Proposed Northwest-Republic Deal : Justice Dept. Cites ‘Concern’ Over Air Merger
The Justice Department said Tuesday that the planned merger of Northwest Airlines and Republic Airlines, which would create the nation’s third-largest airline, “raises competitive concerns” that must be addressed before the Transportation Department grants final approval.
The Justice Department, in a filing with the Transportation Department, said it is taking no position on the merits of Northwest’s proposed acquisition of Republic. NWA Inc., Northwest’s parent holding company, announced Jan. 23 that it would take over Republic for $884 million.
However, Tuesday’s filing specified two Justice Department concerns.
One is that 45 cities are now served by both carriers. The other involves the fact that both airlines have hubs at the Minneapolis-St. Paul airport and that, together, they account for 79% of the passenger boardings there.
“We don’t have enough information to take a position,” James R. Weiss, head of the transportation, energy and agriculture section in the antitrust office of the Justice Department, said in a telephone interview. “We have highlighted the points about which we need more information.”
Deadline for Comment
Tuesday was the deadline for anyone opposing or favoring the merger to comment in an official filing with the Transportation Department, which now is expected to schedule hearings. Weiss said Justice Department representatives would testify at the hearings.
David Sylvester, an airline analyst with Montgomery Securities in San Francisco, said he is not surprised that the Justice Department has reservations about the proposed consolidation.
“Since deregulation, there has been no merger of profitable airlines with so many competing routes,” he said.
Redmond Tyler, a Republic spokesman, said: “We believe this will be resolved quickly to benefit both (the) communities and both airlines.”
William Wren, a spokesman for Northwest, said: “The Department of Justice has taken no position, and no other airline has opposed the transaction. . . . We are hopeful that the regulatory proceedings will be completed by April 1.”
It is known that some unions have opposed the merger. In such cases, unions usually seek provisions--such as a merger of the two carriers’ seniority lists--to protect employees. But the Transportation Department has not approved such protective provisions, according to a spokesman, and will probably not do so “unless their absence would lead to labor strife that would affect the national transportation system.”
Competition With United
If it is approved, the Northwest-Republic merger would create an airline with 298 planes, a work force of 30,000 and a route system serving 100 domestic cities and 25 overseas, including 11 in the Asia-Pacific area.
A major reason behind the effort to merge the two is understood to be to gear up for heightened competition with United Airlines, which flies to 162 cities in all 50 states and can funnel passengers to the new Asia routes that it purchased recently from Pan American World Airways.