Justice Department Vows to Scrutinize Airline Mergers

A Justice Department official said Wednesday that the department will promote competition in the airline industry through strict enforcement of antitrust laws.

“You can be assured that the antitrust laws will be vigorously enforced with respect to the airline industry--and all other industries--during my tenure as head of the antitrust division,” Assistant Atty. Gen. James Rill said in testimony to the Senate aviation subcommittee.

Rill said the department will closely examine any proposed mergers, joint ventures, sales of airport flight slots or other assets, pricing practices and other potentially anti-competitive actions.

Subcommittee members said they were concerned over the growing concentration of airlines through mergers and flight restrictions at major airports.

“In the last 10 years, the price I pay for my ticket to Kentucky has gone up 400%,” said Kentucky Democratic Sen. Wendell Ford. “If I do not fly with one airline, I’m out of luck.”

“I’m looking very strongly at (re)-regulation,” said Alaskan Republican Sen. Ted Stevens.

“The Justice Department intends to use its new authority to enforce those (antitrust) laws vigorously and to promote and protect free market competition in the airline industry,” Rill said, referring to the authority over airline mergers it acquired from the Transportation Department on Jan. 1.

He said the department was closely monitoring Eastern Airlines’ bankruptcy proceedings to determine if they were likely to harm competition and would ask the bankruptcy court to withhold action on any proposed asset sale if necessary.

The Justice and Transportation departments recently opposed the sale of Eastern’s Philadelphia gates and routes to USAir, and they were sold to smaller Midway Airlines instead.

Rill said the department would also watch joint ventures by foreign and domestic airlines, including interline flights.

“These types of transactions, or any consolidation between foreign and domestic airlines, would be analyzed under the antitrust laws using the same analysis described in the department’s 1984 merger guidelines,” he said.

Weary of Studies

Foreigners can have no more than a 25% interest in a U.S. airline. Scandinavian Airlines System recently acquired a 9.9% interest in Continental Airlines, Holland’s KLM Royal Dutch Airlines was a major investor in the group that bought Northwest Airlines and British Airways is purchasing 15% of United Airlines in an employee-management buyout.

Assistant Transportation Secretary Jeffrey Shane said the department was preparing a study of competition in the airline industry and would make policy recommendations in a few months, but Sen. Ford called for quicker action.

“We’re getting tired of waiting for studies. We’re studying this thing to death,” Ford said.

Shane said flight restrictions and a shortage of gates at major airports were the major factors limiting competition.

Transportation Secretary Samuel K. Skinner said Tuesday that he would not allow debt from leveraged buyouts to jeopardize airline safety.