I would like to extend thanks to Airline Division Director David Bourne for allowing me the opportunity to tag along with the IBT contingent to the Senate Committee on the Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights regarding the potential consumer impact of the United Continental merger. In attendance for the IBT were our lobbyist, Jack Albertine of the Albertine Group, Jamie from Strategic Research, as well as Law Clerks Jason Usher and Andrea Andrade.
Before reporting on the hearing, here is the GAO report dealing with the merger. The 27 pages of information provide a very detailed look at the two separate companies as well as the proposed deal. Jock Creach from Seattle did a review of the webcast of the hearing and it can be found here.
In order to get decent seats for the hearing we got in line two hours early. There were several employees, mostly pilots, waiting to observe the proceedings. Just prior to 2pm Jeff Smisek came through and greeted uniformed employees and spoke to them for about fifteen minutes before taking his place in the hearing room. I would characterize this exchange as more than cordial, with the United pilots obviously very excited to speak to Mr. Smisek. In turn Mr. Smisek was smiling and shaking hands with them as he addressed their questions.
Attending the hearing as witnesses were, Glen Tilton CEO United, Jeff Smisek CEO Continental, Darren Bush Associate Professor of Law with the University of Houston Law Center, and finally Bill McGee Consultant for the Consumers Union. Here is a link to the webcast and you will need to fast forward to about 14:14 before the video shows people. The video lasts about an hour and a half.
My review of the hearing is as follows;
I thought both Mr. Tilton and Mr. Smisek came very well prepared to answer questions. Mr. Bush and Mr. McGee were also very prepared and brought some intriguing counterpoints to the discussion. Both of the latter gentlemen were opposed to the merger, stating in part that past mergers rarely produce the promised goals of more stable airlines that benefit consumers. Their contention was that these past mergers generally resulted in reduced flying from some cities as well as higher ticket prices. The testimony of all four of these gentlemen can be read here (Tilton and Smisek), here (Bush), and here (McGee).
There was much concern around potential job loss in Houston by Senator Cornyn of Texas. At one point the Senator even questioned in a veiled manner if the deal to keep headquarters in Chicago were an attempt to please President Obama. The testimony of both CEO's was that there would be job losses in Houston, but that it would be a small percentage of the total workforce, and any losses would most likely be suffered by overlapping management employees. The CEO's both said that frontline employee job losses would be negligible. In any event, Mr. Tilton testified that there had been a huge commitment by the people and city of Chicago. For this reason Mr. Tilton explained that a move in headquarters would have been a deal breaker. Congresswoman Sheila Jackson Lee was in the audience and submitted a statement to the Subcommittee that was entered into the record without objection. The Congresswoman has been quoted in many papers as having concerns over potential Houston job losses should the merger be approved.
There were questions and concerns about the eight current hubs and whether the new airline would continue to maintain their current presence at each of them. Neither CEO would commit to this premise stating that while they believed all eight were necessary to the combined carrier, demand would drive the routes flown. In addition they stated that if there were a shock to the traveling public, as have been witnessed in the past, those events may also drive changes in the scheduling at the hubs. Both CEO's also stated that there may be changes to equipment flying certain routes amongst the hubs as they move larger aircraft to higher yielding routes.
Questions of retirement security as well as a headcount promise were brought up by Senator Amy Klobuchar of Minnesota. The Senator asked both CEO's if they were willing to commit to headcounts as the Delta group did during testimony on the Delta Northwest merger. Neither CEO was prepared to offer any sort of promise regarding headcounts. The Senator then asked both CEO's if they were committed to providing retirement security to their employees. Mr. Smisek, without hesitation, said that he was committed to proving retirement security to his employees. Mr. Tilton then said in a very roundabout way, that only if the merger were approved would he be in a position to talk to the appropriate parties about the possibility of talking about pensions. I sent Senator Klobuchar a note of thanks after the hearing as I was impressed with the direct manner in which she questioned the two CEO's on the employee's behalf.
Finally, Chairman Kohl of Wisconsin asked if the panel had anything else that they would like to add. All four gentlemen gave a wrap up of their respective positions, with Mr. Tilton finishing last. At that point the Chairman thanked the panel and adjourned the hearing.
