The Department of Transportation's rulings on major airline mergers now before it will demonstrate whether the agency is serious about enforcing antitrust law, witnesses told a House Judiciary subcommittee hearing yesterday.
The mergers in question are the proposed acquisition of Eastern Airlines by New York Air, the proposed merger of Trans World Airlines and Ozark and the proposed merger of Northwest Airlines and Republic Airways. Republic Airlines shareholders yesterday approved the proposed merger with Northwest's parent corporation, subject to DOT approval. The DOT, which has antitrust review in the case of airline mergers, has set hearings on the three proposals.
"I think you have a number of cases before the agency now which are the real test of whether it takes its antitrust obligations seriously," said Harold J. Pareti, president and chief executive officer of Presidential Airways Inc. Presidential is a new airline that began service from Washington Dulles International Airport late last year.
Pareti said that, in general, he favors leaving review of such mergers with the DOT, which took over that responsibility from the Justice Department and the Federal Trade Commission as a result of the Airline Deregulation Act of 1978. He also said that, unless antitrust concerns are taken into account in approving mergers, a system of regional domination of the airline industry might develop with combinations such as Eastern and Texas Air dominating the East Coast and other major airlines dominating other regions.
House Judiciary Committee Chairman Rep. Peter W. Rodino Jr. (D-N.J.) said the hearings were prompted by a new wave of consolidation among airlines. "That wave is of concern primarily because of the very substantial impact it may have on competitive structure," he said. "Undue concentration in this industry could undermine competition to the point that deregulation is doomed to failure."
Henry A. Duffy, president of the Air Line Pilots Association, and John F. Peterpaul, vice president of the International Association of Machinists and Aerospace Workers, said airline mergers had been allowed to proceed without protection for displaced workers.
Duffy said the mergers reviewed by the DOT so far do not provide a basis for judging how vigorous it will be in protecting the public from anticompetitive aspects of business combinations. "When we get on the other side of these things the pending mergers , we will see if DOT has any antitrust concerns," he said.
In a related development, an official of Eastern's pilots union said yesterday that the airline's unions have asked the owners of the Hyatt hotel chain and Braniff airlines to consider making a competing bid for Eastern. Eastern agreed in February to be bought by Texas Air for $674 million.
According to wire service reports, Eastern's three major unions have contacted Jay Pritzker, who brought Braniff Inc. out of Chapter 11 bankruptcy proceedings in 1984, and other possible "white knights" about about bidding for Eastern.