WASHINGTON — Delta Air Lines said Wednesday it may be forced to merge with another airline to survive if the government approves two proposed mega-mergers of American-TWA and United-US Airways.
"The current competitive balance in the industry will be disturbed, and the remaining airlines will be required to make dramatic competitive responses," Delta Chairman Leo F. Mullin told a Senate Judiciary Committee hearing on airline mergers.
"Mergers and acquisitions must be part of the competitive response arsenal," said Mullin, whose Delta operates a major hub at Salt Lake International Airport.
Mullin worried the government might approve the two proposed mega-mergers, and then block further consolidation by others. He said that would leave United and American to control half of all U.S. air traffic, and leave others at huge disadvantages.
Over the past week, press reports have said that Delta and Continental have begun discussion of merging themselves. Neither airline would confirm that at the hearing Wednesday but said such a merger might be needed if other consolidation occurs.
"My purpose here today is not to discuss any possibilities that we have under consideration," Mullin said. "We are always talking to a number of airlines about commercial opportunities, be they mergers, marketing partnerships, alliances or other possible arrangements."
Mullin said that if now-proposed mergers occur, the new United would have 26 percent of the U.S. airline market, and the new American would have 22 percent — or half the market between them.
He said that hurts other airlines that may not be able to offer as many destinations or flights. "Size definitely matters when it comes to networks and market shares," Mullin said.
He said it would take Delta 18 years to achieve enough growth internally to match the size of a new United and American.
If the mega-mergers proceeded and other consolidation were blocked, Mullin said, "Then the U.S. airline industry will face a competitive problem: dominance by two large carriers. . . . If United and American are allowed to use mergers to expand their networks, others must be allowed to do so as well."
Continental Chairman Gordon Bethune directly said the proposed mega-mergers "should not be approved. The mergers will harm competition and consumers."
Some senators agreed.
Sen. Herb Kohl, D-Wis., said, "These proposed mergers are dangerous. If we do not intervene to protect competition now, in a few years two or three large airlines could dominate the skies . . . gradually choking off oxygen to the remaining competitors."
Sen. Mike DeWine, R-Ohio, chairman of a Judiciary subcommittee on antitrust, said he fears airline competition is at risk "and the result of that could be higher ticket prices for consumers."
However, officials at TWA and US Airways said mergers are the only way their troubled airlines can likely continue service. And members of Congress in areas where they are prime service providers called for their protection.
Sen. Jean Carnahan, D-Mo., where TWA has a huge hub in St. Louis, said, "This is about saving the jobs of over 12,000 Missourians. . . . The primary difference with the American-TWA deal is that TWA . . . cannot be saved or revived without intervention like that proposed by American Airlines."
Judiciary Committee Chairman Orrin Hatch, R-Utah, urged regulators to look thoroughly at the domino effect the mega-mergers could have on the industry. "Effective antitrust enforcement today will prevent the need for stifling regulations tomorrow," he said.
Meanwhile, Rep. Louise Slaughter, D-N.Y., asked Transportation Secretary Norman Mineta on Wednesday to impose a moratorium to hold off the wave of airline mergers. She said they could raise prices in midsize markets, such as her Rochester, N.Y., district.
E-mail: lee@desnews.com