S. HRG. 110–413 AN EXAMINATION OF THE DELTA–NORTHWEST MERGER HEARING BEFORE THE SUBCOMMITTEE ON ANTITRUST, COMPETITION POLICY AND CONSUMER RIGHTS OF THE COMMITTEE ON THE JUDICIARY UNITED STATES SENATE ONE HUNDRED TENTH CONGRESS SECOND SESSION APRIL 24, 2008 Serial No. J–110–87 Printed for the use of the Committee on the Judiciary ( U.S. GOVERNMENT PRINTING OFFICE 42–877 PDF WASHINGTON : 2008 For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800 Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001 VerDate Aug 31 2005 12:13 Jul 02, 2008 Jkt 042877 PO 00000 Frm 00001 Fmt 5011 Sfmt 5011 S:\GPO\HEARINGS\42877.TXT SJUD1 PsN: CMORC COMMITTEE ON THE JUDICIARY PATRICK J. LEAHY, Vermont, Chairman EDWARD M. KENNEDY, Massachusetts ARLEN SPECTER, Pennsylvania JOSEPH R. BIDEN, JR., Delaware ORRIN G. HATCH, Utah HERB KOHL, Wisconsin CHARLES E. GRASSLEY, Iowa DIANNE FEINSTEIN, California JON KYL, Arizona RUSSELL D. FEINGOLD, Wisconsin JEFF SESSIONS, Alabama CHARLES E. SCHUMER, New York LINDSEY O. GRAHAM, South Carolina RICHARD J. DURBIN, Illinois JOHN CORNYN, Texas BENJAMIN L. CARDIN, Maryland SAM BROWNBACK, Kansas SHELDON WHITEHOUSE, Rhode Island TOM COBURN, Oklahoma BRUCE A. COHEN, Chief Counsel and Staff Director STEPHANIE A. MIDDLETON, Republican Staff Director NICHOLAS A. ROSSI, Republican Chief Counsel SUBCOMMITTEE ON ANTITRUST, COMPETITION POLICY AND CONSUMER RIGHTS HERB KOHL, Wisconsin, Chairman PATRICK J. LEAHY, Vermont ORRIN G. HATCH, Utah JOSEPH R. BIDEN, JR., Delaware ARLEN SPECTER, Pennsylvania RUSSELL D. FEINGOLD, Wisconsin CHARLES E. GRASSLEY, Iowa CHARLES E. SCHUMER, New York SAM BROWNBACK, Kansas BENJAMIN L. CARDIN, Maryland TOM COBURN, Oklahoma JEFFREY MILLER, Chief Counsel WILLIAM CASTLE, Republican Chief Counsel (II) VerDate Aug 31 2005 12:13 Jul 02, 2008 Jkt 042877 PO 00000 Frm 00002 Fmt 5904 Sfmt 5904 S:\GPO\HEARINGS\42877.TXT SJUD1 PsN: CMORC C O N T E N T S STATEMENTS OF COMMITTEE MEMBERS Page Hatch, Hon. Orrin G., a U.S. Senator from the State of Utah ............................ 2 Kohl, Hon. Herb, a U.S. Senator from the State of Wisconsin ............................ 1 prepared statement .......................................................................................... 111 WITNESSES Anderson, Richard, Chief Executive Officer, Delta Air Lines, Atlanta, Georgia 10 Bush, Darren, Associate Professor of Law, University of Houston Law Center, Houston, Texas ..................................................................................................... 13 Chambliss, Hon. Saxby, a U.S. Senator from the State of Georgia ..................... 4 Klobuchar, Hon. Amy, a U.S. Senator from the State of Minnesota ................... 5 Mitchell, Kevin P., Chairman, Business Travel Coalition, Radnor, Pennsyl- vania ...................................................................................................................... 11 Steenland, Douglas, President and CEO, Northwest Airlines, Eagan, Min- nesota .................................................................................................................... 8 QUESTIONS AND ANSWERS Responses of Richard Anderson to questions submitted by Senator Kohl .......... 36 Responses of Darren Bush to questions submitted by Senator Kohl .................. 42 Responses of Kevin Mitchell to questions submitted by Senator Kohl ............... 53 Responses of Douglas Steenland to questions submitted by Senator Kohl ........ 57 SUBMISSIONS FOR THE RECORD Air Carrier Association of America, P. Nicholas Peterson, Legislative Counsel, Washington, D.C., letter ...................................................................................... 71 Anderson, Richard, Chief Executive Officer, Delta Air Lines, Atlanta, Georgia, statement .............................................................................................................. 75 Buffenbarger, R. Thomas, International President, International Association of Machinists and Aerospace Workers, Upper Marlboro, Maryland, state- ment ...................................................................................................................... 86 Bush, Darren, Associate Professor of Law, University of Houston Law Center, Houston, Texas, statement .................................................................................. 98 Memphis Regional Chamber and the Memphis/Shelby County Airport Author- ity, John W. Moore, President and CEO, Memphis Regional Chamber, Larry D. Cox, President, Memphis/Shelby County Airport Authority, Mem- phis, Tennessee, joint statement ......................................................................... 113 Minnesota Chamber of Commerce, David C. Olson, President, Minneapolis Regional Chamber of Commerce, Todd Klingel, President, Saint Paul Area Chamber of Commerce, Kristofer Johnson, President, and Metropolitan Co- alition of Chambers, Daron Van Helden, Chair, joint statement .................... 120 Mitchell, Kevin P., Chairman, Business Travel Coalition, Radnor, Pennsyl- vania, statement ................................................................................................... 125 Moak, Lee, Captain, Chairman, Delta Air Lines Master Executive Council, Air Line Pilots Association, International, statement ...................................... 131 Shook, Veda, International Vice President, Association of Flight Attendants- CWA, AFL–CIO, Washington, D.C., statement ................................................. 136 Steenland, Douglas, President and CEO, Northwest Airlines, Eagan, Min- nesota, statement ................................................................................................. 149 (III) VerDate Aug 31 2005 12:13 Jul 02, 2008 Jkt 042877 PO 00000 Frm 00003 Fmt 5904 Sfmt 5904 S:\GPO\HEARINGS\42877.TXT SJUD1 PsN: CMORC VerDate Aug 31 2005 12:13 Jul 02, 2008 Jkt 042877 PO 00000 Frm 00004 Fmt 5904 Sfmt 5904 S:\GPO\HEARINGS\42877.TXT SJUD1 PsN: CMORC AN EXAMINATION OF THE DELTA– NORTHWEST MERGER THURSDAY, APRIL 24, 2008 U.S. SENATE, SUBCOMMITTEE ON ANTITRUST, COMPETITION POLICY AND CONSUMER RIGHTS, COMMITTEE ON THE JUDICIARY, Washington, DC The Committee met, pursuant to notice, at 2:08 p.m., in room SD–226, Dirksen Senate Office Building, Hon. Herb Kohl, Chair- man of the Subcommittee, presiding. Present: Senators Feingold, Schumer, Cardin, and Hatch. OPENING STATEMENT OF HON. HERB KOHL, A U.S. SENATOR FROM THE STATE OF WISCONSIN Chairman KOHL. Good afternoon. Our hearing today will exam- ine the $3.7 billion merger between Delta and Northwest Airlines, a merger that will create the world’s largest airline. Many predict this merger will just be the beginning in a wave of mergers in our Nation’s airline industry. We recognize the tremendous pressures that the airline has en- dured in recent years. After recovering from the horrible tragedy of 9/11, the industry now faces skyrocketing fuel costs at many of our major airlines, including both Northwest and Delta, and have undergone the painful process of bankruptcy filings. Yet, while it has been the worst of times for the airline industry, it has been no better for the flying public. We all complain about airline service; uncomfortable flights, frequent delays, and mys- terious prices are a staple of air travel. Now the airlines suggest that they will be able to merge their way out of their troubles in a way that will benefit customers. As we analyze their claim, we will confront the crucial question of how this merger will affect air competition and whether it will lead to higher prices and reduced services for customers. We need to very carefully examine the impact of this deal, and others that well may follow, on air service offered to small- and me- dium-sized cities that depend on frequent and inexpensive air serv- ice for their economic health. We expect to hear from the airline executives here today about their plans to maintain service to these communities. While there may always be ample competition between New York and Los An- geles, what does this deal tell us about the future of competition for the rest of us? Of equally vital interest to me is that this merg- er do no harm to the independence of Midwest Airlines of Mil- (1) VerDate Aug 31 2005 12:13 Jul 02, 2008 Jkt 042877 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\42877.TXT SJUD1 PsN: CMORC 2 waukee, Wisconsin, which is, in fact, regarded as our hometown airline. Midwest Airlines is a unique company in the airline industry, an airline that offers the highest quality of service and is actually be- loved by its customers. In the last year, Midwest Airlines was ac- quired by an investment firm that partnered with Northwest Air- lines. If the merger before us today is completed, Delta will acquire Northwest’s stake in that airline. I will expect today to hear from Delta that this will not harm the independence, the quality, and the frequency of service or competitive viability of Midwest Air- lines. Both Delta and Northwest defend this merger by arguing that they operate largely complementary route structures that overlap only occasionally. Whatever the merits of that claim—and we ex- pect the Justice Department to scrutinize it carefully -our inquiry cannot end merely with an examination of overlapping routes. These two airlines are competing national networks. Each airline takes passengers from small- and medium-sized cities through their gigantic hubs and then on to the travelers’ final destinations.