Do you agree or disagree with his position?
Congressman James Oberstar, Chairman of the House Committee on Transportation and Infrastructure, offers an opposition viewpoint to the merger of Continental and United. His opinion is published in USA Today Op/ Ed section and can be found in its entirety at
While I agree with Congressman Oberstar on many issues relating to our industry, especially holding the FAA accountable and his support of General Aviation through the GA Caucus, I disagree with his position on the proposed merger.
The following is an excerpt of his piece in USA today:
This (the merger) is the very antithesis of the structure I voted for when Congress deregulated the industry in 1978. Deregulation promised robust competition and innovation — not market domination by a few powerful carriers.
Beyond encouraging future mergers, the proposed United-Continental merger itself presents problems. The two carriers’ networks overlap on 13 routes between some of America’s largest markets. The two carriers also compete in a number of international markets.
The Justice Department has already expressed its concerns over a reduction in competition between United and Continental. Last year, the two airlines applied for antitrust immunity to collaborate on international service. The department said granting immunity would reduce competition and raise fares in markets where United and Continental claim big shares. As a result, the Transportation Department removed several foreign markets from the immunity.
If antitrust immunity in these markets is unacceptable, how can we now accept a merger that would have the same effect of reducing competition on important domestic and international routes?
The Justice Department should demonstrate that same degree of caution now and put an end to this merger madness.
The problem with his position is that the airlines through this “robust competition” over the past 32 years have not offered better service and done very little to innovate. They have offered lower fares and consequently have been doomed to aggregated losses as an industry since deregulation.
The investors (stockholders) in the airlines have taken a beating and I have to wonder why anyone would ever buy stock in an airline in a long-term hold position. Robert Crandall, former CEO of American, says don’t buy stock in airlines, they are a bad deal. For the airline industry to survive something has to give on the profit (or lack thereof) problem
It seems that the Congressman and many others in DC consider the airlines much like a utility that needs regulation to keep them from monopolizing markets and raising fares. That is contrary to the position of deregulation that should allow the market to work it out.
The other assumption that many are making, that I believe to be flawed in its logic, is that the consumer has no other choice, so we have to keep the airlines in check. Travel by airlines is not like a utility such as electrical power where we don’t have a choice. The traveling public can drive, take trains in some cases and also fly in private aircraft. Or they can choose not to travel it all. Our nation is blessed with a multi-faceted transportation system.
I continue to believe that the airlines should be allowed to work this out in a free market way and let the traveling public determine the airlines success by choosing to or not to buy seats at whatever price the airlines think they can charge.
What do you think?