Airline Execs Taken To Task By Committee Members
United Airlines CEO Glenn Tilton and Continental chief Jeff
Smisek did not exactly receive a warm welcome from the U.S. House
Transportation Aviation subcommittee Wednesday in the first hearing
concerning a possible merger of the two airlines.
"This merger’s consequences for consumers and employees
are practically certain," said subcommittee chair James Oberstar
(D-MN). "It will reduce consumer choice and increase air fares
– significantly, in some cases – among major U.S. and
world markets, from Washington, D.C., to Beijing. With abundant
support, the Department of Justice (DOJ) has found that air fares
are likely to increase significantly when the number of competitors
in any given market is reduced from three to two or from two to
Oberstar said in his opening remarks that in his view, the
larger an airline becomes the more it is able to use its market
share "to the detriment of passengers."
"When I voted for airline deregulation in 1978, I did not vote
for an industry of mega-carriers," Oberstar said. "I voted for
vibrant competition among airlines, competition that would
encourage innovation in schedules, pricing, and services. I voted
for the promise of an industry in which carriers would have every
incentive to create value through intense competition. There are
only a few of us left who voted in this Committee room on
deregulation in 1978. When I cast my vote, I expected the antitrust
laws to be vigorously enforced, as did others."
Representative Jerry Costello (D-IL) echoed some of Congressman
Oberstar's concerns. "I am very concerned how this merger, if
approved, will affect ticket prices for passengers; how the merger
would affect the pilots, flight attendants, mechanics, and
employees of both airlines; how many employees will lose their jobs
or see reduced wages and benefits; and what will happen with
existing union contracts. Less competition generally leads to
higher prices, fewer choices, and a loss of jobs."
"I sympathize with the thousands of airline employees who have
suffered as a result of airlines’ financial problems in the
past," he continued. "Many have seen their hard-earned pensions
dropped during airline bankruptcies, seniority rights disappear,
labor disputes go unresolved, wages frozen or cut, and jobs lost to
outsourcing and consolidation.
The Wall Street Journal reports that both executives insisted
that job cuts would be held to the fewest number possible, and that
most of those would be at Continental's current Houston
headquarters. The reason, they said, was that the airlines fly few
routes that overlap, and so pilots and crews would, for the most
part, keep their jobs. They said the merger was necessary in order
for the two airlines to be able to compete with airlines such as
Delta, which recently merged with Northwest, and American. "This is
a brutally competitive industry. It is today and will be after this
merger," Continental CEO Jeff Smisek said.
Also testifying was AFA-CWA President Patricia Friend, who said
that the employees are the most vulnerable in a merger situation.
"Since the Airline Deregulation Act of 1978, 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," testified Friend. "Over the past 32
years, we have seen the end of extensive and specific protections -
like displacement and relocation allowances, wage protections,
transfer and seniority protections, layoff protection, and others -
that helped shield workers from an unfair share of the burden
resulting from corporate mergers."
In addition to leaving thousands of employees with little to no
protection, Friend said current negotiations for the over
16,000 United flight attendants, represented by AFA-CWA, are also
threatened. For almost six years, she said, the United flight
attendants have been working under a collective bargaining
agreement negotiated while the company was in bankruptcy.
"If the focus of this hearing is on the possible effects for
consumers - you only have to observe how United is treating its
workers to understand how the passengers at the 'new' United may
fare. The employees at United made deep sacrifices to keep the
airline flying and it is imperative that current negotiations for
United flight attendants be completed in some manner before this
merger is finalized. Management needs to focus on protecting their
employees in this merger and providing some economic relief now,"
Smisek and Tilton are making the rounds on Capitol Hill this
week, as additional hearings are scheduled.