYERS. Thank you. 

5 

Any Members want to put their statements in the record? 

The gentleman from Tennessee, Mr. Cohen? 

Mr. COHEN. Thank you, Mr. Chairman. I have submitted my 

statement. And my main interest is the hub in Memphis. That is 

it. 

[The prepared statement of Mr. Cohen follows:] 

PREPARED STATEMENT OF THE HONORABLE STEVE COHEN, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF TENNESSEE, AND MEMBER, TASK FORCE ON COMPETITION POLICY AND ANTITRUST LAWS

I view the proposed merger of Delta Air Lines and Northwest Airlines with an 

open mind. Whatever the ultimate outcome of this proposed merger, my greatest 

concern is that Memphis International Airport continues to be a major air passenger 

hub, whether for a combined Delta-Northwest or for a Northwest that remains independent. I understand the economic realities faced by U.S.-based legacy airlines, 

and I hesitate to oppose this merger outright if such a merger is critical to preserving the hub in Memphis. I have received assurances from representatives of 

Delta and Northwest that the combined company would continue to operate a hub 

at Memphis International Airport and have no reason to doubt that these assurances were made in good faith. Additionally, both the Memphis Regional Chamber 

and the Memphis-Shelby County Airport Authority support the merger and I give 

weight to their opinions. 

Nonetheless, for now, notwithstanding the good-faith arguments of merger supporters, I remain concerned that Memphis will lose its hub status once the proposed 

Delta-Northwest merger is consummated. While Delta and Northwest have committed to maintaining the Memphis hub, I recall that American Airlines made similar assurances that it would maintain TWA’s St. Louis hub after its acquisition of 

TWA in 2001. Although St. Louis nominally remains a ‘‘hub’’ for American, American has dramatically reduced service at St. Louis since acquiring TWA, cutting the 

number of flights and passengers through St. Louis almost in half. Moreover, even 

though I take Delta and Northwest at their word, a combined carrier would have 

a strong incentive to close the Memphis hub eventually. One of the rationales for 

merging the two airlines is to achieve efficiencies by eliminating duplicative operations. Given that Memphis is less than 400 miles from the proposed new Delta’s 

headquarters and hub in Atlanta, I believe that the new Delta will close or significantly scale back operations at Memphis. 

The closing of an air passenger hub would be devastating to my district. The loss 

of jobs and economic activity would be significant. Residents in my district would 

suffer a dramatic loss in the number of nonstop flights to cities around the world. 

Moreover, I do not see any other airline that would be willing or able to play the 

role in Memphis that Northwest currently plays. 

I also share some other concerns of merger critics. The Delta-Northwest merger 

threatens to spark a round of consolidation among the largest U.S. air carriers. Potentially, half of the air travel market could be controlled by just three mega-carriers. This loss of competition could lead to higher prices for consumers and poorer 

service. Moreover, given the intimidating size and potential market dominance of 

these carriers, I question whether any of the low-cost carriers could provide the necessary competitive pressure on the major carriers to keep air fares affordable for 

most consumers. 

Additionally, I am concerned that workers at both carriers, but especially at 

Northwest, will be harmed by this merger. Somewhat disconcertingly, Delta appears 

to be actively discouraging its non-pilot employees, who are non-union, from seeking 

union representation. I fear that this is indicative of how a merged Delta-Northwest, 

which would primarily be run by current Delta management, intends to manage 

labor relations. I hope Delta will refrain from current and future unionization efforts and allow its non-pilot employees to decide, without management interference, 

whether they wish to be represented by unions. 

Mr. CONYERS. All right. 

Mr. COHEN. We have missed our free throws. We don’t want to 

miss our hub. [Laughter.] 

Mr. ELLISON. Mr. Chairman? Mr. Chairman? 

Mr. CONYERS. Mr. Ellison? 

6 

Mr. ELLISON. Mr. Chairman, I am observant of the rules of the 

Committee. I understand I can’t make a statement, but I do have 

one for the record and would appreciate it if the Chairman would 

allow it to be submitted. 

Mr. CONYERS. Your statement will be welcomed into the record, 

as will all other Members. 

[The prepared statement of Mr. Ellison follows:] 

PREPARED STATEMENT OF THE HONORABLE KEITH ELLISON, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF MINNESOTA, AND MEMBER, COMMITTEE ON THE JUDICIARY

Let me start by thanking Chairman Conyers for holding this important hearing 

and for his leadership on this issue. 

This hearing is particularly timely considering the recent announcement of the 

proposed merger between Northwest and Delta airlines. 

My constituents and I have a personal stake and interest in this merger. Minnesota houses corporate headquarters for Northwest Airlines and the MinneapolisSt. Paul Airport, one of Northwest?s major hubs, is located in my Congressional District. I represent thousands of Northwest workers and employees, and thousands of 

jobs in my district both directly and indirectly depend on Northwest Airlines. 

At this point I have several major concerns with this proposed merger. First and 

foremost, I believe this new airline will adversely affect competition and will ultimately lead to higher fares for consumers, reduced quality of services, and a reduction in routes and choices for consumers. Both companies have acknowledged that 

they will become the largest airline in the nation if the merger is consummated. 

According to a number of studies, when a major airline carrier dominates a specific region, they essentially have the ability to control the prices in the market and 

block competition. For example: these studies have shown that these major carriers 

block competition with new carriers by dropping prices and flooding the market with 

new capacity; once the new airline competitor is unable to compete and driven out 

of the market, the incumbent airline often raised its prices in that region. 

So again, my concern with this merger is that instead of helping consumers it will 

be positioned to hurt new competitors, squeeze them out of the market and ultimately damage competition in the long run. This scenario is bad for competition and 

bad for our consumers. 

Second, if this merger is allowed to go forward, I believe this inevitably will lead 

to a domino effect of airline mergers and consolidations. Other major airlines will 

be forced to consolidate in order to compete with the new airline. While, arguably 

low-cost carriers may be able to compete with just one giant airline, these new carriers will almost certainly be put out of business if the industry moves to just a few 

major airlines. Speculations of a United-Continental as well as an American-US Airways merger have already been discussed. I believe a market dominated by just a 

few major carriers would be a disaster for competition and customer service. 

In addition to the market competition issues the Justice department will be examining in the upcoming months. I am deeply concerned about the impact this will 

have on the labor force. Not surprisingly, Northwest?s pilots and ground workers 

are strongly opposing this deal. Northwest pilots are concerned that the seniority 

integration plan will severely reduce the career path for their pilots. Northwest 

flight attendants have approached my office with concerns that they are being pressured not to unionize under the new Delta airline. These are serious allegations 

merit further investigation by the Justice Department. 

As Robert Roach, General Vice President of the International Association of Machinists stated, ?Airline industry consolidation will come at tremendous public expense.? 

I wholeheartedly agree with this statement. 

Thank you Mr. Chair and look forward to hearing today?s testimony. 

Mr. CONYERS. And, yes, Ranking Member Smith and Jim Sensenbrenner, Chairman emeritus, your statement—— 

Mr. SENSENBRENNER. Mr. Chairman, I will just make a very 

brief statement. 

All politics are local. And the concern that I have is the impact 

of this merger on the 47 percent passive interest that Northwest 

7 

owns in Midwest Airlines, which is Milwaukee’s hometown carrier 

and a very popular carrier in my part of the country. 

And I would hope that, as this merger is consummated, that it 

will do nothing to impede upon the service that this carrier currently provides. 

I thank the gentleman. 

Mr. CONYERS. You are welcome. 

Might I note that, before we begin with our witnesses, we have 

a number of non-testifying parties, as they are called. 

We welcome Delta Pilots Association, the Northwest Pilots Association, the Air Line Pilots Association, and the Air Mechanics Fraternal Association. Their representatives and friends and supporters are all in the hearing room, as well. 

I want to begin by introducing the CEO of Northwest Airlines. 

And then I am going to ask my colleague, John Lewis, the distinguished Member from Georgia, to introduce the CEO of Delta Air 

Lines. 

I am pleased to introduce Mr. Douglas Steenland, who has 

served as Northwest’s president since 2001 and its chief executive 

officer since 2004. 

Before joining Northwest in the early 1990’s, Mr. Steenland 

served in the Office of the General Counsel of Department of 

Transportation and the Washington law firm of Verner, Liipfert, 

and others. He earned his bachelor’s degree from Calvin College in 

Michigan, his law degree with honors from George Washington 

University. 

And, Congressman Lewis, I would recognize you to introduce our 

other witness. 

Mr. LEWIS. Thank you very much, Mr. Chairman. 

Mr. Chairman and Ranking Member and Members of the Task 

Force, thank you for holding today’s hearing on competition in the 

airline industry. 

I appreciate your allowing me to introduce Mr. Richard Anderson, the CEO of Delta Air Lines. 

Delta’s headquarters have been located in Atlanta for 67 years. 

They have 25,000 employees in Atlanta, and their hub, which is located at Hartsfield-Jackson Atlanta International Airport, has 

helped make our community home to the busiest commercial airport in the world. 

Mr. Anderson has nearly 20 years of aviation experience. He entered the industry in 1987 at Continental Airlines, where he ultimately served as staff vice president and deputy general counsel. 

In 1990, Mr. Anderson began a 14-year career at Northwest Airlines, where he served in many leadership positions over the years. 

He began as vice president and deputy general counsel, executive 

vice president, and eventually became the airline’s CEO. 

Mr. Anderson then left Northwest to serve as executive vice 

president of UnitedHealth Group and president of UnitedHealth’s 

commercial market group. He also served as a director of Cargill 

and Medtronic, Inc. 

Mr. Anderson became chief executive officer of Delta Air Lines on 

September 1, 2007. He joined Delta’s board of directors in April 

2007. After an extensive and long-reaching and broad search, Delta’s board chose Mr. Anderson to lead the airline. 

8 

He is a native of Galveston, Texas. Mr. Anderson holds a bachelor’s degree from the University of Houston and a degree in law 

from South Texas College of Law. 

Again, thank you, Mr. Chairman, Mr. Ranking Member, for the 

opportunity to introduce Mr. Anderson to you and Members of the 

Task Force. 

And I, too, Mr. Chairman, welcome these two executives here 

today. 

Mr. CONYERS. Well, thank you very much. 

I will check with the length of your introductions from now on, 

because I don’t want Mr. Steenland to feel embarrassed that I just 

gave a few highlights of your illustrious career. 

But we would like you to begin. Your statements will be included 

in the record. Please feel welcome. 

TESTIMONY OF DOUGLAS STEENLAND, PRESIDENT AND CEO, 

NORTHWEST AIRLINES 

Mr. STEENLAND. Thank you very much, Mr. Chairman. And I 

was pleased and flattered by the introduction. Thank you. 

Chairman Conyers, Ranking Member Chabot, distinguished 

Members of the Judiciary Committee Antitrust Task Force, good 

morning. I am 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. 

I am particularly honored, Mr. Chairman, to have the opportunity to appear before you on behalf of Northwest. We are proud 

to be Detroit’s hub airline. 

I would like to acknowledge my congressman, Congressman 

Ellison. We are proud to be the hub airline of Minneapolis. 

I would also like to acknowledge Congressman Cohen. And we 

are very pleased to be the hub airline of Memphis. 

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 whipsawed by incredibly rising oil prices, which 

will cost Northwest an estimated $1.4 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 

tightened competition for 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 agreements. 

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 substantial benefits and build a more comprehensive 

global network. 

Most importantly, the merged airline will be more financially resilient and stable, better positioned to meet customers’ needs, better able to meet competition at home and abroad, and better able 

to provide secure jobs and benefits. 

Let me jump to one aspect of these benefits and provide assurance to all of you here that, as a result of this merger, no hubs will 

9 

be closed. In the United States, the hub at Detroit, the hub at Minneapolis, the hub at Memphis will be preserved. 

I would like in particular to point to the strong support that we 

have received from this merger in Michigan. I would like to call attention to the support of the Detroit Regional Chamber and the 

support of Robert Ficano, the Wayne County executive. 

In Memphis, we received the support of the Memphis-Shelby 

County Airport Authority and the Memphis Chamber. 

And in Minneapolis, we have received the support of the Minneapolis Chamber, the St. Paul Chamber, and the Metro Coalition 

of Chambers, and the Minnesota Chamber. 

The merger will create over $1 billion in annual benefits that 

will help the merged carrier withstand volatile fuel prices and cyclical downturns. 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 

minimum extent. Let’s start with international markets. 

The question of whether there is any reduced international competition has already been asked and answered by the U.S. government. Recently, the U.S. DOT granted antitrust immunity to 

Northwest, Delta, Air France, and KLM, 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, while Delta is strong in the South, the East, and the 

Mountain West. 

The most important fact regarding competition for everyone to 

remember in today’s hearing is that between Northwest and Delta, 

in the United States, we serve over 800 nonstop routes together. 

And out of the total 800, we overlap on only 12. And on those 12 

routes, there is 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 

Expedia have given consumers tremendous power and influence. 

For Chairman Conyers, Congressman Ellison, Congressman 

Cohen, if we go back in time, we remember the merger between 

North Central and Southern, which at that point created Republic, 

which was the largest airline in the country, in terms of destinations served. In 1986, Northwest merged with Republic, which created our hubs in Minneapolis, Detroit and Memphis. 

I think we can confidently say today that, but for the merger of 

Northwest and 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. 

10 

Thank you, Mr. Chairman. I appreciate the opportunity to provide the statement and look forward to any questions that you 

might have. 

[The prepared statement of Mr. Steenland follows:] 

PREPARED STATEMENT OF DOUGLAS M. STEENLAND


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Mr. CONYERS. Thank you so much for starting us off. 

We now turn to the chief executive officer of Delta Air Lines, Mr. 

Richard Anderson. 

TESTIMONY OF RICHARD ANDERSON, 

CHIEF EXECUTIVE OFFICER, DELTA AIR LINES 

Mr. ANDERSON. Thank you, Mr. Chairman, Ranking Member 

Chabot. 

It is a privilege to be here today. There are several thousand 

Delta employees from all the rank and file of our company, pilots, 

flight attendants, airport personnel, and it is a privilege to be here 

on their behalf. 

It is also a privilege to be introduced by Congressman Lewis. 

You know, 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 a stronger financial footing, because it is 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 and the U.S., and Asia and the U.S. than U.S.-flag carriers 

combined. 

U.S. airlines have only 5 percent of the worldwide orders for 

wide-body international airplanes. We aren’t coming here to ask 

you for financial support. We just want the ability to do what is 

in the best interest of our companies, our employees, our shareholders, and the communities we serve. 

This past week, oil hit $120 a barrel. Refining costs have doubled 

to $30 a barrel. Basically, we have had oil double in price in about 

a 12-month period. 

These oil prices have driven five carriers into bankruptcy since 

the 1st of the year, four of which have liquidated. This merger distinguishes Delta and Northwest and it gives us the ability to compete and win versus 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 are both the result of consolidation in this industry. Doug 

Steenland relayed to you the history of consolidation at Northwest. 

Delta is the amalgamation of Western Airlines, Chicago and Southern Air Lines, Northeastern Airlines, and the Pan-Am international route authorities. 

This combination really puts together two very complementary 

airlines, airlines that overlap very little. And when you think about 

where Delta is strong, Delta is strong in the southeastern United 

States, Central and South America, Europe, Africa, the Middle 

East and India. Northwest is strong in the upper Midwest, the 

Midwest, Asia, Japan, and the large cities south and west of Tokyo. 

35 

The European Union open skies and 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 provides stability for employees. We have had them 

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 have set aside 

a significant part of the stock in this transaction to be given to the 

employees upon closing. 

We are committed to no front-line layoffs, and that is possible because this is not an overlapping merger. It is an end-to-end merger. 

We are committed to fair and equitable seniority integration. We 

are committed to protecting people’s pensions. And most importantly, we want to give our employees the opportunity to continue 

a 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 140 small cities in the U.S. receiving service. 

We will create new service to 3,000 new markets domestically and 

6,000 new markets internationally. 

Oil is a game-changer. This merger makes us stronger, stronger 

at a time when oil prices continue to increase, and the benefits, in 

excess of $1 billion, that are created by this transaction, and the 

strong balance sheets, the best costs, the best strategy, the best 

employees give us the opportunity to distinguish these two carriers 

from the last 7 years, 7 years that have produced $30 billion in collective industry losses and the loss of over 150,000 good-paying airline jobs. 

Customers will receive significant expansion, better frequent 

flyer programs, and, most importantly, this airline will have the 

capital and the cost structure and the ability to make investments 

for customers. 

It is good in the end for employees, our customers, and our communities. And we appreciate the opportunity here today to answer 

your questions. 

[The prepared statement of Mr. Anderson follows:] 

PREPARED STATEMENT OF RICHARD H. ANDERSON

INTRODUCTION

Mr. Chairman and members of the Task Force, I want to thank you for providing 

me with the opportunity to address the Task Force about a topic that is critical to 

the future of every employee of Delta Air Lines, Inc. and Northwest Airlines. Last 

week we announced the merger of Delta and Northwest; a transaction that will create America’s premiere global airline. This transaction comes at a unique and important time in the history of the airline industry and our two companies. The world 

is changing rapidly; business is conducted across all parts of the globe and people 

all around the world have unprecedented freedom and opportunity to travel abroad. 

The question facing the domestic airline industry is whether we will have companies 

with the global network and financial stability to compete in this new world against 

foreign carriers. Make no mistake about it; we face formidable competitors from 

overseas. Today foreign flag carriers carry more passengers to and from the U.S. 

and Europe and Asia than U.S. flag carriers. They are frequently funded by their 

government and benefit from regulatory policies that promote consolidation into a 

handful of strong competitors. The Open Skies agreements that have gone into effect recently offer domestic carriers excellent opportunities and daunting challenges 

as transatlantic competition will increase dramatically. The current order book for 

wide body Boeing and Airbus aircraft shows that U.S. carriers make up only about 

36 

5% of the buyers. We do not come here today looking for financial support, but we 

are looking for an opportunity to build a more financially stable U.S. airline with 

the global presence to compete with foreign carriers. 

Our ability to remain strong financially and to compete internationally is severely impacted by the unprecedented rise in the price of oil. Continued prices of $110– 

$115 per barrel of oil will result in bankruptcy for some carriers and rob even the 

most financially sound carriers of profitability. In the last few weeks alone we have 

seen five carriers go into bankruptcy directly as a result of fuel prices, with four 

of them shutting down completely. Airlines are reporting first quarter results and 

the industry will likely report a loss for the quarter compared to profits for the first 

quarter of 2007, with the swing almost exclusively the result of increased fuel costs. 

We have seen the impact of bankruptcies on airline employees and customers. Since 

2001, U.S. network carriers have shed more than 150,000 jobs and lost more than 

$29 billion. The management of Delta and Northwest believe that this merger will 

create a financially stronger airline, with a broad and diversified global route network that will help it weather the impact of fuel prices and the volatility of the domestic and world economies. 

THE DELTA-NORTHWEST COMBINATION WILL BE A STRONG, U.S. BASED GLOBAL COMPETITOR

The combination of Delta and Northwest will create a stronger company with 

route systems that complement each other and will provide an opportunity to offer 

travelers a global network that neither airline independently could offer. Northwest 

for decades has been America’s premiere carrier to Asia; in fact it is the only U.S. 

carrier with a hub in Japan that provides a convenient point to connect to the most 

important destinations in Asia. As a result of restrictions in bi-lateral agreements 

between the U.S. and Japan, there is little chance that Delta would ever be able 

to offer comparable service. Conversely, Delta has invested substantially in building 

the leading service to Europe, the Middle East and Africa from the U.S., as well 

as a strong presence in Latin America. It is virtually impossible for Northwest to 

devote the capital necessary to acquire the planes to build such a franchise. As I 

indicated, the recent Open Skies agreements will permit any U.S. or European 

Union carrier to fly between the U.S. and the 27 EU member states. Already, British Airways, Virgin Atlantic and Ryanair have indicated that they will add or start 

new service between the U.S. and Europe, and Lufthansa is a growing presence in 

the U.S. The combined Delta/Northwest will generate approximately $ 1 billion a 

year in synergies and will have about $ 7 billion of liquidity together with the global 

route network that will allow us to compete in this new environment. 

THE MERGER HAS BEEN STRUCTURED TO PROVIDE STABILITY AND

BENEFITS FOR EMPLOYEES

Delta has a uniquely cooperative relationship with its employees, and in planning 

this merger the impact on employees was uppermost in our minds. I have worked 

at many companies, in many different jobs, in both the public and private sectors 

and I have never seen an employer that respects and cares about its employees 

more than Delta Air Lines. Delta historically has had a culture that always tries 

to do what is best for its people. That is particularly important in view of the immense challenges that Delta and the rest of the airline industry have faced in recent 

years. Given these challenges, I believe it is even more important that we work collaboratively with all of our people so that we can fight and overcome them together. 

As we are beginning to see, companies and employees that fail to work together are 

at greater risk of failure. We believe that it is important that any transaction we 

undertake will benefit the people of both companies, together with our customers 

and other stakeholders. We believe that if we take care of our people, they will take 

care of our customers, and we will all benefit. 

Here are just some examples of how this merger will benefit our people: 

a. We will set aside sufficient equity so that all employees can have an unprecedented equity stake in the merged company. 

b. We will move all employees, over time, up to industry standard pay and benefits. 

c. We will honor our commitment to all U.S.-based, frontline employees to provide a process for the integration of seniority in a fair and equitable manner. 

d. We will maintain the existing pension plans of both companies, both for current employees and for those already retired. 

e. We will maintain our top tier profit-sharing plan and operational rewards 

program. 

37 

f. We have assured our frontline people that there will not be any involuntary 

furloughs as a consequence of the merger. 

g. And particularly important in view of the impact on our industry of record 

fuel prices and economic uncertainty, we will strengthen our airline financially and provide opportunities for our people to benefit from our planned 

growth and future success. 

With respect to whether there will be union representation in the various crafts 

or classes of employees after the merger of Delta and Northwest, we have pledged 

to respect our employees’ preferences on that issue. The Railway Labor Act, as administered by the National Mediation Board, provides a time-tested process for determining employee choices regarding representation following an airline merger. 

We of course will respect that process and those choices. In the meantime, we have 

provided a written commitment to honor the existing Northwest collective bargaining agreements consistent with applicable law, until any post-merger representation issues are resolved. 

Regarding seniority protection for the frontline employees of Delta and Northwest, 

Delta took the initiative last year when our Board of Directors adopted a policy to 

provide a process for fair and equitable seniority integration for employees of both 

companies in any merger. We pledged to use the seniority integration provisions 

from the former Civil Aeronautics Board’s ruling in the Allegheny-Mohawk merger. 

Delta and many other carriers have used the Allegheny-Mohawk provisions in prior 

mergers, and they are also provided for in many collective bargaining agreements 

in the industry. Last December Congress passed legislation that required the use 

of the Allegheny-Mohawk seniority integration provisions in airline mergers. Delta 

successfully fought to assure that the law as passed protected all employees, whether union or non-union. We carried these principles through our negotiations with 

Northwest and have provisions in our merger agreement that provide for seniority 

protection. 

SMALL COMMUNITIES WILL BENEFIT FROM THE MERGER

I would like to address another issue that I know is very important to this Committee and our customers: service to small communities. 

Both Delta and Northwest are very proud of their long history of serving small 

communities. Northwest has often been the only way for people in small towns in 

the upper mid-west to connect with the rest of the country and the world. Similarly, 

Delta was founded in a small southern city and for years its focus was serving small 

southern communities. We know and understand the importance of air service to 

the economic health of these communities. The phenomenal growth of Atlanta and 

the southeast in general is directly related to the superior service offered from 

Hartsfield Jackson Airport in Atlanta, largely by Delta. We intend to continue with 

these traditions and to remain the airline providing the most service to small communities from strategically located hubs in Atlanta, Minneapolis, Detroit, New 

York, Memphis, Cincinnati and Salt Lake City. This is not just customer service, 

it is good business–we have committed publicly that we will not close any hub as 

a result of this merger and to keep these hubs profitable we need the traffic from 

small communities around the country. A robust hub system is critical to the service 

desired by small communities. It is the most effective model to serve these communities as it allows us to use smaller aircraft to bring passengers from many small 

communities to the hub and offer broad connecting opportunities for these passengers. The combined Delta/Northwest will serve over 140 small communities, 

nearly twice the number served by our next closest competitor. The merged airline 

will offer new service to nearly 3,000 domestic origin and destination markets and 

over 6,000 new international markets, greatly expanding the ability of customers 

from small communities to reach every part of the country and the world on one 

airline. 

As the economies of the world become linked more closely, we recognize the importance of air travel to the ability of small communities to compete and thrive in 

a world economy. This merger will open up a new range of options for our customers 

in small communities to put them in closer contact with the rest of the world. For 

example, the combined Delta/Northwest will provide customers in 48 small communities served by Northwest better access to 83 additional international destinations 

served by Delta today, while passengers in 51 small communities served by Delta 

will gain greater access to 20 Northwest international destinations. The combined 

airline will offer passengers over 390 global destinations on a single airline up from 

250 on Northwest alone and 327 on Delta alone. Customers in small towns in the 

south will be able to fly to Japan and much of Asia with one easy connection on 

the same airline. That is not the case today. Similarly, customers in the upper midVerDate Aug 31 2005 13:22 Aug 26, 2008 Jkt 000000 PO 00000 Frm 00041 Fmt 6633 Sfmt 6621 H:\WORK\ATRUST3\042408\41905.000 HJUD1 PsN: DOUGA
38 

west will have many more options to more destinations in Europe and Latin American than they do today. Since Delta and Northwest have focused their attention 

on different regions, there are few overlap routes and customers will gain the benefits of a larger combined network without any material reduction in services. However, providing service to any city, whether small or large, must make economic 

sense and the high cost of fuel for either Delta or Northwest is far more likely to 

result in a reduction or elimination of service than this merger. 

THE UNPRECEDENTED RISE IN THE PRICE OF FUEL HAS CREATED SERIOUS RISKS FOR

THE AIRLINE INDUSTRY

No discussion about the current state of the airline industry would be complete 

without mentioning the devastating impact of the unprecedented rise in the price 

of oil. Every day we read that the price of a barrel of oil has hit new records. Over 

the last five years we have experienced a 28% annualized increase in oil prices and 

in the last 12 months alone, the price of a barrel has nearly doubled. Most analysts 

do not foresee the price of a barrel of oil going below $100 any time in the near 

future. What is less widely publicized is the equally dramatic rise in the cost of jet 

fuel extracted from oil. Since 2001, the cost of a gallon of jet fuel has increased over 

500% and nearly doubled since December of 2006. 

The airline industry is somewhat unique. When the price of oil rises and you go 

to fill your car up with gasoline, you pay more at the pump; there is little choice. 

In the airline industry, we are lucky if we can recover through fare increases even 

50% of fuel price increases. The costs have to be made up somewhere else. Despite 

becoming more and more fuel efficient and obtaining more and more productivity 

from our employees and operations—Delta and Northwest have two of the lowest 

cost structures of the mainline carriers—the impact is dramatic. In 2003 fuel costs 

consumed 17 cents of every dollar of passenger revenue we received; in 2008 that 

number will be 43 cents. Every $1 increase in the price of a barrel of oil costs Delta 

about $60 million. The increase from $110 to $115 per barrel in the last couple of 

weeks alone will cost Delta over $300 million. As a result, there are fewer dollars 

left to improve passenger amenities, acquire new aircraft and provide better compensation and benefits to employees. 

The employees in this industry have sacrificed time and time again. The dramatic 

rise in fuel costs has resulted in much of the cost savings our employees have generated through productivity and benefit losses being used to pay for fuel rather than 

to improve the product. In effect, it has eroded most of the sacrifices they have made 

to make their company viable and sustainable in the future. Merging Delta and 

Northwest will create a much more financially stable company with approximately 

$7 billion in liquidity and $1 billion in annual synergies. The combined airline will 

be able to withstand an 80% greater increase in fuel price than either airline standing alone, and still maintain profitability. This financial strength and flexibility, 

much greater than either airline standing alone, will provide additional resources 

to help weather this unprecedented fuel cost environment and a softening domestic 

market. 

THIS MERGER WILL BE BENEFICIAL TO CUSTOMERS

I have already touched on some of the key benefits our customers can expect such 

as significantly expanding the number of domestic and foreign locations that will 

be available from the merged airline. There will be other benefits such as a common 

frequent flyer program that will provide more opportunity to earn miles, more 

schedule options, and more efficient routes for connecting passengers as we optimize 

the combined hub structure. Of equal importance, the financial stability and flexibility the combined carrier will have will allow for re-investment in our product 

such as planes, in-flight services and reservation systems. For example, we have 

publicly declared our intention to exercise options to purchase up to 20 new wide 

body jets between 2010 and 2013 to upgrade our fleet for international flying. 

We are mindful of the difficulties in combining the complex operations of two airlines and that other airline mergers have encountered problems that have inconvenienced customers. Delta and Northwest are committed to making this merger seamless and trouble free to our passengers. Both Delta and Northwest are members of 

the SkyTeam alliance and are used to working cooperatively. Our frequent flyer programs, customer lounges and IT systems have been partially integrated already. In 

addition, we will be able to build on the decades long partnership between Northwest and KLM (now a part of Air France) and the long standing relationship between Delta and Air France. All of these factors will help smooth the integration 

process for our customers. 

39 

THE MERGER DOES NOT HARM COMPETITION

Doug Steenland’s written submission will deal extensively with the pro-competitive impact of this proposed merger and I will not repeat all of those points. I will 

simply say that these two airlines have complementary networks; Delta’s domestic 

focus is in the east and mountain west while Northwest focuses on the upper midwest. There are only twelve domestic nonstop overlapping markets. Even these nonstop overlaps do not cause competitive problems, as Doug’s statement indicates. 

Similarly, on connecting route overlaps, potential competitive effects are mitigated 

by the presence of low cost carriers, the relatively small market shares of Delta and 

Northwest, alternative airports and the likelihood that legacy carriers will expand 

into these markets. In addition, the transaction will generate significant efficiencies 

through such factors as more efficient matching of aircraft to routes that will enable 

the combined carrier to be financially stable and to offer a better product to customers, such as a broad global network and enhanced airport presence. 

CONCLUSION

In closing, I would like to acknowledge the support we have received from Delta 

people throughout the company. It has been a little more than a week since we announced the merger. We have been traveling our system from Atlanta to Cincinnati 

to New York to Salt Lake City and I am happy to say that Delta people are very 

excited about what this means to them. I believe that Doug will report the same 

about Northwest’s employees. 

Last week we had a meeting in Atlanta attended by almost 2000 employees. Some 

of our people have traveled here today to show their support. Our people appreciate 

the fact that we are taking proactive steps to provide a more secure, financially 

stronger company in these times of increased foreign competition, record-setting fuel 

prices and a weakening economy. They don’t want us standing still. We look forward 

to welcoming Northwest employees to join with their Delta counterparts to create 

and enjoy the benefits of being part of America’s premier global airline. 

Mr. ANDERSON. Mr. Chairman, if I may have introduced into the 

record written testimony in support of the merger from the Detroit 

Chamber of Commerce, the Memphis Chamber of Commerce, the 

Minneapolis-St. Paul Chamber of Commerce, and the Airline Pilots 

Association of Delta Air Lines. 

Mr. CONYERS. We are happy to receive it into the record. 

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Mr. CONYERS. Let’s begin our discussion, gentlemen. Thank you 

for your statements. 

There are several things that are going around right now. You 

know, we heard in the American Airlines-TWA merger, ‘‘No hubs 

will be closed.’’ And within 2 years, they were closing hubs. 

The other thing I am thinking about is, will you—if you don’t get 

this merger, does that mean you are both teetering on bankruptcy 

again? I mean, how bad will the future be if you are not successful 

here? 

Will you just be unstable or go out of business completely? How 

gloomy or possibly hopeful is the picture? 

And then, what about the laying off of employees? You talk about 

no furlough of frontline workers, but the elimination of redundant 

administrative and corporate positions. That sounds—well, you 

know, it sounds like it sounds. 

What do you think about all of these kinds of questions that are 

looming around up here among the Members? 

Mr. ANDERSON. Mr. Chairman, if I could take the A.A.-TWA 

merger, and then I will leave those hard questions to Mr. 

Steenland. 

If you look back at the American Airlines-TWA merger, TWA had 

historically, during deregulation, been only an international carrier. And 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 not a very viable hub at 

the time. And I would distinguish that circumstance, the near-liquidation—in fact, in the end, it was a liquidating Chapter 11, because American just bought the assets. 

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, and the strategies of both airlines. 

And all of these hubs are economically viable hubs. They all play 

important roles in the networks of both airlines. And in the end, 

it is the viability, 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 fly to those cities. Northwest flies uniquely to just the red 

cities. 

So what it actually does is it allows us to cross-hatch these networks. And hubs get stronger when they have more traffic flow. 

And when you are able to take more unique cities and combine 

those unique cities to more of the hubs, you really build a stronger 

patchwork of service for customers. And that is what makes that 

network durable. 

Mr. STEENLAND. Responding to your other two questions, Mr. 

Chairman, in the past, airline mergers have largely happened between airlines that have been in significant and serious financial 

distress. 

61 

As Richard just testified, we have been through our restructuring. And amongst the U.S. airlines, Northwest and Delta have 

the best balance sheets, we have the highest cash position, we are 

as well positioned as any other airline out there. 

Now, having said that, when we emerged from our restructuring, fuel was at $60 a barrel. Yesterday, it closed at $118 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 being able to put these two carriers together, which are 

going to be in excess of $1 billion a year, we will not have at our 

disposal to help offset those significant oil price increases. 

Now, let’s address the issue of layoffs and let’s use the Detroit 

airport as an example. 

At Detroit, Northwest is obviously the large carrier there. Delta 

is also in Detroit. Delta operates to Detroit from Atlanta, Cincinnati and Salt Lake. 

All of our ticket counter employees, all of our employees on the 

ramp, all of our QSAs, the great staff we have there, they are all 

going to be needed and they are all going to continue to have their 

employment opportunities, because the level of flying at Detroit 

will not go down. If anything, it will go up. Same thing about the 

Delta flights that come into Detroit. 

So Northwest employees at Detroit, Delta employees at Detroit 

can be confident that their jobs are in good hands, as well as Minneapolis, 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. Two 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, we will look to see if we can find alternatives. 

If that is not available, we will look to early-out programs and the 

like to try to make that transition as easy as possible. 

Mr. CONYERS. Thank you both very much. 

We welcome, of course, our invaluable Members, Betty Sutton of 

Ohio and Debbie Wasserman Schultz of Florida. The ladies came 

late this morning, but that has never happened before. 

I now recognize our Ranking Member, Steve Chabot. 

Mr. CHABOT. Thank you, Mr. Chairman. 

Mr. Anderson, last Sunday the Cincinnati Enquirer printed highlights from a survey conducted by the National Business Travel Association. And the survey results revealed that 54 percent of their 

members—and that is, again, business travelers—believe that the 

customer service of what would become the world’s largest service 

would be poorer, while 41 percent said flight frequencies to some 

markets would worsen. 

How would you respond to the concerns expressed by these customers? And they actually, my understanding is, generate about 

half of Delta’s revenues. 

Mr. ANDERSON. If you look at these two carriers and the performance of these two carriers, this past year Delta was the numberone on-time airline, according to DOT statistics, among the network carriers. And we ranked number two in the J.D. Power survey among network carriers. 

62 

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. In our lifetimes, 

we will not figure out how to fly into bad weather. And if we did, 

I don’t think I want to do it. 

So setting aside weather, 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 we take those kinds of things very seriously at Delta. And 

I know Northwest takes those kinds of things seriously. And we believe that this consolidation will give us the capital and the balance 

sheet to be able to make the investments necessary to be able to 

continue to improve customer service. 

Mr. STEENLAND. If I could just add one point, Congressman, 

Northwest and Delta have a cooperation agreement in place today. 

We have 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 have already done that, and we are hopeful that 

that will make this transition much, much smoother. 

Mr. CHABOT. Okay, thank you. 

Mr. Steenland, let 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 and Northwest be able to exercise added 

market power in the purchase of fuel? 

Mr. STEENLAND. The simple answer is no. There might be a few 

places where Northwest purchases fuel a little better than Delta 

does and vice versa. But in the big scheme, that is really not where 

the savings comes from. 

The savings come from the cost and revenue benefits by putting 

the two airlines together. We have looked at that very closely. We 

have done tremendous amount of analysis to make sure that we 

are confident in that. 

Conservatively speaking, we think that is worth more than $1 

billion annually. And we will 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 are still not big enough to 

deal with the behemoths out there. And, unfortunately, we are takers and just subject to the incredible increase in the price of fuel 

that has happened over the last 6 months. 

Mr. CHABOT. Okay. Thank you. 

Let me combine two questions, Mr. Anderson, because I think I 

am going to run out of time here shortly, and I want to make sure 

I get both of them in. 

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 

63 

there on a particular flight. They are less expensive, and therefore 

they do that. 

What impact should the merger play in assisting them in not 

having to drive all the way to Indianapolis, which is 100 miles 

away, for example? 

And, secondly, oftentimes when there is a merger one of the concerns is some jobs get eliminated. And Comair, obviously, is an important regional airline, in cooperation with Delta. 

And what are your thoughts relative to what might happen with 

respect to Comair? Because they are very important, we would obviously like to keep them. 

Mr. ANDERSON. When you look at the effects of this combination 

on the contestability of the marketplace, there won’t be any change. 

And it is 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 12 

flights a day. We have 400 flights a day. 

So in terms of—you know, normally in competition and 

contestability analysis you are looking at overlaps in markets, 

right, so that you can combine the pricing of the two together. In 

this case, there is just no overlap in Cincinnati, so it is 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 that in Cincinnati we have strong companies there, right? 

We have got General Electric engines. We have Proctor & 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. And on average, if you control 

for inflation, airfares today to fly one mile are about 30 percent 

lower than they were in 1970. And that has 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 would have three or four stops before you 

got to the endpoint. Now we have nonstop service or one-stop service to virtually anywhere in the world at yields and fares that are 

30 percent lower than they were during deregulation. 

Lastly, Comair is still a very important part of Delta. It is a 

wholly owned subsidiary. We not only rely significantly on Comair 

in Cincinnati, but Comair is a very important regional carrier supporting Delta’s international operations in JFK. 

So we have made a significant number of investments in Comair, 

including new airplanes. And that will remain unchanged after this 

transaction closes. 

Mr. CHABOT. Thank you very much. 

I yield back. 

Mr. CONYERS. Steve Cohen? 

Mr. 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 have also listened to the concerns of the pilot’s 

64 

union, the flight attendants, machinists, et cetera, 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 Republic at 

one point, merger. 

Memphis is very desirous of having a hub. It is important for us 

as a business city. Federal Express, I think, is one of your largest 

users of Northwest. 

Mr. STEENLAND. Absolutely. Absolutely. 

Mr. COHEN. How much is Federal Express’s presence in Memphis 

an important factor in deciding to keep service in Memphis at the 

level it is now? 

Mr. STEENLAND. I think it is critical, Congressman. FedEx is a 

fantastic company and innovator. And they are one of 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 

FedEx to grow and to expand. They help us, in terms of we share 

costs at the airport, which makes the Memphis airport a very attractive, very good place to do business. 

And FedEx is a critical customer and a great partner of Northwest. And they will be a great partner of the merged airline going 

forward. 

We have had a number of discussions with FedEx that are currently in process as to ways where we can further cooperate. And 

we have identified a number of very interesting opportunities that 

I am confident we will pursue in the future. 

Mr. COHEN. And so I presume, Mr. Anderson, that Fred Smith 

would be like E.F. Hutton? 

Mr. ANDERSON. Well, when Fred speaks, you listen. 

Mr. COHEN. Good. 

Mr. ANDERSON. But in my prior life at Northwest, I spent many, 

many days in Memphis and did a lot of work with Jim McGee, 

Larry Cox, Arnold Pearl, Mayor Harrington, and have been a big 

supporter of the airport and was actually instrumental in launching the service from Memphis to Amsterdam some—I guess 10 

years ago now. 

And it has been really successful. We partnered with the airport 

to build a Federal inspection service facility. And Memphis is—I 

have spent a lot of time there and have a certain fondness for it. 

Mr. COHEN. The Amsterdam flight would remain, I presume? 

Mr. ANDERSON. Yes. 

Mr. COHEN. And would there be other possibilities of international travel from Memphis? 

Mr. ANDERSON. Well, that is one of the things that we have to 

look at. Candidly, much of the decisionmaking ends up 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 KLM, just like Amsterdam works from 

Memphis, the corollary to that is Paris, because Paris will be the 

hub of the combined Northwest-Delta in Europe. 

65 

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 have got to get the 787 delivered. Number two, we have 

got to have manageable fuel costs. And then, number three, once 

we have this transaction closed, then we can start acting as a single entity and really understand the economics of each of our route 

networks. 

Mr. COHEN. Are there advantages to the Memphis airport that, 

let’s just say, for instance, the Cincinnati airport doesn’t have, in 

size of runway, climate, and other peculiar benefits? 

Mr. ANDERSON. Well, both airports—in fact, if you look at all of 

these hub airports, we are pretty fortunate, because they are all 

very well-run and they all have plenty of capacity. 

So we built the World Runway in Memphis and opened it about 

6 years ago. Atlanta just added a fifth parallel runway. Detroit has 

four parallels and two crosswinds. Minneapolis just built a new 

runway. 

Salt Lake is starting a new capital plan, is a very well-run and 

very well-managed airport. And Cincinnati is a very well-run airport. 

All these airports have plenty of capacity, plenty of gates, plenty 

of runway length, and they are all very well-run with very good 

management. 

Mr. COHEN. Idling time is important as far as fuel cost. Is Memphis the lowest as far as—the most efficient, in terms of idling 

time? 

Mr. ANDERSON. Clearly, probably your taxi-out and taxi-in times 

at Memphis are going to be among the lowest in the country. And 

I think they are very low at Cincinnati and St. Lake, too. They 

tend to be higher in places like New York, Atlanta, where you have 

more service. 

Mr. COHEN. Memphis is the center of the Delta. Thank you. 

[Laughter.] 

Mr. ANDERSON. Appreciate that. Well, Memphis at one time was 

the number-two city on the Delta network back when Mr. Woolman 

was CEO. And at that time, we had the Peabody Ducks as an endorsement. 

Mr. COHEN. The Delta starts in the Peabody Hotel lobby. 

Mr. ANDERSON. That is exactly right. 

Mr. COHEN. Remember that. 

Thank you, sir. 

Mr. CONYERS. Thank you very much. 

We have the able gentleman from Florida, Ric Keller. 

Mr. KELLER. Thank you very much, Mr. Chairman. 

And I want to thank our CEOs from 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 are here to question you about your business. That is just how 

things work. 

66 

I am going to ask you some local provincial questions about Orlando, about the merger, and then broader questions about the 

country in general. 

I represent Orlando, the world’s number-one vacation destination. Mr. Anderson, on March 19th of this year, Delta announced 

that it was slashing the number of seats it 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. 

Sir, could you tell me what impact, if any, this proposed merger 

would have on your Orlando operations, in terms of routes, ticket 

prices, and jobs? 

Mr. ANDERSON. First, with respect to jobs, we have made a commitment as part of that to our employees at Delta that, while we 

are pulling 10 percent of our domestic capacity in the back half of 

the year—and this has nothing to do with the transaction we are 

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 on the employment 

front, it won’t have an impact. 

The issue that you see in Orlando, with respect to fares, it is an 

incredibly competitive market. And I believe Orlando, because it is 

probably the number-one vacation destination in the U.S., maybe 

in the world—we have all taken our kids there, right? 

Mr. KELLER. Right. And it is number one, 49.3 million tourists. 

Mr. ANDERSON. It is number one? 

Mr. KELLER. Yes. 

Mr. ANDERSON. And so it will always be a very competitive marketplace. With respect to the decision we took, our decision was 

purely about losses and the cost of fuel. 

The transaction we are contemplating here will make both of us 

stronger. Whether it will—I can’t sit here and tell you that we will 

increase service to Orlando. That is going to be more a product of 

where fuel and the economy is. 

Mr. KELLER. All right, so let me hear what I am hearing. In 

terms of job losses or gains, you don’t see a big impact. In terms 

of ticket prices, you don’t see a big impact, because there is already 

so much competition that exists. In terms of routes coming back, 

you are unsure? 

Mr. ANDERSON. I am unsure about routes coming back. 

Mr. KELLER. That is a fair summary on those? 

Mr. ANDERSON. That is a very fair summary. 

Mr. KELLER. Okay, let me just switch then to Mr. Steenland, 

with respect to Orlando, still. The same question: Do you see this 

merger having any impact on the Orlando operations, in terms of 

routes coming back, that sort of thing? 

Mr. STEENLAND. Northwest serves Orlando from our three hubs. 

So we operate flights there from Detroit, Minneapolis, and Memphis. I would anticipate those cities will continue to have nonstop 

service to Orlando. 

As Richard said, it is a very competitive place. And fares have 

always been reasonably priced as a result of the capacity. 

67 

As a result of fuel, there may be some frequency adjustments, 

but there will continue to be nonstop service from all three of those 

cities. 

Mr. KELLER. But you don’t know if you will pick up some of those 

nonstop flights that Delta has had to drop for business reasons? 

Mr. STEENLAND. Well, Northwest has always been a very—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 have never served Orlando other than from one of our hubs. 

Mr. KELLER. All right, I don’t want to cut you off. I got one final 

question, because my time is out, and I would like to direct it to 

both of you. 

I am interested in three specific issues, if you could tell me the 

impact on these issues with the merger and without the merger. 

What impact is there 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 will leave that up to both of you. 

Mr. ANDERSON. Ticket prices, the markets will still stay contestable, because there is no overlap. So ticket prices will still be set 

by market forces. And this merger won’t have an effect in terms 

of the contestability of markets. 

Mr. KELLER. Okay, nationwide, not Orlando? 

Mr. ANDERSON. Nationwide. 

Mr. KELLER. Right. 

Mr. ANDERSON. Second, route options will be dramatically increased. And they will be dramatically increased because you are 

hooking these two end-to-end networks. And while 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 is all those many new combinations that combining the 

red and 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, lastly, with respect to jobs, we have made a commitment 

that no front-line employees will have involuntary layoffs. And I 

think Doug described that we will have redundancies in the corporate staff, and we are going to deal with that as respectfully and 

as judiciously as we can. 

But, obviously, when you merge two companies, there are unfortunately redundancies that you are going to have to deal with over 

time. And we will do that in a respectful and gracious way. 

Mr. STEENLAND. 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, 

we will actually present an opportunity for new service. I think a 

perfect example is the Memphis-Amsterdam flight we just talked 

about, because Northwest and KLM have a joint venture. It is a 

virtual merger and, but for that, there would be no flight along 

those lines. 

And I think we have answered the employment question. 

Mr. KELLER. You concur, essentially, with the answer? 

68 

Mr. STEENLAND. Yes, I do. 

Mr. KELLER. Okay. Thank you. 

Mr. Chairman, I yield back. 

Mr. CONYERS. Thank you very much. 

The distinguished gentlelady from Ohio, Betty Sutton? 

Ms. SUTTON. Thank you, Mr. Chairman. 

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 redundancies? 

Mr. ANDERSON. Correct. 

Ms. SUTTON. Okay, so what does that mean? Does that mean 

management-level—— 

Mr. ANDERSON. Yes. 

Ms. SUTTON [continuing]. Positions only? Okay. That is the only 

effect that this merger will have on employees? 

Mr. ANDERSON. Correct. 

Ms. SUTTON. Okay. 

During the merger negotiations, why weren’t union representatives given a place at the table? 

Mr. ANDERSON. Well, normally in a merger negotiation, it is a 

negotiation between the two corporations. 

Ms. SUTTON. And you all are familiar with the letter that you received from 26 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 responded to that letter formally? Or would you like 

to respond to that here today? 

Mr. ANDERSON. Sure. The transaction is contemplated with respect to several issues. One, we have made the commitment with 

respect to no front-line layoff of employees. 

Number two, we have set aside a substantial portion of the equity of the combined companies for the employees. And that is not 

an option. It is an outright grant of stock so that they can share 

in the benefits that are created. 

Third, we have committed in the merger agreement, and there 

has been legislation that has been passed, and we have committed 

as a company together for seniority protection for employees. 

And, lastly, with respect to the issue that the Chairman raised 

about the Air Line Pilots Association, where the Air Line Pilots Association, the two groups of pilots issued a press release earlier this 

week where they have joined together again. 

They have agreed to process on seniority integration, and we 

have committed to sit down with them and work expeditiously to 

conclude the Northwest-Delta pilot agreement prior to closing. 

Ms. SUTTON. 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 discussion company-to-company, who have you committed to doing that to? Who have you 

given that commitment to? 

Mr. ANDERSON. To all the employees of both companies. And it 

is also a matter of Federal law. 

69 

Ms. SUTTON. Okay. And in that commitment to those employees, 

what form of—what is the actual form of that commitment? 

Mr. ANDERSON. Well, it was included in—you know, the whole 

industry worked on this in the FAA reauthorization last December. 

And there is a provision in airline law called the Allegheny-Mohawk labor protective provisions. 

And they came out of a merger in the industry that became part 

of USAir probably 40 or 50 years ago. And it has been sort of the 

recognized standard in the industry for seniority integration. 

And last December, when the FAA 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 provided LLPs under Allegheny-Mohawk to employees in a merger. 

Ms. SUTTON. Sure. 

Mr. ANDERSON. And it applies to all employees in a merger. Second, we wrote it into the merger agreement. And, third, the board 

of directors at Delta adopted that as the commitment of the company long before this transaction was consummated. 

Ms. SUTTON. Okay, let me turn to some of the issues raised by 

the Association of Flight Attendants. They have expressed concern 

that you are 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? 

Mr. ANDERSON. You know, Delta has a long history of working 

with its employees. If you go back—prior to its bankruptcy, it was 

always noted as one of the best places to work. We have had some 

difficulties, obviously, through bankruptcy, but we do care a lot 

about our employees. 

You know, we would never engage in carrier interference in a 

campaign like that. We support a democratic process. We have both 

union employees, the dispatchers and our pilots, and we have many 

non-union employees, many of whom are with me here today. 

And we believe that we should have a democratic process and let 

people have free elections. 

Ms. SUTTON. And does that mean that you are taking a position 

of neutrality? 

Mr. ANDERSON. We are—as I said, we support a democratic, free 

election with plenty of information for everybody, because our employees have very firm views on both sides of the issue. 

Ms. SUTTON. Are you engaging in advocacy from one side or the 

other or are you in a neutral position? 

Mr. ANDERSON. We are being certain that we do not engage in 

any interference in the election and that we make certain that the 

election provides for free choice for all the employees in a democratic process. 

Ms. SUTTON. Okay, but I don’t think you are really answering my 

question. Are you neutral? 

Mr. ANDERSON. I am neutral to the extent that we will always 

follow the NMB rules and we will be certain that the laboratory 

conditions that the NMB prescribes are complied with at Delta for 

a free election. 

70 

Ms. SUTTON. Well, I will take your answer of not really answering my question as the answer. But thank you. 

Mr. ANDERSON. Thank you very much. 

Mr. CONYERS. You are welcome. 

We have been joined by Congresswoman Sheila Jackson Lee of 

Texas. Mr. Hank Johnson of Georgia, although not a Member of 

the Task Force, is always welcome to sit with us. 

You are welcome. 

And Darrell Issa of California has joined our ranks. 

We now turn to the able Member from Iowa, Mr. Chris Cannon. 

Utah. 

Oh, I am sorry. Lamar Smith, Ranking Member of Texas, is recognized. Excuse me. 

Mr. SMITH. Either one is fine. Thank you, Mr. Chairman. 

I want to say at the outset I am 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 

anti-competitive. 

I have a couple of questions. And the first one goes to how this 

merger would benefit consumers. 

You have already responded that ticket prices would be set by 

the market. There may be some impact on flights. Just in general 

and going beyond those specifics, how do you see consumers benefiting by this merger? 

And Mr. Steenland? 

Mr. STEENLAND. Thank you, Congressman. Several ways. First, 

by creating a more resilient and financially stable airline that is 

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 is to Asia, whether it is to South 

America, linking up those destinations. 

We have tried for a long time—and we have looked at whether 

Northwest could affordably put in a flight from Detroit to Sao 

Paulo, Brazil. On our own, we couldn’t do it. But Delta has a 

strong presence 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 would be one 

opportunity that would present itself. So there will be some expanded opportunities. 

Combining the frequent flyer program so it is now one, customers 

will earn a single set of miles. They will not have miles on one airline. All of these will clearly make air travel for consumers better. 

Mr. SMITH. Okay. 

Mr. Anderson, do you have anything to add? 

Mr. ANDERSON. The one piece I would add to that is the alliance 

piece. And think about the question about Federal Express. You 

know, 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. 

71 

So for corporations that do business globally, 3M in the Twin Cities, they will now have access to parts of the world that they previously didn’t have access. 

And the same for the companies that Delta serves, like CocaCola. 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 traveling around the world doing business more options on the same network. 

Mr. SMITH. Okay, 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 the 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—— 

Mr. ANDERSON. Well, it is mostly in the headquarters. It is essentially the management jobs, not the front-line jobs. 

Mr. SMITH. But how do you define management? At what salary 

level would that begin? 

Mr. ANDERSON. Well, it is various salary levels, but it is many 

of the traditional corporate overhead functions, like finance, accounting, the functions that are in the corporate headquarters. 

Mr. STEENLAND. And the combined—if I could just take a shot— 

the combined airline in the merged world, again, because there is 

no overlap and the hubs will remain and the network will remain 

largely in tact, the expectation is that you will have the same number, if not more passengers. So you will need the same number of 

reservation agents. 

Mr. SMITH. And what would you estimate is the total number of 

people who might lose their jobs? 

Mr. STEENLAND. I mean, it is hard to say, because we haven’t 

really done that bit of granular analysis yet. 

Mr. SMITH. If you can already say that it is only going to be 

those in the corporate management, you surely have an idea of how 

many people you are talking about. 

Mr. STEENLAND. Under 1,000. 

Mr. ANDERSON. Yes, it is probably some number under 1,000. 

But we haven’t done the bottoms up. 

Mr. SMITH. Okay. 

Mr. ANDERSON. You know, we haven’t gone to that level of diligence. 

Mr. SMITH. You have been very general 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 have done in the past? 

Mr. ANDERSON. Well, we have just—right now, Delta has a voluntary program, because, as part of this fuel price run-up, we have 

reduced—we need to reduce our full-time employees by about 2,000 

72 

people. And we have put together a package where we have reduced the retirement age. 

And we provide the rule of 60. Basically, you get lifetime passes 

and I believe it is a week of pay for every year of service. And we 

provide a health benefit and a disability benefit. And we do that 

for both people with 10 years or more seniority, I believe. 

And it is a package of cash, passes, you know, lifetime passes on 

the airline. 

Mr. SMITH. Okay. 

Mr. ANDERSON. And a medical benefit. 

Mr. SMITH. Okay. Thank you, Mr. Anderson. 

Thank you, Mr. Steenland. 

Thank you, Mr. Chairman. 

Mr. CONYERS. Thank you, sir. 

The distinguished gentlelady from Houston, Texas, Sheila Jackson Lee? 

Ms. JACKSON LEE. Mr. Chairman, thank you. 

This has been one of the most instructive and vital experiences, 

to participate in this Task Force, for the work that we are doing. 

I thank the Chairman for acknowledging me. I had to go to the 

floor for the Coast Guard bill. 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 two distinguished gentlemen, 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 gentlemen that are here, I believe, again, as 

I said, that this is a reflection of what is to come. And that is 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 to 

your merger efforts. 

You have indicated that there will not be a negative impact on 

consumers. In fact, you have indicated that—your hubs will remain 

open, that there may be greater reach. And I am very sympathetic 

to small regions or areas. I am in the fourth-largest city in the Nation, maybe the third-largest soon. 

But I am surrounded by rural Texas 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 passenger bill of rights, 

which talks about some of the issues that, in particular, Northwest, 

as you well know, confronted in Detroit some months or a year or 

so ago? 

May I start with Mr. Steenland and then Mr. Anderson? 

Mr. STEENLAND. Yes, ma’am. Based on some of the proposals 

that have been advanced, we would have no objection to being subject to those kinds of requirements. 

We need to serve our customers well. We need to take care of 

them. We are in a customer-service business. We have put provisions in our contract of carriage that are contractually enforceable, 

73 

because we wanted to make sure, if we did make a mistake, that 

there would be recourse. 

And as long as these provisions are properly defined and well understood, the concept of a passenger bill of rights is not something 

that in and of itself we would oppose. 

Ms. JACKSON LEE. Mr. Anderson? 

Thank you. 

Mr. ANDERSON. First, Congresswoman, we have a responsibility 

to our passengers. And our employees take that very seriously. 

The inspector general, about 8 months ago, issued a series of recommendations. The Department of Transportation inspector general issued a series of recommendations with respect to customer 

rights. 

We endorsed those recommendations. And they are legally enforceable against Delta today because we put them in our contract 

of carriage. 

Ms. JACKSON LEE. But you would have no problem then—because I have a shortened time of questioning—to see us push forward legislative initiatives through the United States Congress, 

which ultimately the President would sign? 

Mr. ANDERSON. I would have to just—I am not familiar with the 

bill, but I can tell you that we have been very supportive of the inspector general and the DOT advancement there. And I am sure 

there are concepts there we would agree to. 

Ms. JACKSON LEE. Gentlemen, 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 effort of this merger. 

Let me quickly have you answer again the questions. 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 merger? And 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? 

Mr. Anderson? 

Mr. ANDERSON. Yes. First, we have been clear that this merger 

is about an end-to-end connection between the two networks and 

that front-line employees would not be furloughed, involuntarily 

furloughed as a result of the transaction. And we have made that 

clear. 

The transaction creates a lot of benefits for everybody involved, 

separate and apart from fuel prices. We, of course, would love to 

have a moratorium on aviation taxes and would welcome that at 

any point in time. 

But you are right about fuel. It is really unbelievable the rise 

that we have had in fuel. And it is having a very dramatic effect 

on the industry. 

And we don’t have an energy policy in this country. And without 

an energy policy in this country, we are going to be faced as an industry with continuing difficulty. 

And what we are trying to do here is come up with a creative 

way for these two airlines to be able to navigate through a very difVerDate Aug 31 2005 13:22 Aug 26, 2008 Jkt 000000 PO 00000 Frm 00077 Fmt 6633 Sfmt 6601 H:\WORK\ATRUST3\042408\41905.000 HJUD1 PsN: DOUGA
74 

ficult fuel environment and a very difficult economic environment. 

And I think you have hit the issue right on the head. 

Ms. JACKSON LEE. Quickly? 

Mr. STEENLAND. I would endorse all that Richard said. 

And, again, with respect to fuel, the magnitude of the increase 

in fuel, plus the cost that we have to pay for having that crude oil 

refined into jet fuel, are also at record highs. So if you see fuel at 

$118 a barrel, the price per barrel to refine it is in the $30 to $40 

range. 

So we are really paying close to $150 a barrel for jet fuel, which 

is at all-time record levels. 

Mr. ANDERSON. And we are paying for it with dollars, so our foreign-flag competitors that are paying for it with euros—you know, 

it is the equivalent of about $80 a barrel for them, because they 

are using euros, and we have a weak dollar. 

So it is not just the run-up in the price of fuel. It is also the 

weakness of the dollar, in addition to the crack spreads, which is 

the cost of refining. 

Ms. JACKSON LEE. Let me thank the witnesses. 

Mr. Chairman, I think a passenger bill of rights should really be 

a twin to any potential merger. And with that, I yield back. 

Mr. CONYERS. Thank you. 

The Chair is pleased to recognize the distinguished gentleman 

from Utah, Chris Cannon. 

Mr. CANNON. Thank you, Mr. Chairman. 

And let me apologize for missing the next panel, but we have a 

markup of the Committee that I am the Ranking Member of. I 

thank you for holding this hearing. 

And, Mr. Anderson, your predecessor opposed the merger with 

USAir recently. Why is this merger different? 

Mr. ANDERSON. Well, you have got to put the USAir transaction 

in context. That wasn’t a merger. That was a hostile invasion. 

And in any circumstance where you are 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 employees and 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 USAir 

and Delta almost perfectly overlapped. New York, Boston, up and 

down the East Coast, they had a hub in Charlotte, hub in Atlanta. 

And so since it wasn’t end-to-end, it caused a lot of layoffs and 

reductions in operations, because the value that you were to create 

there was going to come from basically paring the two airlines 

down significantly. 

In this instance, there is very little overlap. In Salt Lake City, 

Northwest has one gate, and I think it may operate six flights a 

day. So we—there is just not very much overlap between the two. 

And if you go back to the CEO’s, Mr. Grinstein’s, testimony at 

that time, he said—specifically he said, you know, we are not opposed to mergers. We are just opposed to bad mergers, and that 

was a bad merger. 

75 

Mr. CANNON. Thank you. You mentioned Salt Lake. What would 

be the effect of this merger on the Salt Lake hub? Are we going 

to see service to Asia and Europe? 

Mr. ANDERSON. Well, our ultimate hope is that once we get them 

together and we can really dig under the covers of the flight profitability and the planning at both airlines, our goal would be to add 

international service, because each of these airlines has a longterm goal of increasing the percentage of its flights to nearly 50 

percent of the total. 

We are both at about 40 percent of our traffic is international. 

And the goal with this alliance, with this merger and our alliance 

with SkyTeam, is to be able to increase our international service. 

And Salt Lake would surely be on that list. 

Mr. CANNON. Thank you. You know, I loved the 1986 merger 

with Western Airlines. That I think resulted in a large number of 

benefits. 

How does this merger compare, do you think, with that one? 

Mr. ANDERSON. Well, in 1986, I was just graduating—I wasn’t in 

the industry, so 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 $1 billion in benefits. 

And that is very important for these two airlines, given the 

headwinds we face on fuel and the economy. 

Mr. CANNON. Thank you. You know, we could end up in a world 

where we go from six major carriers to three. And I have some concerns about that, as I think probably everyone does. 

In particular, what is going to happen to the market on the 

Internet because of this and possibly future mergers? Are you 

thinking about groups like Expedia and Travelocity, Sabre, and 

how they get information, how they—what 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? 

Mr. ANDERSON. Well, the airline industry has the most perfect 

pricing and transparency to consumers. There are a multiplicity of 

very powerful Internet sites that are tied to all seats available 

around the world, Expedia, Travelocity, Orbitz, CheapTickets, 

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 24 hours a day, 

7 days a week, in an unbiased way for flight decisions. 

And I think probably people didn’t really realize that the Internet was going to have such a profound effect. And it is a major factor in keeping markets contestable in the United States and 

around the world today. 

Mr. CANNON. That changes—let me just refine the question a little bit—that changes a little bit with the mergers. What are you 

guys—what are you doing, as CEOs or, Mr. Anderson, as the CEO 

of—company, to help assure that we will have those kinds of benefits? 

76 

Mr. ANDERSON. It doesn’t change those business models. We pay 

for each booking, and it has turned into a very important and powerful distribution tool around the world. 

Mr. CANNON. Thank you, Mr. Chairman. I see my time has expired, but I think Mr. Steenland had—— 

Mr. STEENLAND. 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 Applicable 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. 

Mr. CANNON. I thank you. 

I am a big fan of what you have done, what the industry has 

done in this regard. I really hope that that will continue as we consolidate. 

Thank you, Mr. Chairman. And I yield back. 

Mr. CONYERS. Thank you. 

I am pleased now to recognize the distinguished gentleman from 

California, Darrell Issa. 

Mr. ISSA. Thank you, Chairman. 

Gentlemen, this Committee has asked a lot of questions, and 

they are all good questions, and they are all local. And as a San 

Diegan paying twice as much to fly from Dulles to San Diego as 

I would pay to fly from Dulles to Los Angeles, there is always going 

to be some local issues of deregulation has not been as logical in 

its selection of prices. 

So I am concerned about competition going forward. And that is 

what I am going to talk about today. 

As a non-hub city—what some call a cul-de-sac city, even though 

we are a destination—I noticed you had Yuma, but you didn’t have 

San Diego on any of your maps. So it is not that I am offended. 

It is just that I am 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 are going to be more troublesome to integrate is somehow an advantage. And I appreciate the fact you have got to spin 

every negative as a positive, so we will just leave that one for a 

moment. 

Tell me how you are going to compete domestically inside the 

U.S. in a way in which I am going to see United, American, your 

combined airline, Southwest, and I am going to assume for a moment—not that these other airlines aren’t going to survive—but 

that, when I say those terms, I am 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. 

And my understanding is you will both have about 19 percent domestic market share. I need two to three more—hopefully three 

more—or, in other words, five 20-percenters to feel comfortable. 

77 

Tell me how you are going to compete, and I am going to see you 

in every market that I see them in, and I am going to see three 

to five carriers in every market, including a two million population 

city like San Diego. 

Mr. STEENLAND. Why don’t I start? And I think this is an excellent question. 

Northwest serves San Diego via our hubs. And so when we think 

about it, and we think about taking a customer from San Diego to 

Boston or San Diego to Washington, DC, or San Diego to Charlotte, 

North Carolina, we think about all the myriad of opportunities 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 USAir over Phoenix. There are ample opportunities. And they 

could fly Southwest. 

So there is meaningful competition. We don’t have a crystal ball. 

We don’t know what is 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 is 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 entrant airlines come in time and time 

again. Low-cost carriers today have one-third of the domestic market. 

Mr. ISSA. Right. And I appreciate that you can’t predict how 

United and American and others will divvy up the market or not 

divvy up the market. My question, though—well, let me switch to 

another question. 

Do you think that we would be having an antitrust hearing if, 

instead of looking at your 2007 results, we looked at your 2006 position? 

And correct me if I am wrong—I am just using Yahoo, a company that turned its nose up at a $42 billion all-cash offer because it 

wasn’t enough—they say in 2006 that Delta had a negative net 

worth of $13 billion, Northwest was minus $7.9 billion for—if I 

have got this right—negative $21 billion. Your earnings, again, were a negative $9 billion in 2006. And the 

years before were not as bad, but they weren’t good. If we were 

looking at 2006 results, pre-the wonders and miracles of bankruptcy, would we be having this conversation? 

Aren’t we to a great extent looking at 2007 when you cleaned up 

your balance sheet and became profitable? 

Mr. ANDERSON. When you look at the decision that you take 

when you are comparing this transaction to a standalone plan, that 

standalone plan is built off of the plan of reorganization that came 

at emergence. 

So you are really not looking at 2006. You are really looking at 

the airlines as they both came out of the restructuring process. 

Mr. ISSA. No, no, what I am saying is, is that, if we look at you— 

and I realize everything was re-done, so I am looking at today. But 

78 

if we were back and you were both in bankruptcy in a prior period 

or just—look, it is the middle of 2006, realistically we would be saying—we would be asking you—and this is the point that I would 

like to make—we would be asking you, I assume, ‘‘Are you, in 

fact—do you have a plan to cut enough costs to survive?’’ 

And I assume we would be asking both of you how you were 

going to make two failed airlines successful airlines by comparison 

to your 2007 performance. And that is sort of my question, because 

I want to make sure that the record is complete that we are looking the best—by looking at where you stand today, 2006, 2007, out 

of bankruptcy, we are looking at a best-case scenario that you both 

have had in the last 5 years, isn’t that true? 

Mr. STEENLAND. If you look at those 2006 numbers, Congressman, that you cited what is included in that are an awful lot of 

non-cash reorganization expenses that—— 

Mr. ISSA. Look, I appreciate all of that. I just want an answer 

to the question, because the Chairman has limited time for me, 

which is probably pretty well expired. 

If I go back to 2005 or 2004, okay, I find the same, just not as 

bad. I am the only Member of Congress that sits on a public board. 

I am well aware of what we have to do in order to meet SEC for 

what we publish. 

What I am saying is, aren’t we looking in 2007 at the brightest, 

most positive scenario in the previous 5 years? You know, do what 

they do in the three letters. Blame your predecessors if you need 

to. But, for God’s sake—— 

Mr. ANDERSON. The answer is yes. 

Mr. STEENLAND. The answer is yes. 

Mr. ISSA. Thank you. That is all I really wanted. It was sort of 

a softball. 

Mr. Chairman, thank you very much for your indulgence on that 

question. 

Mr. CONYERS. You are welcome, always. 

This completes our inquiry of the first panelists. As you can see, 

we have a number of very inquiring Members on the Committee of 

varied backgrounds. We assure you, they will scrutinize your submitted statements and papers with great care. 

And we thank you for your cooperation in appearing before us. 

Mr. ANDERSON. Thank you for your graciousness. 

Mr. STEENLAND. It was a privilege to be here, Mr. Chairman. 

Mr. ANDERSON. Thank you. 

Mr. CONYERS. You are welcome. 

Now I would like to call up the second panel. 

And we welcome Ms. Veda Shook and Mr. Clifford Winston. 

We welcome Mr. Doug Moormann and Mr. Buffenbarger. 

We will start with Mr. Buffenbarger, the international president 

of the International Association of Machinists. The son of an IAM 

member, Mr. Buffenbarger has been with IAM for over 30 years. 

He assumed his first IAM leadership post in 1970 when he was 

elected steward of his apprenticeship group at the General Electric 

jet engine prompt group at Evendale, Ohio. And since then, he has 

held various leadership posts, including that of general vice president. He was elected to the office of international vice president in 

1997. 

79 

We have your testimony written, and we would invite you to 

make your presentation at this point. Welcome to the hearing. 

STATEMENT OF R. THOMAS BUFFENBARGER, INTERNATIONAL 

PRESIDENT, INTERNATIONAL ASSOCIATION OF MACHINISTS 

AND AEROSPACE WORKERS 

Mr. BUFFENBARGER. Thank you, Chairman Conyers and Members of this Committee, for the opportunity to speak to you on behalf of airline workers through North America. 

My name is Tom Buffenbarger, international president of the 

International Association of Machinists and Aerospace Workers, 

known as the IAM, 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 

their CEOs would be complaining about overcapacity and looking 

to merge. 

Airlines also cite high fuel prices as a reason to merge, 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 9/11, airlines demanded government aid. Carriers then sought and won pension relief legislation, but still abandoned their pension plans. 

Airlines also used 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 as 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 re-regulation 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 AirlinesDelta Air Lines merger announcement. However, we can’t discuss 

that proposal without recognizing that this announcement will lead 

to additional merger attempts. 

80 

Continental Airlines, United Airlines, American Airlines and US 

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 onto the Pension Benefit 

Guaranty Corporation, the PBGC. This will burden the PBGC with more than $7 billion in combined liabilities. We all know the PBGC has already expressed concerns about such a scenario. 

Just over a year ago, Delta Air Lines was making the rounds in 

Washington trying to block a merger proposal with US 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 $19 million due to the ending 

of his employment at Northwest. Richard Anderson has said he 

would wave the $15 million in merger-related compensation he 

could receive due to change in control, but he could still realize tremendous benefits through a new employment contract as the CEO 

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 and this great Committee. And I will welcome any questions. 

Thank you. 

[The prepared statement of Mr. Buffenbarger follows:] 

81 

1The New York Times, Did Ending Regulation Help Fliers? By Micheline Maynard, April 17, 

2008 2The New York Time OP-ED, April 21, 2008 

PREPARED STATEMENT OF R. THOMAS BUFFENBARGER

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 

of Machinists and Aerospace Workers (IAM), the largest airline union in North 

America. We represent more than 110,000 airline workers in almost every job classification, including flight attendants, ramp service workers, mechanics, customer 

service, reservation agents and office employees. 

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. 

Airline CEOs regularly complain about overcapacity, but they are the ones responsible for creating the problem, not passengers, not fuel prices and certainly not 

employees. 

The need to address overcapacity has been a favorite battle cry for airline management for decades and won’t be resolved by mergers. Braniff, Eastern, Pan Am, 

TWA Peoples Express and others have all disappeared from the scene. Reducing capacity will not overcome management’s failure to run a profitable business. 

If there were only two airlines left in the country, I am convinced their CEOs 

would be complaining about overcapacity and looking to merge. 

Airlines also cite high fuel prices as a reason to merge, 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 9/11 airlines demanded more than $6.3 billion in government 

aid. Carriers then sought and won pension relief legislation, but still abandoned 

their pension obligations. 

Airlines also used the bankruptcy law to force employees and shareholders to 

make sacrifices to save the carriers. IAM members alone at Northwest Airlines, US 

Airways, United Airlines, Comair, Hawaiian Airlines and Aloha Airlines gave up 

nearly $9 billion in bankruptcy. 

Still, this troubled industry lost $30 billion from 2001 to 2006. More than 150 carriers have gone bankrupt since deregulation.1

If airline executives spent as much time running their airline as 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. 

Airlines can’t police their own maintenance programs, small communities are 

under-served, passengers are treated like cattle and employees are continually being 

steamrolled. 

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 re-regulation is necessary if this country has any chance for 

a safe, reliable, profitable and competitive air transportation industry. And I’m not 

the only one calling for re-regulation. 

Although I do not agree with everything former American Airlines CEO Robert 

Crandell says about the airline industry, I share his opinion that, ‘‘market-base approaches alone have not and will not produce the aviation system our country 

needs’’ and that ‘‘some form of government intervention is required.’’ 2

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 weapon to eliminate the jobs and rights of thousands of workers. 

The Machinists Union will not allow this to happen. 

Northwest and Delta employees sacrificed wages, pensions and, in too many cases, 

their jobs to help their airlines survive bankruptcy. 

Mergers are another avenue for airlines to cut even more jobs. 

82 

3Testimony of Don Carty, http://judiciary.senate.gov/oldsite/te020701dc.htm 

4http://www.lambert-stlouis.com/ 

I realize this hearing was prompted by the Northwest Airlines-Delta Air Lines 

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 US 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. 

Both Northwest and Delta have seen their stock prices sink since exiting bankruptcy, and more so since the merger was announced. Passengers, employees and 

investors, three groups with different concerns, all think this merger is a bad idea. 

If the two airline CEOs testifying today can’t independently provide their customers and shareholders with value for their dollar, what will happen under a 

merged company that is saddled with debt and even harder to manage? 

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. 

Shareholders suffer greatly in industry consolidation. At the time American Air- lines purchased TWA, American’s stock was trading at $36.05. Last week it was 

$9.34. US Airways stock before the America West merger was worth $19.30, but 

now trades at around $8.00 per share. 

It would be difficult to find anyone outside of a small group of airline executives 

who expects to benefit from additional airline consolidation. 

Passengers, employees and shareholders have suffered enough by senseless management decisions. In the last month, four airlines have declared bankruptcy. 

We have seen how airlines fail to comply with FAA-mandated safety compliance 

directives. Do we really need more instability in this chaotic industry? 

Both Northwest and Delta operate a hub and spoke system. Combining the two 

will create redundancies, which, if the airlines keep their promise not to close hubs, 

will create regional dominance. 

The new Delta will control the South East and Upper Midwest with two hubs in 

each region. 

Atlanta and Memphis, less than 400 miles apart, will both be Delta hubs. 

Delta will also have two major hubs in Detroit and Cincinnati, less than 300 miles 

apart. If these two airlines merge, the frequency of flights between cities they both 

serve will be diminished. 

It is both insulting and a testament to these airlines’ arrogance that 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 will lose service frequencies and pay higher fares. 

Experience has shown us that commitments made by airlines in mergers are absolutely worthless. 

When American Airlines purchased TWA out of bankruptcy in 2001, promises 

were made to TWA employees. American’s then CEO Donald Carty testified before 

the Senate Commerce Committee saying, ‘‘We look forward to adding TWA’s 20,000 

employees to the American Airlines family,’’ and that American was willing to make 

‘‘commitments to the 20,000 TWA employees and their families that no one else 

would make.’’ 3

In spite of these assurances, the overwhelming majority of former TWA employees 

are no longer employed by American Airlines. 

Thousands of mechanics, ramp workers, customer service agents, flight attendants 

and pilots who were promised careers with American are no longer working in the 

industry. 

We also cannot count on Delta’s promise not to further reduce capacity beyond 

already announced service cuts. American Airlines promised the City of St. Louis 

that it would maintain TWA’s hub operation at Lambert Field after the TWA merger. That once bustling hub had over 474,000 flights in 2000, TWA’s last full year of 

operation. In 2007 that number was reduced to a little more than 254,000. Passengers flown have been reduced nearly in half, from 30.5 million to 15.4 million 

in the same period.4

83 

5Delta Air Lines press release, http://news.delta.com/printldoc.cfm?articlelid=10533 

With the loss of passengers came the loss of tax revenue to the city of St. Louis 

and income for the businesses that support the airport and service the airlines. 

Delta has a history or breaking promises. Over the last 10 years the airline offered employees early retirement packages based principally on very attractive free 

or minimal cost health care programs. 

According to the Delta Air Lines Retirement Committee, retirees’ health care 

deductibles and co-pays were increased dramatically after accepting the packages 

and retiring. 

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 onto the Pension Benefit Guaranty Corporation (PBGC). 

This will burden the PBGC with more than $7 billion in combined liabilities. The 

PBGC has already expressed concerns about such a scenario. 

Just over a year, ago Delta Air Lines was making the rounds in Washington trying to block a merger proposal with US 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.’’ 5 Delta was right then, and wrong now. 

Both Northwest and Delta entered bankruptcy on the same day in 2005 to make 

their companies leaner and more competitive. 

Since they are here today saying that they must merge to become profitable, their 

bankruptcy restructurings must have failed. 

So why should we believe them when they say this merger will be a positive step 

for employees, consumers and shareholders? 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 $19 million due to the ending of his 

employment at Northwest. 

Richard Anderson has said he would wave the $15 million in merger related compensation he could receive due to change in control, but he could still realize tremendous benefits through a new employment contract as the CEO of a much larger 

company. 

If employees lose their right to collectively bargain, if IAM members lose the new 

pensions they negotiated in bankruptcy, if employees are going to be sacrificed to 

grow executives’ personal bank accounts, then this merger will fail. 

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 will follow should not be allowed to proceed. 

Thank you for the opportunity to appear before the committee. I welcome any 

questions. 

Mr. CONYERS. Thank you, Mr. Buffenbarger. You have got us off 

to a slightly different start from the direction of the first panel. 

I am pleased now to welcome Doug Moormann, vice president of 

Economic Development for Cincinnati USA Regional Chamber. He 

is a former vice president of government affairs. And prior to joining the chamber, Mr. Moormann served as the executive assistant 

for business and industry in the office of Governor Bob Taft. 

We are delighted to have you before us, sir, and would welcome 

your testimony at this time. 

TESTIMONY OF DOUGLAS MOORMANN, VICE PRESIDENT, ECONOMIC DEVELOPMENT, CINCINNATI USA REGIONAL CHAMBER 

Mr. MOORMANN. Thank you very much. 

Chairman Conyers, Ranking Member Chabot, and distinguished 

Members of the Antitrust Task Force, good afternoon. 

84 

Ranking Member Chabot, thank you very much for the opportunity and the invitation to present testimony today. 

Again, my name is Doug Moormann. I am 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 fifthlargest Chamber of Commerce in the United States, approaching 

6,000 members, representing more than 300,000 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 Air Lines and Northwest Airlines, is critically important. 

Globally competitive, U.S.-based airlines are important to the 

Nation and its economic well-being, as trade expands and international markets become more accessible. 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 

34,000 direct jobs and $2.8 billion per year in annual economic impact. 

The hub also provides the regional business community with 

nonstop access to nearly 120 domestic markets and to the top business destinations in Europe. 

I am 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 jet service that is 

headquartered in northern Kentucky, will also continue to be utilized by Delta as a major part of its operations. 

Perhaps nowhere is the impact of the hub more evident than on 

our regional economic development and business attraction efforts. 

As our region competes 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 accessibility and superior air service. Direct flights and 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’s success in attracting foreign investment to the 

United States tracks very closely with the onset of international 

service at CVG. Between 1999 and 2003, the number of foreignowned companies in the Cincinnati USA region more than doubled 

from 150 to over 300. 

Today, that number stands at more than 400 international businesses. These are international businesses that are investing in the 

United States, employing our workers, and, importantly to Congress and other government entities, paying our taxes. 

A 1998 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. 

85 

Based on the chamber’s preliminary assessment, the merger of 

Delta and Northwest represents a combination of complementary 

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 

domestic 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 carrier will have more than 20 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. CVG 

has historically among the national leaders in the high cost of airfares, 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 will result in some fare relief for our region’s 

loyal customers. 

Mr. Chairman, the Cincinnati USA region benefits greatly from 

a competitive economically sustainable and healthy Delta. If the 

companies’ path to competitiveness and financial stability requires 

a merger, then our community realizes that a merger is in the best 

interests of our community. 

Chairman Conyers, Congressman Chabot, again, thank you very 

much for the opportunity to visit with the Committee today. I appreciate the attention you have given to our testimony and would 

be happy to answer any questions if you have some. 

[The prepared statement of Mr. Moormann follows:] 

PREPARED STATEMENT OF DOUGLAS MOORMANN

Chairman Conyers, ranking member Chabot, and distinguished members of the 

Committee on the Judiciary Antitrust Task Force—good morning. 

Ranking Member Chabot, thank you for the invitation to present testimony today. 

My name is Doug Moormann and I am the Vice President for Economic Development for the Cincinnati USA Regional Chamber. As the Chamber’s vice president 

for economic development, I lead the Cincinnati USA Partnership—the region’s 

catalytic economic development organization focused on attracting new companies, 

retaining and expanding our existing companies and accelerating business growth 

across our entire region. 

The Cincinnati USA Regional Chamber is one of the largest such business organizations in the country, approaching 6000 business members and over 300,000 employees ranging from global companies like Procter & Gamble, Toyota and GE Aviation to strong privately held mid-sized companies and sole proprietors. Eighty percent of our members have fewer than 50 employees. Our region includes 15 counties 

in Southwestern Ohio, Northern Kentucky and Southeastern Indiana. 

It is an honor to have the opportunity to speak to the Task Force this morning. 

The issues on which you are deliberating—the proposed merger of Delta Air Lines 

and Northwest Airlines is critically important. Globally competitive, U.S. based airlines are important to the nation and its economic well-being as trade expands and 

international markets become more accessible. More specifically, ensuring that 

Delta thrives is critically important to the Cincinnati region—its people and its economic prosperity. 

Importantly, I want to stress that our Chamber’s interests are aligned with the 

larger community interests. We are not alone in acknowledging the immense value 

of the Delta hub. The region is united in its recognition that air service, in particular, the hub service offered by Delta, is an unparalleled economic driver in our 

community and an asset that absolutely must be retained to ensure the ongoing economic competitiveness of the Cincinnati USA region. 

86 

The region benefits from the hub service in two important ways: 

1) The hub creates jobs and economic activity—activity approaching $2.8 billion 

in total annual impact according to a study conducted by the University of 

Cincinnati; and 

2) The hub provides the regional business community with non-stop access to 

nearly 120 domestic markets and the top business destinations in Europe. 

To place this number of non-stop destinations in perspective, it is more than 

three times the number served by the five surrounding airports—combined. 

The CVG airport also features more non-stops than are offered at the airports in Los Angeles, Boston, Charlotte, San Francisco or New York. 

In 2005, the University of Cincinnati Economic Center for Education and Research found that the benefit of the hub is an estimated $2.85 billion annually and 

approximately $22.2 billion in economic activity in the past 10 years. The hub is 

also responsible for 34,000 airport-related jobs. But that is just the beginning. Altogether, UC reported that the hub is responsible for 131,515 jobs in the Cincinnati 

USA region. Considering that overall employment in the region is just over one million, the hub effects approximately 13 percent of total regional employment. These 

jobs are not concentrated only around the airport—nearly half belong to workers in 

Hamilton County, Ohio and a full third are jobs belonging to residents of Northern 

Kentucky’s three northern tier counties. Just as the local economy functions as a 

region, the impact of the hub is indeed regional. 

I must acknowledge that the size of the hub has been reduced since 2005. Clearly, 

the reduction in service has resulted in commensurate reductions in the number of 

jobs and level of economic impact generated by the hub. UC researchers have estimated that the overall economic impact has not decreased by more than fifteen percent and that the scale and importance of the hub remains huge to the regional 

economy. 

Perhaps nowhere is the impact of the hub more evident than in our regional economic development and business attraction efforts. As this region competes in the 

global marketplace for jobs and capital investment, we must identify and tend to 

our differentiators—our key competitive advantages. In making the case for job creation and capital investment in the Cincinnati USA region one of our top advantages is accessibility, superior air service. Direct flights and same-day out and back 

service make a difference and businesses know it. Many businesses calculate that 

without same-day service per-trip costs double. 

The region wins jobs, wins capital investment and grows wealth because of the 

hub service available to our business community. 

A case in point—the North American Headquarters for Toyota Manufacturing is 

located minutes from the airport. This major headquarters operation employing over 

1500 people chose to locate in the Cincinnati USA region in large part due to the 

air service available. On a typical day, Toyota flies as many as 100 people to and 

from the airport. 

According to Dennis Cuneo, Former Senior VP for Corporate Affairs for Toyota, 

‘‘Toyota selected Northern Kentucky as the site for its engineering and manufacturing offices because it is centrally located among our manufacturing plants and 

Midwest suppliers, and has an excellent transportation system, including a worldclass airport.’’ 

One of the region’s most notable development accomplishments in recent memory 

is the attraction of Tata Consultancy Services to Cincinnati USA. This Indian investment will create 1000 new information technology jobs in our region. As is evident in its company name—this business provides information technology consulting 

services around the nation and indeed around the world. One of the top reasons that 

Tata selected Cincinnati is because of the outstanding air service we offer—direct 

flights to its customers locations. In this case, the region won, in large part, because 

of the air service we offer. 

The region’s success in attracting foreign investment to the United States tracks 

very closely with the onset of international service from CVG. Between 1999 and 

2003, the number of foreign owned companies in the Cincinnati USA region doubled 

from 150 to 300. Today that number stands at over 400 international businesses investing in the United States, employing our workers and paying our taxes. Hence, 

the hub service at the airport is providing this region with significant levels of economic growth and wealth creation. 

The region’s Fortune 500 companies—those companies leading the way in terms 

of global competitiveness and success—are reliant on the hub service at CVG to 

meet the competition on the world stage. 

87 

Charlotte Otto, Global External Relations Officer for P&G says, ‘‘Hundreds of our 

people are moving—day after day—to cities all around the U.S. and the world. Our 

ability to fly nonstop to so many destinations is truly a strategic advantage.’’ 

P&G is a global business and could be located anywhere in the world. One of the 

top reasons the company remains here and expands here, aside from it calling Cincinnati home since its inception, is reflected in Charlotte’s quote—the ability to fly 

direct to destinations around the world. 

The international access afforded to the region also results in a more robust export market. Among similarly situated cities (Charlotte, Columbus, Indianapolis and 

Kansas City) Cincinnati USA has the highest levels of exports per capita and the 

greatest share of economic activity devoted to exports. 

A 1998 study from George Mason University 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.’’ Cincinnati USA simply must remain on the international 

service map. 

Based on the Chamber’s preliminary assessment, the merger of Delta and Northwest represents a combination of complementary air service providers. Domestically, 

Delta’s strength lies in the East, Southeast and Mountain West portions of the 

United States. Northwest primarily serves the Midwest. Internationally, Delta offers 

strong connections to Europe and Latin America while Northwest is a major provider of service to Asia. It appears to us that there is 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 would be the exclusive provider of non-stop service. 

Beyond that, our understanding is that the overall industry will remain competitive if the Delta-Northwest merger is approved. In a post merger, our understanding 

is that no single carrier will have more than a twenty percent share of the domestic 

market. In fact, Southwest currently carries more domestic passengers than Delta 

and Northwest combined. 

Clearly, from a competitive stand point, in a merged environment there will be 

no less competition at CVG than currently exists. In fact, the reduced service noted 

earlier, may present an opportunity to attract new carrier service to the CVG airport and actually enhance the level of competition. 

The Cincinnati USA region is viewing the merger through five lenses: 

1) Retain the maximum number of jobs at the hub 

2) Maintain the maximum level of service at the hub—115 non-stop domestic 

destinations 

3) Retain non-stop international service at CVG—service to Paris, London, and 

Frankfurt, Roma and Amsterdam are key to our international job attraction 

efforts 

4) Retain, and consider expanding through consolidation, the reservations center in Cincinnati 

5) Assurance that Delta will continue to utilize Comair as a major provider of 

regional air service. 

We have posed these questions to top Delta executives and have received assurances that the merged business plans to retain the hub, continue and possibly expand international service, retain the reservations center and continue to utilize the 

regional air services offered by Comair. We take them at their word and will monitor the progress of the merger with guarded optimism. 

Cincinnati USA is poised for growth. A new riverfront and skyline is emerging, 

we have a revitalized central business district and an improved business tax environment. Unified, regional action plans are under development and our business 

and community leaders are engaged. One of the key underpinnings of our success 

is an airport that offers superior air service. We respectfully request that you keep 

in mind the prospects for prosperity for the 2.1 million residents of Cincinnati USA 

as the merger is evaluated. 

Before closing, I would be remiss if I did not mention air fares. CVG is historically 

among the national leaders in the high cost of air fares—one top national ranking 

we would prefer to shed. The Chamber, and indeed the entire community, hopes 

that a new merged entity will result in some fare relief for this region’s loyal customers of the airline. 

Mr. Chairman, the Cincinnati USA region benefits greatly from a competitive, 

economically sustainable and healthy Delta—if the company’s path to competitiveness and financial stability requires a merger then this community realizes that a 

merger is in its own best interest. 

88 

In closing, thank you for convening this hearing and considering the implications 

of a Delta/Northwest merger. I am confident our interests are aligned—focused on 

building and maintaining strong economies in metropolitan areas. 

Chairman Conyers, again, thank you for the opportunity to visit with you. Members of the Task Force, I appreciate your attention and will answer any questions 

you may have about my testimony. 

Mr. CONYERS. Thank you very much, Mr. Moormann. 

We now turn to Dr. Clifford Winston, a senior fellow at the 

Brookings Institute, who specializes in transportation industry organization and regulation and, over his 25-year tenure at Brookings, has authored numerous books and articles. 

He has a degree from the University of California at Berkeley, 

a master’s from the London School of Economics, and has a PhD 

in economics from Berkeley. 

Welcome. 

TESTIMONY OF CLIFFORD WINSTON, BROOKINGS INSTITUTE 

Mr. WINSTON. Thank you. I appreciate having the opportunity to 

testify. 

What I would like to do is try to just distill my testimony into 

three comments about competition in the industry and take a 

broader look at appropriate public policy. 

The first part of my testimony includes descriptive information 

about the airline industry. There is a lot of data about this industry, and we get a pretty good idea about how it is performing and 

how travelers’ welfare and industry profitability are affected. 

And in a nutshell, 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-sized carriers at the route level. And 

this is an important point that I think has been missed in previous 

testimony. 

The focus has been on the number of carriers at the industry 

level. That is not where carriers compete. They compete at the 

route level. 

You could have 10 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 

is obviously a more competitive situation. So focusing on the route 

level is absolutely essential. 

What we see is there has been an increase in route-level competition since deregulation and then it has been stable—on in. However, obviously, there has 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, as 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 provides service from BWI to Oakland. 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. 

89 

The combination of the steady appearance of route-level competition and the identity of carriers has led to a significant decline and 

a steady decline in real fares. Actually, real fares have declined 60 

percent or so since deregulation, not 30 percent, as was said earlier. 

So travelers have clearly gained from the competitive situation, 

but the problems now are facing the carriers where profitability 

has been quite volatile and there is a lot of pressure now on the 

profitability because of increases in fuel prices. 

Now they have pressure to cut costs, but there is now another 

phenomenon which we really have never seen before and, again, 

not mentioned earlier. It is the increase in load factors, that is, the 

share of seats that are filled by paying passengers. 

That figure now is at an all-time high of 80 percent. So we have 

a real problem. The planes are filled up. It is not excess capacity. 

How could there be excess capacity? It is an 80 percent load factor. 

You can’t put anybody anywhere, unless you want to put them in 

the bathroom. 

So the difficulty is, how can you be making money when you are 

filling your planes? And as I said, you are still having problems. 

Mergers, then—and this is my second point—are understood in 

this context as 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 to relieve 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 mergers, makes a lot of sense, because here 

you see access to international routes and now you see carriers 

both having financial distress. 

So I see greater access to international operations, which would 

expand their network, and that would obviously improve their performance; restructuring their network, to attract more business 

travelers to funnel them through from domestic to international 

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. 

Mr. ELLISON. [Presiding.] Dr. Winston, we need you to wrap up 

your testimony. 

Mr. WINSTON. Okay. 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 have been doing so effectively with other carrier relationships and other industries. And they are absolutely critical. 

Final point I would say, in terms of competitive policies, given 

concerns about mergers and an interest in 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 

carriers to serve our routes and our carriers to serve their routes. 

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Thank you. Sorry for going over. 

[The prepared statement of Mr. Winston follows:] 

PREPARED STATEMENT OF STEVEN A. MORRISON AND CLIFFORD WINSTON


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Mr. ELLISON. Finally, I would like to introduce Ms. Veda Shook, 

the international vice president for the Association of Flight Attendants. 

An Alaska Airlines flight attendant since 1991, Ms. Shook 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 counsel president, local 

founding president for Local Executive Counsel 39 and on numerous union committees. 

Thank you, Ms. Shook. 

TESTIMONY OF VEDA SHOOK, INTERNATIONAL VICE 

PRESIDENT, ASSOCIATION OF FLIGHT ATTENDANTS, CWA 

Ms. SHOOK. 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 is 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 has been little attention paid to the extreme upheaval 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 in contract protections 

in a merger. 

Virtually all of the employees at Northwest Airlines have chosen 

to join a union. Delta, on the other hand, has only major one work 

group that is unionized, and that is its pilots. 

Delta flight attendants have been working diligently to secure a 

better future through joining AFA and eventually negotiating a legally binding contract. Their hard work paid off recently when they 

presented authorization cards signed by over 50 percent of their 

workforce to join AFA. 

In fact, yesterday, the National Mediation Board opened the polls 

and voting will end on May 28th. We remain confident that those 

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 non-union employees from gaining a union, but 

also a chance to eliminate the unions that have already provided 

protection for their members at Northwest. 

98 

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 60 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 election to be considered valid, 50 percent plus 

one of all eligible voters must turn out to vote. 

In other words, the Delta flight attendants began voting with 100 

percent no votes and must systematically turn more than 50 percent of those into votes for representation. In effect, a person who 

by design or by passivity chooses not to cast a vote in an NMB 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. 

A primary concern is to 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 the AFA 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 nonunion, and denying the bargaining 

rights that are essential in the face of this merger. 

Using this merger as an opportunity to destroy unions provides 

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 as Delta is a nonunion carrier, as well as the largest carrier, they will be poised to set in 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 Northwest, 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 

Delta—as this representation election progresses over the next 5 

weeks so that they stop engaging in ruthless election activities 

aimed at voter suppression. 

And, finally, I hope that you will use your influence to persuade 

Delta management to become neutral in this representation election, as the law intended and is currently not happening. 

99 

If these executives are successful in their goal to keep the new 

Delta nonunion, we would see this merger as the beginning of the 

end of the airline industry as a source of decent and respectable 

jobs. 

I am proud to be joined today by flight attendant representatives 

from Delta and Northwest who together today again presented Mr. 

Anderson with a letter requesting Delta—with a letter requesting 

neutrality in the Delta flight attendant election and, unfortunately, 

again, he dismissed the request. 

While 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 as you review this merger and the 

impact that it will have on our lives and our families. 

We are 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 unions. 

Thank you. 

[The prepared statement of Ms. Shook follows:] 

PREPARED STATEMENT OF VEDA SHOOK

Thank you, Chairman Conyers for holding this vital and timely hearing on the 

proposed merger of Northwest and Delta Airlines. My name is Veda Shook and I 

am the International Vice President of the Association of Flight Attendants—CWA, 

AFL-CIO. AFA-CWA represents over 55,000 flight attendants at 20 U.S airlines and 

is the largest union in the world representing flight attendants. We especially want 

to thank the Committee for inviting us to testify today and giving voice to the concerns of the working women and men of these two great airlines. Flight attendants 

and other employees have kept these airlines flying during the good times . . . and 

through some very difficult times. We appreciate having a seat at this table to testify on behalf of the tens of thousands of airline employees across this county who 

have collectively sacrificed billions of dollars in pay and benefit cuts over the last 

several years, and to share our views and our concerns about what this merger 

could mean to them. 

This merger between Northwest and Delta has drawn significant attention from 

the media, communities served by both carriers and here on Capitol Hill. The attention being paid to what will create the largest airline in the world is appropriate 

. . . and necessary. Already this announced merger has led to credible speculation 

about what airlines will be next to merge. Airline CEOs continue to call for greater 

consolidation in light of the exploding cost of fuel, although the merger drumbeat 

started much earlier as airline executives sought greater profits following the recent 

epidemic of bankruptcies. 

Consumers are frightened that this airline merger in particular, and further consolidation of the industry in general, will lead to much higher fares and reduced 

service. Hundreds of communities are rightfully concerned that this merger and others could lead to the loss of valuable air service as the evolving mega-carriers shed 

routes in hopes of consolidating their profits. 

The increase in consolidation activity requires appropriate oversight to protect the 

interests of employees and passengers. Federal regulators will look carefully at the 

impact this merger and others will have on the consumers and communities. We 

hope that this Committee and other Congressional Committees will exercise—beginning with this hearing—vigorous oversight responsibilities as well. 

While some protections are in place for consumers and communities, there are virtually no protections for airline workers in this merger. There has been little attention paid to the extreme upheaval that mergers create for the thousands of airline 

employees who find themselves unemployed or whose lives are disrupted. 

This has not always been the plight of airline workers. There were many important protections in place for airline workers prior to the Airline Deregulation Act 

of 1978; the Allegheny-Mohawk Labor Protective Provisions (commonly know as the 

LPPs) were made a condition of government approval of virtually every airline 

merger. The LPPs contained extensive and specific protections—like displacement 

and relocation allowances, wage protections, transfer and seniority protections, layVerDate Aug 31 2005 13:22 Aug 26, 2008 Jkt 000000 PO 00000 Frm 00103 Fmt 6633 Sfmt 6621 H:\WORK\ATRUST3\042408\41905.000 HJUD1 PsN: DOUGA
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off protection, and others—as part of a standardized set of provisions designed to 

shield workers from an unfair share of the burden resulting from corporate mergers. 

But no real protections from our federal government exist today to cushion airline 

workers involved in mergers. After Deregulation employers successfully lobbied for 

an end to the LPPs because, as they argued at the time, these matters are ‘better 

left to the collective bargaining process.’ Union contracts provide a level of protection for those employees covered by the agreement, but there is little to no protection for non-union airline employees. 

Those same employers who wanted to leave these protections to the bargaining 

process now spend millions of dollars on union busting, trying to prevent their employees from attaining the right to bargain, or to strip that right from those who 

have had it for decades. And today, many of those same employers who hold press 

conferences to trumpet the fact that their mergers will not cause any layoffs often 

refuse to agree in writing to such guarantees when they come to the bargaining 

table. 

Of all the well-developed rules referred to prior to Deregulation as the AlleghenyMohawk Labor Protective Provisions, only one exits today—the provision establishing basic seniority protections in the event of a merger. And, that provision was 

only recently resurrected and included in last December’s Omnibus Appropriations 

bill after the advocacy of AFA-CWA and the strong support of Representative Russ 

Carnahan, Senator Claire McCaskill and this Congress. 

Earlier attempts by Congress to provide protections for airline employees during 

mergers provides us with an instructive history in the current context. We continue 

to feel the effects of the Airline Deregulation Act; the proposed Delta—Northwest 

merger is just the latest manifestation of the impact of Deregulation. But an attempt by Congress to cushion the clearly anticipated effects of the start of Deregulation proved to be a complete failure. 

Congress included the Airline Employee Protection Program (EPP) in the Deregulation Act to assist adversely affected employees. At least 40,000 employees lost 

their jobs in the wake of Deregulation. The EPP was supposed to provide for both 

monthly compensation and first-hire rights at other airlines. However, displaced employees never received the benefits Congress promised and funding was never authorized for the benefits, turning the whole program into a cruel joke for airline employees in desperate need of a life line. So while Congress has recognized the need 

to assist airline employees facing the traumatic effects of industry consolidation in 

the past, a fully-funded federal effort is desperately needed now in what is shaping 

up to be another significant era of airline consolidation. 

As we look for solutions to cushion the enormous negative impact this latest 

merger will have on workers at Northwest and Delta, perhaps it’s time to revisit 

the concept of employee protection from the Deregulation Act. No, we are not proposing to re-regulate the industry today; that’s a worthy discussion for a different 

hearing that we welcome and we would encourage Congress to hold. But we do 

think that—at a minimum—something needs to be done to shield workers from the 

harshest effects of this merger and any future mergers. 

Executives at the airlines have, to date, promised that there will be no layoffs, 

but they refuse to put that commitment in writing. We all know that the minute 

the ink is dry on the merger agreement, executives will be looking for cost saving 

‘synergies’ that will make the new airline ever more profitable. Many of the 

synergies that the executives will likely turn to first are precisely the steps that will 

harm the interests of the workers, such as furloughs, base closures, fleet reductions 

and, perhaps worst of all, outsourcing. 

Workers cannot, and should not, be left to fend for themselves in this situation; 

we did not bring these problems on ourselves. The federal government set this chain 

of events in motion with the passage of the Deregulation Act and its subsequent neglect in forming a rational aviation policy for our country. The airlines themselves 

have compounded the problems for workers with an almost endless string of cutbacks, bankruptcies, mergers and layoffs. Government and the airlines, then, bear 

the responsibility. And, either the federal government or the airlines must pay to 

offset what is otherwise the unfair burden placed on the workers resulting from Deregulation and its current aftermath. 

The Deregulation Act provided monthly compensation and first-hire rights to protect displaced airline workers. Those same protections are needed and appropriate 

today on the eve of the Delta—Northwest merger and potential mergers to come. 

Congress could adopt and fund those protections, or it could require the employer, 

as a condition of approval of this merger, to fund those protections. We must stop 

shifting these costs on employees who are least able to shoulder that burden. 

This merger also seriously jeopardizes the collective bargaining rights of all the 

Northwest employees who have fought for and won the legal right to have union 

101 

representation. Virtually all employees at Northwest have chosen to join a union. 

Delta, on the other hand, has only one major workgroup that is unionized—its pilots. I am proud to say today that the approximately 13,500 Delta flight attendants 

are now the closest to securing their future by forming a union through AFA-CWA 

as they are currently engaged in a representation election. 

Delta flight attendants have been working diligently to secure a better future 

through joining AFA-CWA and eventually securing a legally binding contract. Their 

hard work paid off when they filed cards from over 50% of all the Delta flight attendants requesting an election to join AFA-CWA. In fact, yesterday, the National 

Mediation Board (NMB) mailed voting instructions to Delta flight attendants and 

the voting will end on May 28th. We remain confident that this brave, strong and 

proud group of Delta flight attendants will come together—despite the efforts of the 

company’s anti-union consultants—and choose union representation and a strong 

voice to protect themselves and the future of their profession. 

In the context of this merger, the company’s anti-union tactics take on added urgency; the merger should not be permitted to become a vehicle for union busting. 

Airline executives have realized the opportunity that this merger presents: not just 

a chance to prevent thousands of non-union employees from gaining a union, but 

also a chance to eliminate the unions that already provide protection for their members at Northwest. 

While Delta flight attendants vote on whether to join the union, the Northwest 

flight attendants face a very real threat to their collective bargaining rights. Northwest flight attendants joined AFA-CWA 20 months ago, but have been union members for 60 years. Their proud tradition of union representation is threatened by 

management’s use of this merger process to attempt to eliminate the Northwest 

flight attendants collective bargaining agreement which, in turn, poses a real threat 

to the job security for thousands of flight attendants. 

In fact, we view the current representation election among the Delta flight attendants as not just an opportunity for them to gain a voice on the job and a seat at 

the table, but as the ‘‘first line of defense’’ to protect the over 60 years of collective 

bargaining rights for the Northwest flight attendants. This is due to the unique way 

that representation elections are governed by the National Mediation Board. Although the Railway Labor Act (RLA) makes no mention of such an extraordinary 

requirement, the NMB rules state that in order for a representation election to be 

considered valid, 50%+1 of all eligible voters must turn out to vote in the election. 

If 95% of flight attendants who cast a vote want to join AFA-CWA but only 49.9% 

of all the eligible flight attendants cast a vote, then the election is invalid. 

In effect, a person who chooses not to cast a vote in an NMB election is counted 

as a ‘‘no’’ vote, encouraging management to focus their efforts on voter suppression 

in every election. I ask the members of the Committee to consider if they, or most 

of their colleagues, would be sitting here today if our Congressional elections were 

governed under the same onerous rules, where turnout is more important than the 

votes cast. 

Based on the number of Delta flight attendants who have signed AFA authorization cards, and the number of Northwest flight attendants who are already union 

members, AFA has the support of a solid majority of the combined workforce. Since 

at least 1926, national labor policy as defined by this Congress has been to encourage unionization of workers. Congress could further that goal, and prevent airline 

mergers from becoming an occasion for union busting, simply by defining victory 

under the RLA organizing rules as a majority of the votes cast. 

It is our hope, and the hope of thousands of Delta flight attendants, that they will 

overcome these difficult election procedures and decide next month to join AFACWA. They will then have the right to bargain for improved work rules through a 

legally binding contract and the historic collective bargaining rights of the Northwest flight attendants will have been protected in the newly merged Delta Airlines. 

Delta and Northwest flight attendants, working under the umbrella of AFA-CWA’s 

constitution and bylaws, can move forward on integrating their two groups and negotiating for an improved contract for what will be the largest flight attendant 

workgroup in the United States. This does not require new legislation; all we ask 

is that the Committee urge these employers to remain neutral so, as originally envisioned by Congress when it adopted the Railway Labor Act, the employees can decide the issue of union representation for themselves, without coercion, interference 

or influence by the employer. 

Bargaining rights are paramount if the flight attendants are to have an opportunity to negotiate over the impact this merger will have on their work lives. Our 

primary concern is that Delta executives will use the merger to eliminate the rights 

of employees to have a seat at the table when the airline is fully merged with 

Northwest. One need look no further than Delta’s past actions in organizing camVerDate Aug 31 2005 13:22 Aug 26, 2008 Jkt 000000 PO 00000 Frm 00105 Fmt 6633 Sfmt 6621 H:\WORK\ATRUST3\042408\41905.000 HJUD1 PsN: DOUGA
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paigns. In the last flight attendant election, Delta engaged in numerous activities 

to suppress the number of flight attendants casting ballots and to spread mis-information. When AFA-CWA appealed to the NMB to hold a ‘‘re-run’’ election due to 

the overwhelming interference of Delta management in the election process, the 

NMB swept aside overwhelming evidence of interference and Board precedents. The 

current chairman of the NMB stated in his dissent that ‘‘[t]he majority’s decision 

now creates a gray area of legally allowable conduct: that which is ‘‘troubling,’’ but 

does not constitute interference. I am at a loss to understand this reasoning that 

rationalizes an attempt by management to silence the voices of their employees.’’ 

Delta executives have not been shy about their efforts to prevent the employees 

from forming unions. In fact, in a meeting with AFA-CWA Northwest leadership, 

Northwest management stated flatly that there would not be a seat at the table for 

the flight attendants in the merger discussions. He went on to state that the current 

Delta was a non-union company and that the ‘‘New Delta’’ had every intention of 

remaining a non-union company; Delta planned to defeat the union and prevent the 

flight attendants from having, or keeping, the bargaining rights that are essential 

in the face of this merger. Delta has already demonstrated that they will again continue to spread disinformation and make every effort to prevent Delta flight attendants from casting ballots in the upcoming election. Is this what we’ve come to in 

this country? They’ve even gone so far as to state that they supported and were instrumental in having the seniority integration protections passed by Congress in the 

Omnibus Appropriations late last year, even though they spent months opposing inclusion of the language. I would ask this Committee: what is wrong with our system 

when the majority of these flight attendants want union representation and yet face 

such great barriers to achieve that goal? 

Using this merger as an opportunity to destroy unions provides 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 have not seen in decades. If Delta is a non-union 

carrier, as well as the largest carrier, they will be poised to set in 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. 

Flight attendants face one other devastating threat in this merger, one that no 

other work group is likely to encounter. This merger may resurrect efforts by Northwest executives to outsource our best jobs to flight attendants based outside the 

U.S. Such outsourcing of flight attendant jobs on international routes to foreign nationals will resurface and become a standard industry practice. When Northwest 

first proposed doing just this during bankruptcy, a bipartisan group of House and 

Senate members rose up to decry such a move as jeopardizing aviation safety and 

especially security. With a union fighting to protect the Northwest flight attendants 

jobs, and support from members of Congress, Northwest management backed off 

such a proposal and thousands of good paying jobs remained for Northwest flight 

attendants. Only if the union retains its bargaining rights following the merger will 

the flight attendants have the legal standing to continue the fight against such outrageous ideas as outsourcing flight attendant jobs; such an idea is just the tip of 

the iceberg. Many of the current Delta executives were involved in earlier 

outsourcing attempts when they were at Northwest Airlines. 

I urge the members of this Committee to send a strong and clear signal to Northwest, 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 would urge this 

Committee to use its good offices to monitor Delta management as this representation election progresses over the next five weeks so that they do not engage in election activities similar to those of five years ago—actions that violated the spirit of 

the Railway Labor Act, even if the NMB ruled they did not violate the letter of the 

law. And finally, I hope that you will use your influence to persuade Delta management to remain neutral in this representation election. If they are successful in 

their goal to keep the ‘‘new Delta’’ non-union, we could see this merger as the beginning of the end for the airline industry as a source of decent and respectable jobs. 

While 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 as you review this merger 

and the impact that it will have on our lives and our families. We are the ones who 

have the most to lose; and we have the least protection. Most importantly, don’t let 

them destroy the one thing we have protecting us—our unions. 

Mr. CONYERS. [Presiding.] Thank you, Ms. Shook. 

And thank all of the gentlemen who, along with her, testified. 

103 

It sounds like you are in a pretty bad position, you and all the 

attendants, to me. I am not aware—I haven’t been aware of this 

before, but it sounds like they are thumbing their noses at you. 

And if they are doing that now, I shudder to think what they are 

going to be doing after this merger goes through. 

Am I being too hard on them? 

Ms. SHOOK. Frankly, I don’t think you are being hard enough. It 

was not just thumbing the nose at the flight attendants today. In 

fact, I believe it occurred with your good governance today. 

They are 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 how—I can’t describe how massive their 

campaign is to try and make sure that the Delta flight attendants 

don’t vote. It is really extraordinary and something I have never 

seen before. 

Mr. CONYERS. Why, Mr. Buffenbarger, is there such apparent 

hostility toward working people who provide the very basis for the 

existence of the services of the airline? 

Mr. BUFFENBARGER. Mr. Chairman, that is a very large question. 

I would like to point out that, in the years 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 communities served. 

None of that exists today. We are here talking about consolidation. 

And then 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 to the pilots, they came to the 

machinists 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 occasions, we even took stock 

and bought stock in the companies. And they still found their way, 

managed their way into bankruptcy. 

And the result of that was to cast away our pension plans, put 

them into the PBGC, and expect the American taxpayer to pay a 

reduced pension to the employees. They destroyed the 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.’’ Well, they failed at two trips to the 

plate, and now we are 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 disserving the American flying consumer is not the answer. 

I think re-regulation, as I mentioned in my remarks, it is 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 is what we need today. 

104 

Mr. CONYERS. Well, now we have had two CEOs testify here, and 

we have had two union representatives testify thus far. 

I feel like calling them back, frankly. Let’s start all over and see 

if we can sort some of this out. 

Now, you are dealing on this Committee mostly with a bunch of 

lawyers. And we understand business. I mean, we understand that 

self-interests and monetary gain can drive people to say and do a 

lot of things. 

I mean, that is not unique. This is what we do, we sort fiction 

from fact and try to make the best application of the rules that govern this great country, economically and otherwise. 

Now, do you stand to benefit? I mean, what is in it—they didn’t 

tell me they were in for 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? 

Mr. BUFFENBARGER. It is accurate, Mr. Chairman. 

Mr. CONYERS. Well, do you stand to gain? Do you two—are you 

getting some big deals out of this, some monetary—— [Laughter.] 

What is in it for you? 

Mr. BUFFENBARGER. Nothing but negatives, the pain on membership, the loss of employees’ jobs. And, no, we do not make a dime, 

a penny, or a euro out of this. 

Mr. CONYERS. So let me now turn to a more neutral party here. 

Here is your Committee, your Judiciary Committee—— 

Ms. SHOOK. May I answer the question you had asked before, 

please, if I may? 

That sometimes what we see with these carriers and the CEOs 

and the executives is they are short-timers. And they will come in; 

they will come out. They will 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 is not just a job. It is 

their chosen career. And they are in it for the long haul. 

And if, at the end of the day, there are some guarantees for the 

flight attendants and there is some preservation, there is 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 

are trying to preserve middle-class, good jobs that we work very 

hard at. And what we are trying to do is maintain that level and 

that standard for middle-class jobs. 

Mr. CONYERS. So, Dr. Winston, this is why we have you as a witness on this panel. You work at Brookings, thoughtful, intellectual, 

and fair-minded. You heard both panels here today. 

What say you about how the Ranking Member of this Task Force 

and myself and Steve Cohen and all the ladies and gentlemen of 

the Congress that are on this Committee who will be pouring over 

the results of the hearing, what would you have us do here that 

would operate to the benefit of the consumers? 

You know, the one person we don’t have as a witness is the guy 

that flies, the person that pays the bill, the person who gets stuck 

in the airport overnight, and lots of other things. We are representing the best interests of this country, in terms of this proposed merger. 

105 

What do you think? How do you think we sort all this out? 

Mr. WINSTON. Well, this fall, we are going to celebrate the 30th 

anniversary of the Airline Deregulation Act. And, fortunately, there 

is great reason to celebrate. 

And I base this not on advocacy, but just the overwhelming evidence that it has been developed not just by me and my collaborator, Steve Morrison, but other scholars throughout the country, 

that airline deregulation, based on the empirical evidence, has generated substantial benefits to consumers. 

You can see that most clearly in the graphs that I have included 

in my testimony, a substantial decline in real fares, increase in the 

number of competitors at the route 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 is 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 have evolved since regulation. 

During regulation, airline fares were regulated and there was restrictions on entry. And the fares that were in existence generated 

above-normal profits. And we got into a relationship between carriers and labor—what they call rent-sharing. That is the jargon. 

That is, how do we divide up this excess pie? 

Okay, 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, 

there was a big change. That share of the pie was gone, as the industry became far more competitive, and there was ‘‘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 is how 

they were 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 1960’s that they haven’t forgotten, even though the industry 

was regulated then and it was deregulated now. 

But we see one fundamental difference, and those are the newentrant 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 is really the key to the problem, that the new 

entrants, JetBlue, AirTran, Southwest, they did not have this rentsharing mentality and had a more entrepreneurial relationship, 

which I think has helped them in developing their labor relations 

and have a more constructive working relationship. 

I can understand that the what we call legacy carriers—Delta 

and Northwest are among them, but certainly United, American, 

others are included—have this rent-sharing mentality that leads to 

this bitterness. But it is 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 relationships, lead to efficiencies but also have a contented workforce, 

the legacy carriers will just lose more market share. That is what 

is going to happen. 

106 

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 are honored 

and if there is any violation of those laws. There is a place to intervene. 

But short of that, we do have carriers in this industry who have, 

‘‘worked things out’’ or are working things out. And the other carriers just have to do that. And then the merger, to the extent that 

it proceeds, is going to have to, again, lead to good relationships, 

because no carrier—and I would stress this—no carrier is successful with an unhappy workforce. 

You are not going to be making money that way. You will just 

cut your throat if you have a reputation for not treating your labor 

well. And I think the market is what is going to discipline all of 

this. 

Mr. CONYERS. Do you know what I am going to do now? You 

raised some interesting points. And because my Ranking Member 

has to go on the floor to debate, I am going to stop here. 

All of you, hold your points. I know everybody wants to join in 

this discussion. 

And I would like to recognize Steve Chabot now at this time. 

Mr. CHABOT. Thank you, Mr. Chairman. I will try to be brief 

with my questions. 

If I could, Mr. Buffenbarger and Ms. Shook, just follow up with 

the points that you had made. And you all were in here, I assume, 

when the two CEOs were here and testified and 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 is 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 you are saying? 

I was talking to the two union workers. 

Ms. SHOOK. Well, thank you. I am not an economist. And what 

I would say is that we have not taken a position on this merger. 

That is largely because we haven’t actually been involved in the 

discussions, even though we have asked. We have not been equal 

partners. So we don’t actually have all the data to be able to make 

an informed decision. 

Mr. CHABOT. Okay, thank you. 

Mr. Buffenbarger? 

Mr. BUFFENBARGER. Please rest assured, Congressman Chabot, 

that we are opposed to this merger. We have dealt for many years 

with the two gentlemen you had previously when they worked for 

the same company and worked in offices next door to 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. 

107 

Our members, in the new model, worked their tails off to make 

Northwest successful. And we were rewarded by years of courtroom 

challenge trying to collect the money on the stock that we owned. 

And that is the type of relationship—it is not on the employees’ 

side. It is 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 

as a very critical part of the success of their proposed merger. 

We know what it is going to bring, and it is going to bring more 

pain. And it is going to disserve the flying public. 

Mr. CHABOT. Let me stop you there, if I can, because I have got 

limited time. 

Mr. BUFFENBARGER. Sure. 

Mr. CHABOT. But just to—as one of the representatives from the 

greater Cincinnati area, I know that when we heard about this— 

and as we have 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 are union 

or nonunion jobs, we want the jobs to stay there. We want the local 

economy to continue to thrive to the extent that it can in a weak 

economy that we are in right now. 

But we appreciate your input, as well. 

And if I could turn to you, Mr. Moormann, on behalf to Greater 

Cincinnati USA Chamber of Commerce, 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. MOORMANN. Mr. Chairman, Congressman Chabot, the hub is 

vitally important to the regional economy in the Cincinnati USA 

region. And that is a 15-county region of 2.1 million people that is 

northern Kentucky, southwestern Ohio, and southeastern Indiana. 

Let me give you a case in point. Just last year, Tata 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 1,000 new jobs in the Cincinnati USA region. The multiplier effect will probably lead to at least 1,500 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 is 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. 

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. The reason it is interested in the Cincinnati USA region is because there are six nonstop daily flights 

to their headquarter city. 

I think those are just two very fine points to put on this, but they 

are two examples of how vitally important the hub is in attracting 

jobs to our region. 

108 

When you look at the growth that is 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 and 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 taxpayers in our region. 

Mr. CHABOT. Okay, thank 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 few years, the highest in the Nation, 

and that a lot of the folks in our area 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? 

Mr. MOORMANN. One of the top issues of concern that have surfaced 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 is offered to us. 

There is a premium associated with nonstop service to 120 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 paying 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, is that Delta has, in 

their words, rationalized the level of service at our airport. 

That has reduced the number of flights. It has taken out seat capacity. And what we hope that the results of that is, is an opportunity for other carriers to look at our community potentially to 

offer service. 

So I think there is 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 to our region because of the 

reduced Delta service. And that may have some positive impact on 

the exorbitant fares that we pay now. 

Mr. CHABOT. I certainly hope so, because I know that—you know, 

I have heard the same explanation from Delta relative to the convenience and being able to fly internationally, et cetera, and we 

pay a premium. 

But there is a number of communities that have that same absolute and their prices are lower. And I just don’t buy it. I mean, I 

think they are 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 that. 

Mr. Chairman, do I have any additional time or am I out? 

Mr. CONYERS. You have as much time as you desire, sir. 

Mr. CHABOT. I will ask one more question, and thank you, Mr. 

Chairman. 

109 

Mr. Winston, since I didn’t get to you, how would you characterize the health of the U.S. airline industry generally? And do you 

envision more bankruptcies, if current trends continue? 

Mr. WINSTON. Let’s not forget that 2006, 2007 were modestly 

profitable years after the huge losses following September 11th. So, 

I mean, no industry could really take an unanticipated 20 percent 

reduction in demand and be in good financial shape. And they had 

to absorb this for several years, came back very modestly in 2006, 

2007, and now losing money again. 

So, I mean, they hadn’t recovered yet, and now they are hit—— 

Mr. CHABOT. Is that principally because of the high fuel prices, 

with—— 

Mr. WINSTON. Oh, no, no, no. 

Mr. CHABOT. It is not that? 

Mr. WINSTON. No, no. I mean, they were in—several years following, as you know, September 11th, they lost $30 billion or so 

dollars. It was only—— 

Mr. CHABOT. You said they were then doing marginally better, 

but now they are not again. I thought—— 

Mr. WINSTON. Right, they lost—from between—after September 

11th up through 2005, there were huge losses in the industry. 

Mr. CHABOT. Right. Then you said it got somewhat better. 

Mr. WINSTON. Things got a little better in 2006, 2007, but certainly not even close to what they lost. 

Mr. CHABOT. And now they are struggling—— 

Mr. WINSTON. And now we are starting down again. 

Mr. CHABOT. And I am just saying, is that related to the fuel 

prices? 

Mr. WINSTON. Oh, now, yes. 

Mr. CHABOT. That is what I—— 

Mr. WINSTON. I would say—with the fuel prices and, in general, 

any other macroeconomic slowdown, sure, to the extent the economy is slowing because of the subprime mortgage that is obviously 

going to hurt a few. And the combination, a number of them, I 

think, are vulnerable. 

Mr. CHABOT. Thank you very much. 

I thank the entire panel and yield back. 

Mr. CONYERS. Thank you very much, Ranking Member Chabot. 

We turn now to Steve Cohen, our distinguished Member from 

Tennessee. 

Mr. COHEN. Thank you, Mr. Chairman. 

Mr. Moormann—is it correct, ‘‘Moormann’’? 

Mr. MOORMANN. Yes. 

Mr. COHEN. Is your chamber coming out and taking a position 

on this merger? 

Mr. MOORMANN. We have 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 a sustainable, financially viable corporation, because of our region’s reliance on Delta, we think that that is a positive way to go. 

Mr. COHEN. So you were concerned that, if they don’t merge, 

there is a possibility that Delta could no longer be a viable airline? 

110 

Mr. MOORMANN. Well, I would not go so far as to say that. I 

would say that we are looking for Delta to make its decisions as 

to what can make it a successful, financially viable company. 

Mr. COHEN. If there is not a merger, would Cincinnati have a 

hub? 

Mr. MOORMANN. We believe that we would. We believe that Cincinnati is in a very important part of the Delta network, either in 

a merged environment 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. 

Mr. COHEN. Do you have any reason to believe that Cincinnati 

and Memphis are in any way pitted against each other as possible 

cities that might—one or the other might lose a hub? 

Mr. MOORMANN. We have no evidence of that, aside from our 

own suspicions, because of the proximity of the cities. 

Mr. COHEN. So you do have suspicions that Memphis or Cincinnati could be without a hub if the merger goes through? 

Mr. MOORMANN. I would say that 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. 

Mr. COHEN. To eliminate either city? 

Mr. MOORMANN. Correct. 

Mr. COHEN. Right. 

Mr. Winston, you have listened to the testimony. Do you believe 

with a merger that all the hubs would remain open and at the 

same level that they experience now? 

Mr. WINSTON. I would be surprised. I think—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 given you 

have 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 it, they have abandoned all the routes 

they have got after the merger. That has happened; we know that. 

Mr. COHEN. But on the front end, they said they weren’t going 

to do that? 

Mr. WINSTON. I am sorry? 

Mr. COHEN. Did they say on the front end they weren’t going to 

abandon those routes? 

Mr. WINSTON. I am 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 are doing this to fundamentally change the network 

of what you are doing to take advantage of international operations. I mean, that is going to be the key synergy to Delta-Northwest, in my view. You will be able to take advantage of Northwest’s 

operations in Asia, Delta’s in Europe, and you are going to think 

of trying to route traffic so that you can get a fair amount of that 

traffic abroad. 

To me, Cincinnati and Memphis, that is pretty close to have two 

hubs. I don’t know why—it is not obvious to me why you would 

111 

have both of them. But, look, there was economic reasons to have 

them in the first place. They may still be viable. 

But there is one thing also you have to think about, how other 

carriers are going to react to this merger. And they might say, 

‘‘Look, we are going to start going into some of these areas ourselves simply because we want some of that traffic going to Asia.’’ 

Mr. COHEN. Being that Memphis does have FedEx and makes 

that the largest cargo hub in the world, and being that Memphis 

has the lowest—it is one of the most efficient airports and the best 

climate and great idling, you know, limited amount of idling time 

on the tarmacs, is there any reason in the world why they wouldn’t 

jettison Cincinnati instead of Memphis? [Laughter.] 

Mr. CHABOT. Now, wait a minute here. [Laughter.] 

Mr. COHEN. We did beat you in basketball this year. You don’t 

have to answer that question. 

Mr. WINSTON. 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. 

Mr. COHEN. Ribs. 

Mr. WINSTON. No. [Laughter.] 

Mr. WINSTON. It is now a test airport for satellite service, for satellite air traffic control, that Federal Express is using. So our basis 

for our air traffic control system, one of the test areas in the country is in Memphis. 

Now, whether that—you know, it is a low-density airport to 

begin with, so whether that is improving their arrival and departure is hard to say, but that is an important advantage. They are 

the test case for that with FedEx. But, I mean, that is one thing 

that you have got to keep in mind about their service. 

In terms of whether the Cincinnati hub or the Memphis hub is 

the most viable airport, it depends on what happens on the international part of the operations. If they see that now that we have 

more attractive operations in Asia, they may say, ‘‘Look, we want 

to expand Memphis, because that is going to hook up better with 

Asia.’’ 

If for whatever reason they think, ‘‘Well, now our designs are 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 there are many things that are going to be changing. I think 

just sort of looking in a static sense, ‘‘Here is the map, and this 

is what is going to happen,’’ I think it is going to be very misleading. And we have learned that from other mergers. 

The 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 mergers. 

Mr. COHEN. Let me ask Ms. Shook. Have the Northwest attendants taken a position, do you know? 

Ms. SHOOK. Well, we represent the flight attendants at Northwest Airlines and, no, they have not formally taken a position. 

What is important in this discussion is that, again, we need to be 

equal partners and be involved in this discussion. 

112 

Right now, we are focused on the Delta flight attendants, who 

are currently—their election started yesterday. And then, beyond 

that, we will do whatever it takes to make sure that the Northwest 

flight attendants protect their collective bargaining rights. 

Mr. COHEN. The difficult in the whole is the public—both of these 

CEOs made clear that they felt like no service would be disrupted, 

no hub would be disturbed, everything, et cetera, et cetera. And 

you look at—the Commercial Appeal had a poll online this morning, Memphis 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 to keep the hub, and 

then they would merge, and then the hub would disappear. By far, 

that was the response. And that is a concern you have. 

And you look—I believe there was an article somebody told me 

about from one of the senators in Missouri, maybe Senator 

McCaskill—was it McCaskill—about TWA and the story there, 

where they basically, like Howard Hughes, disappeared—— 

Ms. SHOOK. When you are saying that you are hearing from your 

constituents, obviously I do know 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 and 

Memphis? It is a very real concern. 

Mr. COHEN. All right. Well, I appreciate the testimony. 

Thank you, Mr. Chairman. 

Mr. CONYERS. Thank you very much. 

We have competing sets of facts. We have competing predictions 

of what the future is going to be. And we have different views of 

what will happen if the merger occurs. 

And it is not clear to me that the deregulation of 30 years ago 

has been all that it was cracked up to be initially. As a matter of 

fact, I have, in discussions with a number of Members, including 

Members of the other body, our senators, who regret some of their 

initial enthusiasm about the whole deregulation concept. 

And so, Dr. Winston, I want you to know that there is another 

side to this thing. Consumers magazine recently wrote about it in 

connection to air travel. I am going to ask unanimous consent and 

put it into the record. 

But what we are looking at is an attitude, and maybe it can be 

explained, but there seems to be an attitude of hostility between 

the employers and the employees, that the—why wouldn’t—here is 

a multibillion-dollar change. Why wouldn’t you let a few union representatives sit in on the meetings so that they could show some 

support for it? 

I mean, it is hard to be kept outside the door and then, when 

we get ready to go in, ‘‘Well, let’s everybody get aboard.’’ And the 

question might be in Washington during this coming period of time 

is we don’t know what it is we are getting on board for. We don’t 

know where we are 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 2008 in Washington and say, ‘‘Wow, they didn’t live up to any 

of that stuff or maybe very little.’’ 

113 

And then when you show the gain—I mean, human nature is 

human nature. This isn’t peculiar to airline industry or airline 

execs. But when you have got a deal on the table where you might 

be enriched by double-digit millions of dollars, it might affect your 

thinking a little bit, maybe a lot. 

So that is where we come in. Our question isn’t what is good for 

the airline industry, per se, or the airline executives in particular. 

But what is good for the American people, the consumers, the average people 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 salaries and pension 

benefits and health benefits are reasonably negotiated? 

I am nervous about, ‘‘ here is one organization with a union, here 

is another one without a union,’’ and they don’t act like they really 

are going to ever change much. I mean, with or without the merger, they don’t seem to be for unions. 

So what is the problem here? And this is what a hearing is good 

for. We want to get down, if we can, and talk to each other about 

this, because we are going to, 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 24th?’’ Well, we learned that this was a wonderful opportunity for things to get better if we took a couple of the biggest 

companies and put them together. And then we had another panel 

in which we got an almost completely different picture. 

And we haven’t talked about whether a merger would really reduce competition on this panel. We have been saying that it will 

increase competition. 

Mergers rarely increase competition, I mean, as a general principle, mergers reduce competition. 

And when competition is reduced, it seems to me the consumer 

loses benefits. The consumer doesn’t gain by a company getting bigger. 

So these are some of the things on my mind. And I would like 

to just go down the line and have you give us any final comments. 

Mr. Moormann, how would—I know your organization is supporting, but has it been a little stunning to you that we could get 

two panels that describe and see things so differently as we have 

had here this morning in the Judiciary Committee? 

Mr. MOORMANN. Well, I think, certainly, it is surprising but not 

necessarily unexpected that you would hear very different opinions 

about how management 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 of employees that it could. 

And to our understanding, they did. We continue to have somewhere around 7,000 Delta employees working in our region. 

They said that they would continue to utilize the Comair services. They are continuing to utilize Comair, which employs probably another 6,000 or so people in our community. 

114 

So we, I think, have no choice but to take them at their word. 

And when they assure 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 and 

accept that, that that is what their business plan entails. 

Mr. CONYERS. Dr. Winston? 

Mr. WINSTON. Well, as I said, I think that the tensions and hostility between labor and management didn’t just begin yesterday. 

I think they began many decades ago. 

So it is not surprising that there are different views and suspicions. And I think that is really the heart of it that is obviously 

of concern, that there is 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 has been going on for many decades 

with some of these carriers. It saddens me that you don’t see deregulation as positive. And I think one of the positive things that 

it did was open the industry up and suggest there are alternative 

ways that labor and management can sort things out. 

And we have seen this with success with other airlines. So it 

would be interesting, in part of this, to sort of see how that has 

been able to work. 

As I said, I think another part of it is the dynamics of it. It is 

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 are not going 

to change routes, we are not going to cut labor. 

I think that they are in a position where they have to. They are 

fighting for survival. This has been a very tough period for them. 

And I don’t see that any company’s successful by annoying labor 

and irritating labor. Ultimately, they will fail. 

Fortunately, though—and this is the success of deregulation—we 

have others to take their place. Their failure is just going to lead 

to an increased share of the low-cost carriers and other carriers or 

legacy carriers can work things out. 

So I see the tension, but I see the value of markets is in many 

ways correcting a lot of these problems in giving you a backup if 

things fail here. But I am hoping that they don’t. 

Mr. CONYERS. Well, I share your hopes. 

Let me ask you, though, suppose we had a little bit of re-regulation. Suppose we brought back a little. What would be so bad about 

that? 

Mr. WINSTON. Do you have anything—what specifics? 

Mr. CONYERS. In particular? 

Mr. WINSTON. What specific re-regulation did you have mind? 

Mr. CONYERS. Right. 

Mr. WINSTON. You certainly wouldn’t want to re-regulate fairs. 

Mr. CONYERS. Let me ask Mr. Buffenbarger. What kind of re-regulation could we have in mind in this kind of a discussion? 

Mr. BUFFENBARGER. Thank you, Mr. Chairman. I think there is 

a role for government to step in, as they did prior to 1978, when 

also the cost of fuel was regulated and managed by the government 

and leveled the playing field for the airlines, which meant then 

115 

they had to use their brilliant business minds to figure out other, 

better ways to compete. 

I think the way we structure who actually manages the industry—let’s talk about that for just a minute. Right now, we had two 

gentlemen address us 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 am 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 is about 

providing a public service to the best interests of this country. 

You know, everything we have deregulated, 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 that bill, they skyrocketed up. 

We have deregulated the financial institutions to a great degree. 

We are in a lot of problems again today. 

I think Congress needs to take a serious look at what deregulation really means, what is the role of government in our lives, and 

something like public transportation, not just airlines, but rails and 

the roads and the—you know, all the stuff we do, we need to understand that, when the private sector can’t deliver reasonable expectations to the consuming public, that it is 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 fuel is the first place to start, how we manage 

the air traffic control system. Memphis is the test bed because it 

has a large cargo hub. And how do we integrate commercial flying 

people versus packages? And how can you use the new satellite 

system to make that integrate even better? 

Those are things that offer a little hope. But the issue of re-regulation 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. 

Mr. CONYERS. Ms. Shook, 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 have had a subprime 

mortgage meltdown, which is now affecting millions of people, literally all the financial markets in the world, and it is a question 

now of, how did this thing get so completely out of hand? 

And guess what one of the answers that is 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, that they were offering people opportunities for an 

adjustable mortgage rate, which only, unfortunately, adjusted upward. 

And so this, to me, suggests a case for regulation. 

116 

And I would like to yield to the gentleman. 

Mr. CHABOT. Would the gentleman yield? 

Mr. CONYERS. Yes. 

Mr. CHABOT. I thank the gentleman for yielding. The gentleman 

brings up the subprime mortgage crisis, and I can’t let it go 

uncommented upon that one of the solutions in this Committee was 

a joint bipartisan effort between the Chairman and myself. And I 

might note that 100 percent of the Republicans who voted for it are 

present here in the Committee today. [Laughter.] 

So I yield back. 

Mr. CONYERS. What about—you know—— 

Mr. WINSTON. Did you want me to comment? 

Mr. CONYERS. Yes, deregulation doesn’t solve problems. It can 

frequently create problems. 

Mr. WINSTON. My view is it 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 take the comment about you want to regulate fuel prices. 

Think it through. What is going to happen? Suppose we start capping the price of oil. We have been down this road before. We saw 

what happened. We are going to get supply—— 

Mr. CONYERS. What did happen? 

Mr. WINSTON. Supply shocks, that is, supply reductions. With the 

price less, less supply. Eventually, pressure to ‘‘take them off’’ and, 

all of a sudden, through the roof, because supply had been cut 

back. 

Eventually, though, the market did sort itself out. And you know, 

following the price shocks of the late 1970’s, early 1980’s, prices 

went down. 

Markets do have disturbances. It would be wrong to say and misleading to say markets always perform perfectly. They don’t. There 

are shocks. And we learn from that. 

The issue is: Who learns quicker and who learns more effectively, 

markets or government? 

Let’s go to subprime, right? Do we really know what caused that? 

I mean, at this point, I think there is obviously a lot more understanding that we need to get. Were they really truthful information 

problems or were a fair number of people, more than people want 

to admit, saying, ‘‘Look, we knew what we were getting into. We 

took a risk. The risk didn’t work out, and we are caught from 

that’’? 

Honestly, what could government regulation have done to anticipate this problem and done something effectively to prevent it and/ 

or intervene through it? 

Mr. CONYERS. I have an answer for you: plenty. 

Mr. WINSTON. Then it gets back to then the response. Why didn’t 

it do it? And if that is the case, then how could we continue to 

count on government in playing 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 is responVerDate Aug 31 2005 13:22 Aug 26, 2008 Jkt 000000 PO 00000 Frm 00120 Fmt 6633 Sfmt 6601 H:\WORK\ATRUST3\042408\41905.000 HJUD1 PsN: DOUGA
117 

sible for what and whether, in fact, regulations will truly have the 

effects that we think they are going to have. 

I would quickly that, also, by the way, on the comment I can’t 

resist, on the passenger’s bill of rights, I think ultimately that is 

going to do more harm than good. 

Mr. CONYERS. Well, so much for your liberal economics—today. 

[Laughter.] 

Mr. WINSTON. It has nothing to do with politics. 

Mr. CONYERS. Yes. As they say, ‘‘Yeah, right.’’ 

Mr. WINSTON. Check my voting record. 

Mr. CONYERS. Well, that is a good idea. I think I would invite 

you to check mine, as well. 

But, really, I think we need to talk more, not in the hearing, 

about the subprime meltdown, but it is still—this isn’t something 

that is in the past or that happened. It is getting worse, as you 

probably know. 

We turn now to Ms. Shook. 

Ms. SHOOK. Thank you. 

Once again, I would just like to thank you for the opportunity 

today. As obviously I have 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 is a very good opportunity today to provide voice to the 

flight attendants. So I would like to thank you for that. 

I would like to invite you, Congressman, next time you are 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 representation election. 

And I would respectfully say to Mr. Moormann, when we have 

to take Delta at their word, I would like to give you a sampling 

of what these flight attendants have to face every single time they 

check in for work. 

There are huge posters on the wall. There are pop-up screens 

when they check in on the computer. There are supervisors everywhere. There are glossy leaflets. There is a spooling video. It is 

just—it is incredibly overwhelming, all with the Delta logo all over 

it. 

So I am very serious in that request that, to give you some reference on what they are up against. 

And I want to just also address Mr. Winston that I believe it is 

somewhat of an oversimplification to pit labor and executives 

against one another. And that is not at all what I am talking about 

today. 

We are talking about Delta flight attendants coming together to 

collectively have a brighter future working with their management. 

We are talking about the Northwest Airlines being peers with their 

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 today. 

Mr. CONYERS. Thank you so much. 

Did anyone want a last comment before we adjourn this hearing? 

118 

Mr. Buffenbarger? 

Mr. BUFFENBARGER. Mr. Chairman, I would just like to point out 

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 

deregulation. 

So I think we need to bear in mind that some of the lessons from 

the past are just as appropriate today as they were in the time of 

Franklin Roosevelt. Thank you, sir, for the opportunity. 

Mr. CONYERS. Well, I thank the second panel. It was certainly 

more lively than the first. 

The Committee is adjourned. 

[Whereupon, at 1:34 p.m., the Task Force was adjourned.] 

119 

A P P E N D I X 

MATERIAL SUBMITTED FOR THE HEARING RECORD

PREPARED STATEMENT OF THE HONORABLE SHEILA JACKSON LEE, A REPRESENTATIVE

IN CONGRESS FROM THE STATE OF TEXAS, AND MEMBER, TASK FORCE ON COMPETI- TION POLICY AND ANTITRUST LAWS

Thank you, Mr. Chairman and ranking member for your leadership in holding today’s important hearing on the state of competition in the airline industry. Today’s 

hearing will focus on the proposed merger between Delta Air Lines and Northwest 

Airlines announced on April 14, 2008. The hearing will consider whether this merger raises any antitrust concerns. Last week, Delta and Northwest airlines announced a $3.6 billion merger agreement that would create the largest airline in the United States. Many believe that 

if this merger is consummated, it may trigger a wave of further consolidation within 

the industry involving the other major carriers, United, Continental, US Airways, 

and American Airlines. 

Mergers among these large national carriers could lead to the survival of struggling airlines that have suffered financial losses, more carriers, more jobs, more destinations and routes, and increased regional stability around airline hubs. Opponents of consolidation argue that the current state of the industry and the current 

trend toward consolidation could lead to anticompetitive concerns. Critics of consolidation argue that jobs could be lossed as business is streamlined. Additionally, critics argue that the proposed airline consolidation might yield reduced seat capacity 

and increases in ticket prices. 

Today’s hearing promises to be very interesting and deserves much consideration. 

It presents a topical issue that has recently been reported by the Associated Press 

in news articles within the last few days, I look forward to hearing more about the 

proposed merger. I also look forward to working with the airlines and other members of Congress to address any anticompetitive behavior that may be implicated by 

any consolidation. 

I welcome our distinguished panelists and I look forward to their insightful testimony. 

In the past few weeks, four smaller airlines in America, Aloha, Skybus, ATA, and 

Frontier, have filed for bankruptcy and will all have since gone out of business. Another all business-class trans-atlantic airline, Maxjet, went out business in December. It’s rival, Silverjet, is seeking a buyer. Oasis Hong Kong, a pioneer of low-cost 

long haul services, collapsed on April 9, 2008. Another airline, Champion, will cease 

operations in May 2008. Alitalia may experience a similar fate unless a takeover 

by Air France-KLM can be revived. 

The economy is tight and by the looks of things is slowly creeping into a recession. 

The economic downturn is pressuring U.S. air carriers. Fuel costs are going through 

the roof. Oil is at $114 barrel and airlines are confronting their biggest economic 

crisis in recent years than the darks days that followed the tragic events of 9/11. 

Aviation taxes and fees are exorbitant. U.S. refinery capacity is at its lowers point 

since Hurricane Katrina, squeezing jet fuel supplies and driving up prices. 

On the world market, crude oil is priced in U.S. dollars, and the weakening dollar 

makes jet fuel relatively less expensive for foreign (especially European) competitors 

than for U.S. airlines. Foreign airlines pay 37% LESS for oil because of the weak 

dollar. 

The surging cost of fuel is the single largest cost center for U.S. aviation. In 2003, 

fuel was approximately 17% of industry expense; in 2008, it is projected to account 

for more than 34% of industry expenses. Airlines are looking at staggering losses 

this year. Airlines are facing a $18 billion increase in fuel costs in this year alone. 

Despite the increase in the cost centers for aviation, there are many critiques of 

the U.S. air transit system that would not support consolidation. For example, thirty ago, Congress passed the Airline Deregulation Act of 1978 and since that time, 

the airline system has deteriorated. 

Mr. Robert Crandall, the former head of AMR, the holding company for American 

Airlines, is reported to have said in the New York Times that ‘‘our airlines, once 

world leaders, are now laggards in every category, including fleet age, service quality and international reputation. Fewer and fewer flights are on time. Airport congestion has become a staple of late-night comedy shows. An ever higher percentage 

of bags are lost or sent to the wrong airports. Last-minute seats are harder and 

120 

harder to find. Passenger complaints have skyrocketed. Airline service, by any 

standard, has become unacceptable’’ In short, Mr. Crandall states that ‘‘consolidation will not resolve the woes of individual carriers, nor will it fix the nation’s aviation problems’’ In his view, the U.S. air transit system is underregulated, overtaxed, 

infrastructure is terrible, carriers charge too little and fly too much. 

The reality is that both Delta and Northwest have declared bankruptcy and have 

posted staggering billion dollar first-quarterly losses this year. The Department of 

Justice’s historic antitrust analyst has generally focused upon the relevant product 

and geographic markets and city-pairs in airline mergers. In determining whether 

a transaction significantly raises concentration levels in city-pair markets, the DOJ 

separately evaluates non-stop service and connecting service. The reasoning behind 

the dual analyses is that for price-sensitive consumers, connecting flights may 

present a reasonable alternative; whereas, for business travelers, they may not. 

Once overlapping city-pairs have been identified, the DOJ evaluates the number of 

other carriers serving the markets, the nature of that service, and their market 

shares. The DOJ then focuses upon those city-pairs in which post-merger concentration levels may make it feasible for the merged parties to exercise market power. 

The DOJ may also consider the timeliness, likelihood, and sufficiency of magnitude 

of entry by other competitors. According to analysts, there is little duplication in the 

routes between Delta and Northwest. 

I am not convinced that the merger is an optimal solution to the economic and 

financial woes beset by the industry and beset by these Delta and Northwest. It is 

possible that the merger of these two airlines could lead to further consolidation. 

Because Delta and Northwest airline’s fleet is old, there is concern about keeping 

workers employed, keeping capacity, and airline tickets at an affordable price, perhaps the answer lies in addressing the fuel crisis. Part of the reason for the merger 

is to save and costs and to increase profits. Part of the reason for the increased cost 

to these companies is the soaring price of fuel. Thus, I ask whether a solution might 

be to temporarily suspend the jet fuel tax when oil is above $100 per barrel. Insist 

that the Administration halt additions to the Strategic Petroleum Reserve and direct the Administration to sell 10 million barrels of petroleum from that reserve. 

Insist that the Administration release the nearly 2 million barrels currently sitting 

in the Northeast Home Heating Oil Reserve. Say no to increasing passenger airline 

taxes and make corporate jets pay their share for their use of the air traffic control 

system. 

Should this merger be consummated without any regulation from Congress, I 

would offer that we should work together with Delta and Northwest airlines to ensure that they comply with H.R. 1303, ‘‘Airline Passenger Bill of Rights Act of 

2007.’’ H.R. 1303 requires a covered airline to: (1) establish procedures for handling 

passenger complaints; (2) provide customers at the airport and aboard an aircraft 

with information regarding delay, cancellation, or diversion; (3) establish procedures 

to allow passengers to exit the aircraft in the case of a departure or arrival delay 

which would require passengers to remain on a grounded aircraft for more than 

three hours, with specified exceptions; (4) provide passengers on a departure or arrival delayed grounded aircraft with essential ventilation, food, water, sanitary, and 

medical services; (5) publish a monthly list of its chronically delayed flights and provide such information upon ticket purchase; (6) publish and update lowest fare and 

schedule information; and (7) make every reasonable effort to return lost baggage 

within 24 hours. 

H.R. 1303 directs the Secretary of Transportation to: (1) review airline and airport 

emergency contingency plans for bad weather; (2) work with air carriers to ensure 

that a pilot operating a (long) departure-delayed flight is permitted to return the 

aircraft to the terminal to allow passengers to exit the aircraft without losing the 

flight’s departure sequence position; and (3) conduct a study of the ability of air carriers to provide for passengers’ essential needs in cases of diverted flights. 

The Northwest-Delta merged entity should guarantee that frontline employees, 

airline pilots, and airline stewards and stewardess will not be terminated and that 

no airline hubs will be closed. Labor unions and their collective bargaining should 

be recognized and preserved. Lastly, the merger should not affect employee retirement plans and salaries. 

I would be curious to hear from our panelists whether there is any possible alternative to merger. Again, I welcome our panelists and look forward to their enlightening answers. 

I yield back the balance of my time. 

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PREPARED STATEMENT OF THE AIRCRAFT MECHANICS FRATERNAL ASSOCIATION


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ARTICLE ENTITLED ‘‘FEAR OF FLYING? LIFE SINCE DEREGULATION - 2008’’ 

FROM UNBOSSED.COM


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