WASHINGTON - The chief executive officer of US Airways Group Inc. faced tough questioning at a Senate hearing yesterday as lawmakers fretted that his company's proposed unsolicited takeover of Delta Air Lines Inc. would harm consumers, particularly those in rural areas.
Doug Parker, chief executive of US Airways, said the nearly $10 billion acquisition of Delta would result in an efficiently run carrier that could offer low fares to fliers. He urged lawmakers to "let the market work."
Several senators said their constituents were concerned that a merger would result in cutbacks to service in small communities, where the per-unit costs of running an airline tend to be more expensive than in big cities with lots of passenger traffic.
"You're an aggressive suitor, but the lady from the South doesn't want to be forced into this shotgun wedding," said Sen. Trent Lott (R., Miss.), a reference to Delta's Atlanta headquarters.
On Jan. 10, US Airways, of Tempe, Ariz., increased its bid for Delta by nearly 20 percent, but Delta's chief executive has remained cool to the offer.
Delta's official committee of unsecured creditors, which will play a key role in deciding whether any merger agreement would move forward, has not issued a statement about its position since US Airways increased its offer.
"The surest, safest bet from the creditors' point of view is to go ahead with our stand-alone business plan," Delta chief executive Gerald Grinstein told reporters yesterday.
Grinstein, in testimony before the committee, called US Airways' bid "blatantly anticompetitive" and a "poster child of the worst kind of merger," estimating that 10,000 jobs would likely be eliminated. Parker disputed that figure, saying any job losses would be gradual and through attrition, rather than by layoffs.
US Airways is the major carrier serving Philadelphia International Airport, with about two-thirds of the traffic.
Despite his opposition to US Airways' offer, Grinstein said in a newsletter to employees Tuesday that a merger could not be ruled out for Delta after it exited bankruptcy. Grinstein also said Delta was "not negotiating" a merger with Northwest Airlines Corp., denying reports in the Wall Street Journal.
US Airways shares rose 8 cents to close at $53.35 on the New York Stock Exchange. Delta shares rose 12 cents, to $1.18, on the pink sheets.
Parker, who led America West Airlines' 2005 merger with US Airways, argued that the merger would lead to lower prices for consumers because the company would be in a better position to compete with low-cost carriers such as JetBlue Airways Corp. and Southwest Airlines Co. The growth of those competitors, he said, shows the "tendency of the marketplace to respond. . . . New carriers can come in and lower prices."
Both airline executives said the industry had made important strides toward rebounding from the financial troubles incurred as a result of the 2001 terrorist attacks and soaring fuel prices.
Delta is planning to come out of Chapter 11 bankruptcy by midyear as an independent company and is planning for a Feb. 7 Bankruptcy Court hearing in New York to discuss the details of its bankruptcy exit plan. US Airways has said it would revoke its takeover bid if Delta's creditors do not postpone that hearing by next Thursday.