Senators Sympathetic to Delta at Hearing

Washington --- Delta Air Lines CEO Gerald Grinstein got a sympathetic hearing Wednesday when he told the Senate Commerce Committee that US Airways' proposal to acquire his company would hurt workers and consumers.

"Delta does not need to be acquired to be saved," Grinstein said at a packed hearing on airline industry consolidation. "Delta is poised to emerge from bankruptcy this spring as a strong, fiercely competitive, stand-alone airline."

One senator after another expressed serious doubts about industry consolidation, saying they feared a loss of service to smaller markets.

Sen. Jay Rockefeller (D-W.Va.), who chairs the aviation subcommittee, even floated the possibility of imposing more regulations to boost service to small communities.

"The industry is far too changed and far too global for us to return to a completely regulated environment. However, I am becoming increasingly convinced that some regulation may become an option to make sure small communities are not harmed by consolidation," Rockefeller said, though he didn't offer any proposals.

Congress cannot directly prevent an airline merger, but the Transportation and Justice departments must give their approvals.

During a break in the hearing, Grinstein told reporters he'd like to see Congress pass a nonbinding resolution urging the Bush administration to block the deal.

US Airways CEO Douglas Parker defended the proposed takeover, saying it would lower costs and boost operational efficiencies, allowing the combined airline to cut fares in "dozens of new markets."

His "fair and equitable proposal" to buy Delta would create "a stronger, more competitive carrier than either carrier can become on its own," Parker said.

Sen. Trent Lott (R-Miss.), referring to Delta's Atlanta headquarters, told Parker, "You're an aggressive suitor, but the lady from the South doesn't want to be forced into this shotgun wedding."

US Airways launched its bid in November and sweetened it this month. From the start, Grinstein has said he wants to bring Delta out of its Chapter 11 reorganization on its own.

US Airways, based in Tempe, Ariz., has set a Feb. 1 deadline for Delta's bankruptcy creditors --- who have a major voice in the outcome --- to tell management to take steps toward completing a merger.

Creditors must weigh the advantages of getting $10.3 billion in cash and stock from US Airways against the risks of having a merger drag out in a regulatory review. A Democrat-led Congress urging the White House to stop the deal would likely make creditors even more wary.

Delta's court-appointed creditors committee met Wednesday but wasn't expected to reach a decision. The committee includes bondholders, suppliers and other parties, such as Delta's pilots union.

The bankruptcy court had set a deadline of today for creditors to file objections to Delta's request for a Feb. 7 hearing on approval to start soliciting creditors' votes for its stand-alone reorganization plan. US Airways has asked for the hearing to be delayed.

That deadline has been extended for the official creditors committee and could be extended for others as well.

At least one group of creditors --- hedge funds and other investors holding about 15 percent of claims in Delta's case --- is likely to file an objection. It supports taking initial steps toward a merger.

"We continue to have active discussions with all interested parties ... to ensure that the company is doing everything possible to maximize recoveries for creditors," said Chris Mumma, spokesman for the smaller creditor group.

Meanwhile, Delta worker groups have waged a high-profile campaign to build opposition to the merger.

Hundreds of workers, retirees and other supporters worked Capitol Hill this week, holding a rally, talking with lawmakers and handing out literature. At Wednesday's hearing, about 50 pilots dressed in black Delta uniforms lined the walls of the overstuffed hearing room.

Outside, Delta supporters crowded a winding staircase, hoping for a seat inside the second-floor room. Their line stretched to the basement and down a corridor.

US Airways appeared to have no supporters present beyond executives.

"If the US Airways people think this is such a great deal, why aren't they here?" asked Cathy Cone, chairwoman of the Delta Retirement Committee.

From the start, the hearing seemed tilted in Delta's favor. It kicked off with Sen. Johnny Isakson (R-Ga.) introducing Grinstein, saying the chief executive has done "great things" for Delta.

Mark Cooper, research director of Consumer Federation of America, testified that because Delta and US Airways have so many overlapping routes, a merger inevitably would reduce competition. "I think consumers would be hurt," he concluded.

Robert Roach, a vice president of the International Association of Machinists and Aerospace Workers, noted that when American Airlines purchased TWA in 2001, it promised to maintain a hub in St. Louis. "That once-bustling hub with over 300 flights per day has now been reduced to less than 100," he said.

Grinstein predicted 10,000 jobs would have to be cut for US Airways to make the merger work.

To believe neither jobs nor service would get cut in the merger, he said you also "have to believe in Tinker Bell."

Parker said a merger would not cause layoffs, though many jobs would not be refilled as people left the company. His plan is for the merged carrier to carry Delta's name, but that the headquarters location hasn't been settled.

Andrew Steinberg, a Transportation Department assistant secretary, seemed to offer Parker the only hint of support.

He refused to comment on the proposed Delta deal, but said that in general, consolidation does not necessarily harm consumers.

"We must allow failing firms to exit the business if market forces decide that assets should be reallocated to more efficient firms," he said.

Staff writer Russell Grantham contributed to this article.



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