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Mergers involving UAL Corp., US Airways Group Inc., AMR Corp. and DC Air could hinge on the outcome of contract negotiations between Delta Airlines Inc. and its pilots. Delta and the Air Lines Pilots Association late Wednesday petitioned the National Mediation Board to free them from contract talks. The move triggers a process that could lead to a strike in April. Such a strike would seriously impair U.S. air travel, especially in the Southeast where Delta operates a hub in Atlanta. According to airline industry observers, the disruption to U.S. businesses and consumers would dwarf the troubles that ensued last year when United Airlines pilots staged a work slowdown. Antitrust experts also said the resulting uproar could derail all pending airline deals. That’s because, in disrupting air travel nationwide, the strike and its aftermath would underscore the danger to the economy of having only a few major carriers. Lawmakers are already upset with the airline industry for high travel prices and shoddy service, three antitrust lawyers said. A Delta strike could add momentum to proposed legislation blocking all airline mergers, they said. Reps. Louise Slaughter, D-N.Y., and Peter DeFazio, D-Ore., on Monday introduced just such a measure. An airline travel crisis could also greatly increase the political pressure on the antitrust agencies to stop the deals, the lawyers said. If the federal mediation board approves the request to end talks between Delta and the pilots group, then it would recommend arbitration. If either party rejects that option, the board would start the so-called 30-day cooling-off clock. At the end of 30 days, the pilots could strike. The potential for crippling strikes at a merged United or American is another reason to kill the deals, agreed Alfred Kahn, a Cornell University professor and the father of airline deregulation. “This is one additional argument why it is dangerous to have fewer carriers, and it cements my arguments against the carving up of US Air between United and American,” Kahn said. None of the antitrust experts suggested Delta would intentionally provoke a fight with its union to kill the pending mergers. Yet the three lawyers, who requested anonymity, said death of the pending mergers would benefit the airline if a strike occurs. The lawyers noted that Delta has the most to lose under current agreements for United to acquire US Airways and American Airlines to buy DC Air and rescue Trans World Airlines Inc. from bankruptcy. It would become a second-tier carrier, especially because a recent marketing deal between Continental Airlines Inc. and Northwest Airlines essentially makes an acquisition of either of those carriers improbable. A Delta spokesman said the airline would like to see the other deals stopped, noting the carrier supports legislation imposing a one-year moratorium on mergers involving the top eight players. Yet he said Delta’s first priority is to reach a deal with its 9,800 pilots, not disrupt pending mergers among its rivals. “We would never want to jeopardize the history and stability of our company for the sake of someone else’s deal,” the spokesman said. Talk of a Delta strike comes as lawmakers seek ways to stop airline consolidation. On Wednesday, Senate Commerce Committee Chairman John McCain, R-Ariz., and Sen. Ernest Hollings, D-S.C., introduced a bill that would let the Department of Transportation reject mergers that would increase concentration at a hub if the agency deems the deal against the public interest. That standard is much looser than what the Department of Justice now applies to airline mergers. “It is not enough for the antitrust laws to look at each transaction in a vacuum,” Hollings said. “The public’s interests, its needs and its conveniences also must be reasserted.” The bill also would permit the Department of Transportation to reassign gates and slots if any airline controls more than 50 percent of capacity at an airport. But Kahn questioned the need for legislation. He noted that the Department of Transportation has a poor record regulating airline deals, permitting Northwest Airlines to acquire Republic Airlines in the 1980s. That deal effectively gave Northwest control of the upper Midwest. Kahn also objected to use of the public-interest test, which is part of the McCain-Hollings bill. He said the Federal Communications Commission has abused this same standard to unnecessarily interfere with telecommunication mergers. “If antitrust can’t do it in these circumstances, nothing can do it,” he said. Not everyone agrees that a Delta strike would stir Congress to act. “There might be some momentary emotional thing,” said Joel Mitnick, a partner at Brown & Wood in New York. “But I don’t think it will be a significant part of the analysis at an agency or on Capitol Hill.” Tom Brock, a partner in the Washington office of law firm Proskauer Rose, said lawmakers rarely pass special antitrust provisions for specific industries. One of these last instances was in the 1970s, when Congress invoked antitrust laws to exempt hospitals from treble damage claims. In the 1960s, meanwhile, Congress tried to save evening newspapers by passing a bill allowing joint operating agreements among rival papers. Such ties between rivals typically would be illegal. “While the airline industry may be a situation with a lot of publicity, I’m not convinced that this is necessarily one that has generated — at least not yet — the type of concern that would prompt congressional intervention,” Brock said. Copyright (c)2001 TDD, LLC. All rights reserved.

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