Hearing of the Subcommittee on Antitrust, Competition Policy and Consumer Rights of the Senate Judiciary Committee - An Examination of the Delta-Northwest Merger

Statement

Hearing of the Subcommittee on Antitrust, Competition Policy and Consumer Rights of the Senate Judiciary Committee - An Examination of the Delta-Northwest Merger

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SEN. CHARLES E. SCHUMER (D-NY): Well, thank you, Mr. Chairman, for holding this timely hearing.

And I'd like to say to Mr. Anderson you wouldn't have the job you did unless you were an eternal optimist. (Laughter.)

MR. ANDERSON: You probably wouldn't, either. (Laughter.)

SEN. SCHUMER: That's exactly -- (laughter) -- that is exactly what I was thinking. You beat me to the punch. I was going to say neither would any of us. (Laughter.)

But in any case, it's good to be here, and I thank you for coming.

And I want to really thank Chairman Kohl. He's always on the ball with these things, and this is a timely hearing and very much appreciated.

Let me tell you my basic view. I generally think that our antitrust policy has been too weak. I think we've seen too much consolidation.

And even in the airlines industry, mergers in general don't appeal to me. I am worried that we'll only have three or four big carriers.

However, my preliminary review of this merger is that it's a good one. I will not sign off on it yet. We have a lot more to explore. But I think that because there's very little overlap in the service between Delta and Northwest and because of the changing conditions in the airline industry, as I said, on first glance it makes some sense. The negatives seem more benign than in other instances, and the positives seem more real.

Obviously with the dramatic increase in fuel costs, fuel costs really are a game changer that affects, I think, how one would view this deal, because the need to provide efficiencies to make up for the dramatic increase in fuel costs is kind of large.

Having said that, some of the other airlines that might merge simply to eliminate routes and eliminate competition -- you have very little overlap of competition -- would worry me a great deal. So I don't think -- anyone who supports this merger does not -- it does not necessarily indicate you'd support a general merging of the airline industry.

I have two caveats here that I want to be careful with and I want to put on the record before I ask questions.

First, I think it's very important that labor have a seat at the table here. I know that some of Northwest's pilots feel that they haven't been adequately involved in the talks about the merger, and so I signed a letter with Senator Kennedy and others to make sure labor interests from both companies were heard and respected.

Second -- and this is vital to me -- I worked very hard to bring good air service to upstate New York. We had terrible service 10 years ago, and I helped bring some of your competitors to New York, particularly JetBlue and Southwest to upstate, and they make money on those routes because they were so underserved.

And we met -- Mr. Anderson and I did -- yesterday. We went over it city by city. And it seems that the effects will be either positive or neutral in terms of both flights -- number of flights, where they go -- and jobs. And I'm going to hold Delta to that, and that is key to at least -- for whatever it's worth -- my view and my support on this. And I know you're going to get back to me in writing on the things we discussed, Mr. Anderson.

But first, to just make it clear, it did seem as we went through all of the New York state areas that there would not be a cutback in service or in jobs as a result of this merger. Is that correct?

MR. ANDERSON: That's correct.

SEN. SCHUMER: Okay.

Second, I would like to ask either you or Mr. Steenland about the first question -- unless you've answered it, because I came in late -- about the pilot situation.

Did you answer that already?

MR. STEENLAND: We did, but I'll --

SEN. SCHUMER: You don't have to go over it. I'll look at the record. I don't want to take people's time, as long as that's been brought up.

Third, could you comment -- oh, one other point I want to make. So jet fuel is -- you guys are hollering about that, as you should. So is the average motorist who drives around Rochester, New York or any other part of New York state. But frankly we've had a policy for seven years that's done nothing about this, and the chickens are coming home to roost.

And frankly we don't hear a peep out of industry. We hear it when you come talk to us, but when some of us say we have to change our policy, the president's basic view -- it's no secret -- is what's good for big oil is good for America. It's sure not good for Delta Air Lines, Northwest Airlines or the airline industry. And yet -- maybe because of solidarity among businesses -- we don't hear anything from you all. And I think that's got to change in the whole transportation industry, not just the airlines industry, in terms of this.

Sitting at your seat, Mr. Anderson, a year or two ago was Mr. Rex Tillerson, then the newly installed -- I think it was at a hearing that you called, Mr. Chairman -- the newly installed head of Exxon Mobil, and he said, "We don't believe in alternative energy." That's what he said. And, you know, jaws dropped, but basically through the friendship of the president and the administration we don't have an alternative energy policy despite the fact as I look at my four colleagues here every one of them including and myself, we've pushed hard for it.

We need your help in that. We need you to speak out, and we need you to speak out on specific policies. Oil companies get royalties that they got when oil was $19 a barrel to encourage them to explore. They don't need them at $120 -- whatever it is today -- $120 a barrel. But when we try to change them, Chamber of Commerce doesn't support us. Now, I understand the oil companies are part of the Chamber of Commerce, but neither does -- neither do we hear from anybody else in business, most of whom are affected negatively.

Would you comment a little on any of the things I said, because my time is running out?

MR. ANDERSON: Well, okay. I have in the past six months at a speech at the FAA forecasting conference about six weeks ago made the very clear statement that jawboning OPEC is not an energy policy and that this industry suffers because we haven't had an energy policy in this country. And now it's not just airlines. It's going to fundamentally change the fabric of how people live, because many people live far away from where they work, and we've all grown up with two cars and our parents working far away from where we lived. And that's going to change. So perhaps our voices haven't been loud enough, but we have taken at Delta and I know Northwest has taken a public position in that regard that's been critical of the lack of an energy policy.

SEN. SCHUMER: But, sir, we need your help on specific issues -- for instance, the royalty issue. I mean, you know, I know that some of your confreres in the oil industry don't like it. Or when we say that, you know -- well, there are a whole variety of policies, and we need -- rather than saying we need a new energy policy -- everyone says that, except Mr. Tillerson --

MR. STEENLAND: Senator, as an industry we went on the record I think it was last week and took the position that we should stop filling the Strategic Petroleum Reserve at $120 a barrel.

SEN. SCHUMER: Right.

MR. STEENLAND: We had the chairman of the trade association testify. We said that's a terrible thing to do. It's just simply forcing up price, and we ought to stop right now.

SEN. SCHUMER: Right. Right. Okay.

Any other comments on anything I said, because my time's up?

MR. ANDERSON: No, sir.

SEN. SCHUMER: Thank you, Mr. Chairman.

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