Pioneer Editorial: Air merger brings lots of questions
For good reason, Minnesota officials are cautious with their views of Monday's announced merger of Northwest and Delta air lines. From a Minnesota standpoint, we need to be shown how the merger will improve air service to the state -- otherwise w...
For good reason, Minnesota officials are cautious with their views of Monday's announced merger of Northwest and Delta air lines. From a Minnesota standpoint, we need to be shown how the merger will improve air service to the state -- otherwise we'll oppose it.
It's understandable that corporate powers at the highest level see a brighter profit margin with a merger. There's economy of scale, and a Northwest/Delta merger would create the world's largest commercial air service. Officials cite the rising cost of jet fuel, and the larger company should be able to save expenses there.
But what's unsaid is potential savings elsewhere, such as leaving Northwest pilots out in the cold as Delta pilots would come first in seniority. And Northwest's headquarters, long a fixture in Eagan, would move to Delta's headquarters in Atlanta. Goodness, even the Northwest Airlines name would be gone -- the new entity would be called Delta.
Northwest has a number of obligations to the state of Minnesota, which bailed the airline out in the 1990s and made concessions not long ago when Northwest climbed out of bankruptcy. Gov. Tim Pawlenty, who is watching the merger progress with a keen eye, says Northwest is on the hook for $440 million to the state, not to mention pledges of retaining 17,000 workers (it hasn't) and keeps Minneapolis-St. Paul as a hub.
U.S. Rep. Jim Oberstar, DFL-8th District, chairman of the House Transportation and Infrastructure Committee, was more pointed in a news conference Tuesday, when he called the potential new airline a "globe-straddling, mega-carrier." He worries that the merger will cause the other airlines to scramble and merge, creating a "cascade" of new companies that then would limit choice to travelers, and the near-monopoly situation will boost prices.
He also cited what is our worry -- the impact to local air service, such as Northwest Airlink, which is owned by Northwest Airlines.
"For smaller communities, mergers inevitably lead to fewer flights, or even a complete loss of commercial air service" Oberstar says. "Small communities now served by Northwest and Delta could see their flight options dwindle as the combined carrier reduces capacity in overlapping markets. There is no guarantee that, as capacity is removed from these small markets, they will be able to attract successor carriers to the market. In addition, as capacity and competition is reduced, fares will invariably increase."
The Justice Department will have a final say on the merger, but we hope that its study is thorough and evaluates rural air service as well as corporate convenience.