Friday, May 07, 2010

Regarding the Continental-United Merger and Congress' Grubby Hands

Oberstar vows close scrutiny of United-Continental merger
The chairman of the House Transportation and Infrastructure Committee is urging the Justice Department to block a proposed merger between United Airlines and Continental Airlines. Rep. James Oberstar, D-Minn., said forced divestitures and similar measures would not change the anticompetitive nature of the merger, which he called "a disservice to all of aviation domestically and internationally." But experts say the merger looks like a safe bet, despite the political rhetoric. Analysts note that the two airlines compete head-to-head on only 13 domestic nonstop routes, and Continental CEO Jeff Smisek noted earlier this week that "we have no international route overlaps whatsoever." Houston Chronicle (5/6) , Reuters (5/6) , Bloomberg Businessweek (5/6)

Great! Congress finds another way to meddle in our lives. What’s so wrong with this merger? There is very little route overlap. There is no overseas route overlap. For once the labor battle isn’t between labor and management in the merger but between the competing labor unions!

It’s not like there isn’t competition. The legacy carriers have been merging for some time now. Does Northstar Oberstar remember when his home state Northwest merged with Delta?

Meanwhile, newer, smaller, more agile airlines keep cropping up. It might be said that the easiest way to make $1,000,000 in the airline industry is to start with $10,000,000, but that hasn’t stopped entrepreneurs from trying. Part of what is creating problems for the legacies is that the newer carriers aren’t burdened with the pay and benefit structures the legacies are. Even with bankruptcies and re-organizations, the legacies still carry a legacy of decades of workers.

Ironically, United and Continental had a similar name in their founding. Walter T. Varney was an instrumental figure in the founding of both companies. Maybe as a nod to Varney the new company could go back to Continental's old name: Varney Speed Lines. Or at the very least the first plane painted with "United" on the fuselage and the tilted globe on the tail be given the moniker "Walter T. Varney".

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