When Jim Oberstar chaired the U.S. House Transportation Committee, he vociferously opposed the merger of Minnesota-based Northwest Airlines with Delta Air Lines.
Oberstar warned in 2008 that the union of Delta and Northwest would kick off a wave of mergers that would lead to the dominance of three “mega-carriers.”
He was right about the creation of three big airlines.
President George W. Bush’s Justice Department allowed Delta to acquire Northwest. The Obama administration gave a green light to the merger of United and Continental.
Now American Airlines and US Airways are seeking federal regulatory approval to merge their operations and become the nation’s biggest airline.
At the same time, Minnesota’s congressional Democrats are urging President Obama to appoint Oberstar to become the next secretary of Transportation. Secretary Ray LaHood plans to leave the administration, but in his final weeks on the job he’s busy dealing with cost-cutting scenarios linked to sequestration.
A former 18-term congressman from Minnesota’s 8th District, Oberstar understands the intricacies of transportation policy affecting U.S. roads, waterways and skies.
Oberstar, 78, railed against the Delta and United mergers, because he argued that industry consolidation would be bad for consumers by pushing up fares and reducing competition.
During his last decade in Congress, many airlines were on an exceedingly shaky financial footing. US Airways, United, Delta and Northwest all sought the safety of bankruptcy court to shed expenses, revise their business plans and emerge with a new lease on life.
While Oberstar has fought to preserve flight choices and increase competition among carriers, the airline industry has moved to consolidate its operations in the hopes of restoring financial health.
For example, in 2012 Delta produced net income of $1 billion and recently paid $372 million in profit-sharing to employees. Delta has been aggressively paying down its debt and passing along its actual costs of doing business to airline passengers.
The airline industry was hurt by the 9/11 attacks and the Great Recession, but it has been particularly hard hit by high fuel prices.
Airlines for America Chief Economist John Heimlich reported last week that top “U.S. airlines eked out another year of meager profitability” in 2012. “Expenses grew faster than revenues with record-setting fuel prices serving as a primary driver,” Heimlich said in a written statement.
If Oberstar gets named to Obama’s Cabinet, he could use the Transportation Department post to publicly raise questions on behalf of airline consumers.
But it’s highly unlikely that Oberstar, or anybody else, could present the substantive case that’s needed to block an American-US Airways merger.
The two carriers have few overlapping routes, so in that regard an American combination with US Airways bears a resemblance to the Delta and Northwest merger.
After a period of due diligence, it’s expected that the Justice Department’s antitrust division will allow the American and US Airways merger to take flight.
Then Oberstar’s fears over creation of a three mega-carrier universe will be realized.
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