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No major obstacles likely for Delta deal
Delta Air Lines' proposed take-over of Northwest Airlines is the biggest airline test yet for US antitrust officials, but experts do not expect a drawn-out review or any significant roadblocks to the deal.
- Reuters
- Published: 00:17 April 16, 2008
Washington: Delta Air Lines' proposed take-over of Northwest Airlines is the biggest airline test yet for US antitrust officials, but experts do not expect a drawn-out review or any significant roadblocks to the deal.
While the US Justice Department is expected to work carefully, the agency's track record on consolidation favours approval. "This administration has taken a very pro-merger stance," said Diana Moss, an economist and senior fellow at the nonprofit American Antitrust Institute.
The Justice Department's antitrust chief, Thomas Barnett, has said the agency would not "prejudge" competition issues and would work as quickly as possible to review any merger. That is good for merger proponents who believe their best chance rests with the Bush administration, which leaves in January.
"I think the review can be completed in time," said Andrew Steinberg, who most recently was a senior aviation policy official at the US Transportation Department, which would have a say in the decision.
"A lot depends on things that vary from case to case. So it depends on the parties' ability to produce relevant documents as well as their [willingness] to fix any perceived competitive issues," Steinberg said.
Conditions
Divestment of some airport gates to competitors would likely be a condition of approval, experts agreed.
Ted Bolema, a former Justice Department antitrust official in the Clinton administration and now a merger expert at Central Michigan University, said market concentration generally dominates antitrust review rather than politics or industry financial turmoil, not including bankruptcies.
"This administration is more likely to look more strictly at market factors," Bolema said.
While the scope of this deal is unprecedented - nearly 20 per cent domestic market share based on passenger revenue - Northwest and Delta have few overlapping routes, a crucial factor.
If approved, the new carrier would leave six major airlines, including low-cost power Southwest Airlines, competing for US market share.
Delta commands 53 per cent of business at its Atlanta hub and a third of flights at Salt Lake City and Cincinnati.
Northwest has 66 per cent of the business at Minneapolis, 60 per cent at Detroit and half the flights at Memphis.
They have few overlaps with nonstop service, including New York's John F. Kennedy airport to Detroit; Cincinnati to Detroit; Cincinnati to Minneapolis and Salt Lake City to Minneapolis, according to fare expert Terry Trippler.
There are no overlapping routes in their top 10 markets respectively, but the Atlanta/Memphis proximity could raise eyebrows at Justice. Competition concerns had derailed a proposed 2001 merger between US Airways and United.
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