U.S. Tentatively Backs Delta’s Acquisition of Western Air

Delta Air Lines won the Transportation Department’s tentative approval Thursday to purchase Los Angeles-based Western Air Lines, creating a new carrier with routes stretching from Japan to West Germany and with the industry’s third-largest balance sheet.

The action, which followed similar approval by the Justice Department on Oct. 2, was stayed for 25 days while public comments are accepted, though no serious opposition is expected. The purchase price is about $860 million.

In a brief statement, Transportation Department regulators said the merged carrier, despite its mammoth size, “is unlikely to substantially lessen competition” in the airline business.

Delta ranks as the country’s fifth-biggest carrier and Western, having come back from serious financial woes in the early 1980s, is No. 8.

Transportation Department antitrust experts said Delta’s largely Southeastern and Midwestern route system overlaps little with Western’s Southwest-oriented routes, so a merger of the two will eliminate little head-to-head competition.

The two airlines are direct competitors on only four nonstop routes from Western’s Salt Lake City and Los Angeles hubs and from Oklahoma City. In all but one--Salt Lake to Portland, Ore.--other airlines offer competing service, and in Portland, United Airlines is the dominant carrier and offers “discipline” against price hikes, the regulators stated.

The department also said that regulators found “no evidence of barriers that would prevent other carriers from offering competitive service in the overlap markets.”

A Delta spokesman in Atlanta said the company is “delighted” by the approval. Delta Chairman and Chief Executive David C. Garrett Jr., at a shareholders meeting in Monroe, La., called the action “one of the most significant moves your company has ever made.” He said it “should solidly position us to face future challenges.”

“We’re pleased,” Western spokeswoman Linda Dozier said in Los Angeles.

Dozier said the merger should be submitted to both firms’ stockholders in special meetings by year-end and then would go to President Reagan, who has the authority to review it, since it would affect international air-route agreements with other nations. Delta has recently expanded aggressively into both the Atlantic and Pacific markets, with routes to London, Stuttgart and Munich, West Germany, and with approval to serve Tokyo.

The combination initially will make Western a separate unit of Delta but later will wipe out both Western’s name and its corporate identity--60 years old this year--as the nation’s first regularly scheduled air carrier.

Delta has vowed to retain virtually all of Western’s 11,000 employees, but their duties may change, and some will be transferred from Los Angeles to Delta’s Atlanta headquarters, Dozier said.

Meanwhile, Western said its third-quarter operating income rose 12% to $32.8 million over the same period last year. Delta, which also released third-quarter figures Thursday, said net income leaped 79% over last year’s quarter to $52 million.

Delta-Western’s status as the nation’s No. 3 airline will be short lived, however, since the Transportation Department is expected soon to approve Texas Air Corp.’s purchase of troubled People Express and the remaining assets of bankrupt Frontier Airlines, a People Express subsidiary.

Texas Air already has approval to buy huge Eastern Airlines--a merger that, when completed, will create the nation’s biggest air carrier, ahead of United, American and Delta-Western.

Those are but the biggest in a frenzy of airline mergers approved by the Transportation Department this year. Others include mergers of Northwest and Republic airlines, Trans World Airlines and Ozark Airlines, and United Airlines’ purchase of Pan American World Airways’ Pacific routes.