Justice Dept. Approves Delta’s Acquisition of Western Airlines

The Justice Department gave its blessing Thursday to the proposed acquisition of Los Angeles-based Western Airlines by Delta Air Lines. The action was not unexpected since there is little overlap in the routes of the two carriers.

“We have concluded that this transaction is not likely to lessen competition. Accordingly, we do not oppose its consummation,” Charles F. Rule, deputy assistant attorney general, said in a letter to Matthew V. Scocozza, assistant secretary of transportation for policy and international affairs. The Department of Transportation has final authority to approve or disapprove airline mergers. The proposed transaction, announced Sept. 9, is valued at $860 million. It would give Atlanta-based Delta, the nation’s sixth-largest carrier in terms of revenue passenger miles, a greatly enlarged route structure in the West and would strengthen its position as a nationwide carrier.

Western’s prominence in the California market and its hub in Salt Lake City provide an excellent fit with Delta’s strength in Eastern markets. At the time of the announcement, analysts praised the proposed transaction as very realistic and said the price that Delta was paying was fair.

Western, the country’s oldest airline, would be operated at first as a wholly owned subsidiary of Delta. But within a year after completion of the merger, the two carriers would be consolidated and the Western name would disappear. The carriers have said they expect the merger to be consummated by next spring.

Delta is strong financially and is said to have the best balance sheet in the industry. Western had a turnaround in 1985 after five years--1980 through 1984--in the red.

The airlines overlap on only two routes--between Dallas-Fort Worth and Salt Lake City and between Portland, Ore., and Salt Lake City.

Officials of both airlines expressed satisfaction Thursday with the Justice Department’s action. “We are delighted and are looking forward to getting final approval,” said William Berry, a Delta spokesman. “It happened with good speed and things look promising.”

A Western spokesman, Glenn Bozarth, said: “We’re pleased.”

Under terms of the agreement, Western’s stockholders will receive $6.25 in cash plus a fraction of a share of Delta common stock for each of their shares.

Once the two carriers have combined, the resulting airline will fly more than 40 billion revenue passenger miles. This would make it the nation’s fourth-largest line, behind a merged Texas Air Corp.-Eastern Airlines, United Airlines and American Airlines.

Texas Air, a holding company that also owns Continental Airlines and New York Airways, announced recently that it will buy financially ailing People Express and its bankrupt subsidiary, Frontier Airlines. The merger of Texas Air and Eastern was given final approval earlier this week by the Department of Transportation.