[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]



 
                  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



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                       COMMITTEE ON THE JUDICIARY

                 JOHN CONYERS, Jr., Michigan, Chairman
HOWARD L. BERMAN, California         LAMAR SMITH, Texas
RICK BOUCHER, Virginia               F. JAMES SENSENBRENNER, Jr., 
JERROLD NADLER, New York                 Wisconsin
ROBERT C. ``BOBBY'' SCOTT, Virginia  HOWARD COBLE, North Carolina
MELVIN L. WATT, North Carolina       ELTON GALLEGLY, California
ZOE LOFGREN, California              BOB GOODLATTE, Virginia
SHEILA JACKSON LEE, Texas            STEVE CHABOT, Ohio
MAXINE WATERS, California            DANIEL E. LUNGREN, California
WILLIAM D. DELAHUNT, Massachusetts   CHRIS CANNON, Utah
ROBERT WEXLER, Florida               RIC KELLER, Florida
LINDA T. SANCHEZ, California         DARRELL ISSA, California
STEVE COHEN, Tennessee               MIKE PENCE, Indiana
HANK JOHNSON, Georgia                J. RANDY FORBES, Virginia
BETTY SUTTON, Ohio                   STEVE KING, Iowa
LUIS V. GUTIERREZ, Illinois          TOM FEENEY, Florida
BRAD SHERMAN, California             TRENT FRANKS, Arizona
TAMMY BALDWIN, Wisconsin             LOUIE GOHMERT, Texas
ANTHONY D. WEINER, New York          JIM JORDAN, Ohio
ADAM B. SCHIFF, California
ARTUR DAVIS, Alabama
DEBBIE WASSERMAN SCHULTZ, Florida
KEITH ELLISON, Minnesota

            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               STEVE CHABOT, Ohio
ZOE LOFGREN, California              RIC KELLER, Florida
SHEILA JACKSON LEE, Texas            F. JAMES SENSENBRENNER, JR., 
MAXINE WATERS, California            Wisconsin
STEVE COHEN, Tennessee               BOB GOODLATTE, Virginia
BETTY SUTTON, Ohio                   CHRIS CANNON, Utah
ANTHONY D. WEINER, New York          DARRELL ISSA, California
DEBBIE WASSERMAN SCHULTZ, Florida    TOM FEENEY, Florida
                                     LAMAR SMITH, Texas, Ex Officio


            Perry Apelbaum, Staff Director and Chief Counsel

      Sean McLaughlin, Minority Chief of Staff and General Counsel


                            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

                                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


                  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. 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 hands-off approach has even encouraged companies 
with questionable merger justifications to give it a try.
    And some analysts have stated that the government has 
nearly stepped out of the 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 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 
Cincinnati-Northern 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 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.
    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?
    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 Minneapolis-St. 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 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.
    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 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.
    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
















































    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.
    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 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.

        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 mid-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.
                  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 mid-west. 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.
    [The information referred to follows:]
    
    
    
    
    
    
                                














                                










                                










    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.
    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 
number-one 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.
    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 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 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.
    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.
    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.
    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?
    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.
    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.
    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.
    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 
Coca-Cola. 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 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, 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 difficult 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.
    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 long-term 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?
    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.
    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 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.
    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 
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.
    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:]
              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\
---------------------------------------------------------------------------
    \1\ The New York Times, Did Ending Regulation Help Fliers? By 
Micheline Maynard, April 17, 2008
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \2\ The New York Time OP-ED, April 21, 2008
---------------------------------------------------------------------------
    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.
    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 Airlines 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\
---------------------------------------------------------------------------
    \3\ Testimony of Don Carty, http://judiciary.senate.gov/oldsite/
te020701dc.htm
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \4\ http://www.lambert-stlouis.com/
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \5\ Delta Air Lines press release, http://news.delta.com/
print_doc.cfm?article_id=10533
---------------------------------------------------------------------------
    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.
    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 fifth-largest 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 foreign-owned 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.
    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.
    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 world-class 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.
    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.
    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.
    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.
    Thank you. Sorry for going over.
    [The prepared statement of Mr. Winston follows:]
     Prepared Statement of Steven A. Morrison and Clifford Winston














    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.
    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.
    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, layoff 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 Allegheny-Mohawk 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 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 AFA-CWA. 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 campaigns. 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.
    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.
    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.
    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 
new-entrant carriers. Southwest, low-cost carriers, they have 
very good labor relations. They didn't grow up under this rent-
sharing mentality.
    And I think that is really the key to the problem, that the 
new entrants, JetBlue, AirTran, Southwest, they did not have 
this rent-sharing 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.
    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.
    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.
    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.
    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?
    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 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.
    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.''
    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.
    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 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.
    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 responsible 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?
    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.]
                            A P P E N D I X

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               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
    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 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.

                                

   Prepared Statement of the Aircraft Mechanics Fraternal Association










                                

  Article entitled ``Fear of Flying? Life Since Deregulation - 2008'' 
                           from unbossed.com










                                 
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