Fair competition is critical to a freemarket area and competition spurs innovation and assures that resources are allocated efficiently. Because the free market cannot flourish without competition, a merger that decreases competition can undermine a freemarket. Thus, antitrust laws set limits on companies. Specifically, section seven of the clayton act prohibits mergers that lessen competition or tend to create a monopoly. This is meant to strike a balance between companies freedom to organize their affairs. Two of the four legacy carriers, American Airlines, which is then in chapter 11 bankruptcy since late 2011, and u. S. Airways, announced plans to merge. It would be called American Airlines but be led by u. S. Heirs chief executive officer. Chief executive officer. This is a highly technical inquiry and the department should be guided surely by the facts and the law, not politics or ideology. The basic question the department should seek to answer is, how this mergers impact on competition would affect consumer welfare. Congress has an oversight responsibility to ensure the department of justice conducts its merger reviews in a thorough, fair, and reasonably prompt fashion. The department should ask whether the merger would enable them to raise ticket prices or other fees or reduce services on particular roots. Especially roots routes. Come petition on these routes, from lowCost Carriers, to keep a post merger American Airlines in check. It should also ask whether post merger, a new carrier would move into a rout and begin to compete. To put it mildly. New airlines with new Business Models of sprung up to serve consumers. Other airlines have gone bankrupt. Some of the laughter have returned from bankruptcy. Others have merged. Others have failed altogether. The House Judiciary Committee has held hearings on two major mergers, delta northwest and united continental. They now control 80 of the domestic market. If this goes through, that number will decline to four. Should this be the last merger in the Airline Industry . Would allowing this merger finally strike the right balance between competition and the cyclical bankruptcy that has occurred in the industry recently e a major concern any time there is fluctuation in the Airline Industry is have smaller airports, how smaller airports would be effective. Affected. U. S. Airheads invested heavily in charlotte. Would american maintain or this have or not . Can maintain their routes are mostly counsel mentor, not overlapping, and the merger will enhance competition by giving the current fourth and fifth Largest Airlines a stronger position from which to compete the other three. Congress has no formal role in the department of justices merger review process. Congressional hearings provide important public venues to ask, debate, and identify possible answers to these questions which are of great importance. Rather than rushing to judgment, my hope is that everyone involved will take care to evaluate the evidence and do it is best for competition and consumers. I look forward to the testimony of the witnesses. In the end, i look forward to a wise decision by the department of justice that ensures a competitive future for the Airline Industry and protect the welfare of american travelers. Thank you. The subcommittee chairman is recognized. Thank you. This is the first hearing of the newly renamed subcommittee. We used to call it cal. Thanks chairman baucus, and i look forward to what i hope will be a productive working relationship of the 113 congress. As an initial matter, unlike with previous mergers, the Union Representing workers at both the is airlines are expecting strong support for the merger. That is encouraging. The union said American Airlines were instrumental in agreeing to this move. The final joint release dated february 14 between the different unions be entered into the record. Without objection. Also, a letter from the president of the association of National Flight attendants and the Pilots Association expressing support for the merger be entered into the record. Without objection. I understand why labor supports this merger. They are forced to get a better deal than they would otherwise. That is more than i can say for the employees of former northwest airlines, many of whom are my constituents in memphis. As we consider the merits, we should look back of similar mergers in the recent past to see how it benefits consumers and what happens. I respect the reviews of labor in support of this merger and recognize that no two mergers of airlines or any other entities are necessarily unlike, the merger of northwest and delta has shaped my image of Airline Mergers. Prior to that, northwest had a significant hub in memphis. Given memphiss proximity to the headquarters in atlanta, a concern about the potential cost of the merger to consumers and employees in my home district. In this room in 2008, the delta ceo said about the future of the memphis held it will be additional. It will be more is this for memphis, not less. I expressed concern to them about reduced service or out right illumination of the hub and asked about continuation about a piece about which we have great pride. He testified there would be no horrible closures. He said the merger would maintain interNational Flight to amsterdam. We did expect more flights for memphis and suggested that memphis to paris would happen. More flights, this would enhance the status of traffic and service at the Memphis International airport. He said it would add, not delay not take away from Memphis International airport. He knew memphis from when he was at northwest, he loved the ribs, he looked the city, he knew how well managed the airport was, how the time on the tarmac and taking off was less. It was the best connection they could possibly have. Those facts were true. His response was not. I asked u. S. Air and when other airlines did not come to memphis, u. S. Airways did. They added additional flights from memphis to washington at a better price. I appreciate that. We like that competition. U. S. Airways did something other airlines did not. When Frontier Airlines that about coming into memphis, northwest cut their prices. That eliminated the opportunity for frontier to come in. Later, people expressed an interest. Because delta had a market share, people express did not come in. The opportunity is there in memphis. Before the merger, there were 240 flights a day. Since december, 40 of that service, 96 flights. It would not surprise me to see further cuts. Saturdays looks like dodge city. There are opportunities for u. S. Airways to come into memphis and fly these routes. Delta has used its base in memphis to lower, keep people out and not have competition. This has caused businesses to not choose memphis is a place they want to come, because they do not get the service. Fedex needs the service and supplies it. They take some of their product and puts it on the airlines, which could help your airlines serve memphis. Call fred smith. He will tell you, come to memphis. So do i. There are plenty of reasons why we look at this merger, i understand wonderful things about mr. Johnson and mr. Kennedy, we have heard from richard anderson. We do not want a repeat performance. The basis upon which he made his untrue statements are still valid. Memphis International Airport is a fine airport, great service, great weather, great opportunities to save on fuel and a great city to serve. I appreciate your being here, i appreciate mr. Baucus scheduling this hearing. I look forward to u. S. Airways and american serving memphis. The great airport that it is. Thank you. Enter a statement from mr. Mcgee, the consumers union, expressing concern from this merger. I dont like the balance of my time, which doesnt exist, but it is traditional to yield back. [laughter] mr. Cohen does not want you to merge with delta airlines. [laughter] our first witness, without objections, other members Opening Statements will be made a part of the record. This time, i will introduce the witnesses. Gary kennedy, representing usair american, you are going to go first. Senior Vice President and chief Compliance Officer at American Airlines, mr. Kennedy directs all of American Legal Affairs worldwide. He also directs americans Corporate Compliance program and overseas Corporate Governance matters. Before joining American Airlines in 1980 four, key practice law in salt lake city. Mr. Kennedy is a magna cum laude graduate of the university of utah where he was a member of a fraternity. He got his degree from the university of utah school of law. We look forward to your testimony. As i told you privately, before the hearing started, i have seen tremendous improvement in the airways operations. In the staff, the service, it has been a real transformation. I compliment you on you and the Management Team at u. S. Airways. Your american i shouldve been, meant to mr. Johnson. I apologize for that. I will get to mr. Johnson and compliment you. Mr. Johnson, executive Vice President of corporate and Government Affairs at u. S. Airways. Prior to joining us airways, in 2009 he was a partner of indigo partners, a private equity firm specializing in acquisitions and Strategic Investments in the airline and aerospace industries. He also served as executive Vice President with American West Corporation Prior to this merger with us airways. He earned his mba from the university of california berkeley and a ba in economics from Cal State University in sacramento. Thank you for testifying. What is said to mr. Kennedy about us airways, obviously applies to you. I did tell both of you, i was thinking the testimony would be flipped. It really is a wellmanaged airline. Dont travel american i dont have that many locations to travel on american. When i did, they were very professional. Our third witness is mr. Kevin mitchell with the Business Travel coalition. Chairman and founder of the coalition, where he advocates for the Corporate Travel community in north america, europe, and asia. He has over 40 Years Experience in restaurant, hospitality, sport management, Business Aviation and Business Travel industries. Before founding btc, inservice Vice President of Cigna Corporation and received his ba in International Relations from st. Josephs university in philadelphia in 1980. We thank you for testifying. Our fourth witness, professor sagers, professor of law in cleveland ohio. He specializes in administrative law, antitrust, law and economics and business regulation. Before joining the economy academy, he was in private practice in washington d. C. At the law firm of arnold and porter and shea and garner. He got his degree from Michigan School of law. We thank you for testifying. Our last witness is dr. Clifton it is clifford, isnt it . Livered Winston Clifford winston, phd. Senior fellow in economic studies. His research focuses on analysis of industrial organization, regulation and transportation. Coeditor of the annual microeconomic edition of brookings paper on Economic Activity and has authored numerous books. Before coming to brookings, dr. Winston is an associate professor at 90 mit. He went to the university of california berkeley and got his masters from the London School of economics. Thank you for testifying. Mr. Kennedy, you will go first with your opening statement. Each of the witnesses written statements will be made entered into the record in their entirety. I ask each witness to summarize his testimony in five minutes or less. To help you stay within that time, there is a timing light on that table, when the light switches from green to love green to yellow, you have when the light turns to read your time has expired. I am more lenient than most people. If you need to go on another minute, that is fine with me. I recognize mr. Kennedy. Chairman, members of the subcommittee, thank you for the opportunity to testify today. My name is gary kennedy, the senior Vice President of American Airlines. Ive been intimately involved in the chapter 11 restructuring of our company and the proposed merger between american and he u. S. Airways. The Airline Industry has experienced severe economic turbulence over the past decade. The events of 9 11 created difficulty in this industry and we grappled with ways to survive in wake of the emotional and economic a people created by this terrible events. In 2003, American Airlines is on the brink of filing for a the protection. Thanks to the willingness of our organized labor representatives to take the steps necessary, at that time, to reduce costs, we avoided a chapter 11 filing. The next years, we struggle to find a way to rental stability. Despite our best efforts, our losses continue to mount, 12hing 12 lien dollars billion. We came to the painful conclusion in 2011 that time had run out areas the only viable path forward was to restructure our business under chapter 11 of the bankruptcy code. There is no easy way to describe how difficult our bankruptcy reorganization has been for the company and our employees. Beginning at the top of the organization, we reduced our Senior Management ranks by 35 . We then moved, making necessary changes, including the reduction of 15 of total management. We began renegotiating our secured obligations, our leases, and our contracts with vendors. We also negotiated new, long Term Contracts with each of our organized labor groups. These new contract include productivity improvements and changes to health and retirement benefits. At the same time, we increased pay for our employees and mitigated job losses by offering retirement incentives. One of the most important objectives we achieved was to freeze rather then terminate the play pension plans. We now expect to fulfill the supplications rather than unload the monday pbgc as other airlines have done. All that we accomplished was done in the context i our chapter 11 case, and in consultation with the Creditors Committee appointed by the United States trustee. A midsummer last year, we made sufficient progress that we decided in conjunction with the Creditors Committee, to embark on a formal process to consider a merger with u. S. Airways. It was clear from the outset of our review that a merger with u. S. Airways could create significant value for our stakeholders and bring substantial benefits to the traveling public. We conservatively estimated that by 2015, revenue and cost synergies will outweigh the negative by over 1 billion. This will make our company a much stronger competitor against the other large airlines. We are under no illusions that mergers are easy or seamless. We have agreed from the outset to do everything in our power to do learn from the success of mistakes that came before us. Most decisions have already been made. The combined company will use the great American Airlines brand. It will remain headquartered in the dallas, fort worth area. Busey hubs in both both systems will continue to be held. Our ceo, tom horton, and the u. S. Airways ceo will jointly lead of the Transition Team and the new american as it emerges from bankruptcy. Mr. Parker will be ceo of the new company, mr. Horton will be chairman of the board. I understand and recognize that many members of congress are skeptical of promises made in the situations. Often concerned about industry concentration. We do not intend to make commitments we cannot keep. Above all, i would urge you to consider the facts with which i began my testimony. Nothing has been more damaging for the Airline Industry, our employees, our customers, and our shareholders and the years of economic term or turmoil be experienced. This transaction is unique in that it is endorsed by all of our labor unions and embraced by management and the boards of both companies. We know we have a solemn obligation to implement this transaction with great care and thought. We are eager to do so. Thank you for the opportunity to testify today. Mr. Johnson. Thank you chairman and ranking members. Thank you to the entire committee for having us here today. It is an honor to testify about a merger of u. S. Airways and American Airlines. On the creation will be good for competition, and choice. Expanding the network for the benefit of our customers, our employees, our shareholders and communities is the motivation for bringing these companies together. Integration of the Complementary Networks will enhance competition in an already highly competitive marketplace. It will also deliver significant benefits to each of those constituencies. Our customers and communities will benefit from more and better service. Our employees will receive improved pay, at her benefits, and greatly enhanced. Security. I would like to acknowledge the fact that there are about 30 of our colleagues here in the room with us today who came to join us for the hearing. I would like to thank them personally for joining us. Our shareholders will benefit from improved Financial Stability and 1 billion of synergies created by the merger. We got unprecedented support from our 100,000 labor employees. The u. S. Airways team has been a leader in delivering exceptional customer service. We have long recognized that we could do more. Airline passengers have made it clear that what they want our Broader Networks capable of taking them wherever they want to travel, whenever they want to go. By combining the systems of american and u. S. Airways, the new american will build the network air passengers want. One that will compete vigorously with the networks of delta and northwest with low Cost Carriers like jetblue and southwest. The passenger benefits of the new American Airlines symphony, mentoring nature of our operation. By combining these operations, we add destinations. Out of the nearly 900 domestic routes we will serve, we have only 12 nonstop overlaps. U. S. Airways has historically provided extensive air service to small and mediumsized communities. This will allow us to extend that focus to the American Airlines system. Combining these networks will also create new, exciting, international opportunities. We will provide thousands of passengers better alternatives with more than 1300 new route worldwide. They will have the potential to access over 130 cities around the globe, served by american, but not yet served by u. S. Airways. And 62 served by us airways and not yet served by american. By adding u. S. Airways to the one world global alliance, we will increase competition on global routes by creating attractive opportunities for Additional Service for one world customers. Domestic markets will become even more competitive. Although it will be the Largest Airline in the u. S. , the new American Airlines will have less than 25 or send of domestic seat miles and will compete against the nationwide networks of delta with 21 , and united and southwest, each with 19 . A host of smaller, but fast growing lower crust airlines, jetblue and virgin america. As we think about completing in a Global Airline business, we merger will create a third u. S. Airline that will compete successfully with Major International airline. The new company will be financially stronger. The u. S. Airways system has been consistently profitable areas he success little restructuring of american will return that profitability. We expect to generate over 1 billion in net synergies between increase revenues. And reduce costs from scale and the elimination of duplicate systems in management. That improved Financial Performance will provide creditors with enhanced opportunity for a full recovery. A result unheard of in airline bankruptcy. It will create more Financial Stability and the cyclical Airline Industry. That Financial Stability will also provide very significant benefits to our employees, better pay and benefits, greatly improved job security, and better opportunities for advancement. It is not surprising that the merger has generated unprecedented support from employees of both companies, their labor unions, and the communities they live in. Antitrust review of these issues is important, and we are already working with the Justice Department to demonstrate the competitive benefits. We appreciate the opportunity to address these issues with the subcommittee today and commit to working with you in your oversight capacity. We announce the merger over 12 days ago only 12 days ago, so there are still issues. I will do my best to answer any questions you have today. Thank you very much. Hanky. Thank you. This morning i will explain one threat to Price Transparency enabled by this merger that has been agreed to by airlines, but not yet caught the eye of the public. I am also presenting this testimony this morning on behalf of the American Antitrust Institute. In 2008, i warned this and other committees in testimony of the dangers of the then proposed delta northwest merger and what those dangers would hold for consumers. I remember well that northwest ceo testified that Committee Members should not be concerned because the market is a planning affect of thirdparty distributors such as expedia is so pervasive and so important that they create this transparency that will keep prices low. He used this transparency to justify the merger. He was right back then about the effects of transparency. Today, airlines, including american and u. S. Airways, have agreed on a brazen new Worldwide Business model for how to price and sell tickets. It is designed to destroy Price Transparency, which is the very antidote to consolidation needed to ensure a healthy marketplace. The model is called new distribution capability, nbc. They are spearheading augmentation. Ndc is designed by determining agreement among competitors to create a transparent model for the pricing of tickets were fares are published and publicly available for Comparison Shopping and purchase by all consumers on a nondiscriminatory basis. What problem are the airlines endeavoring to solve . That has been decried publicly that the monetization of Airline Services caused by lowfare Search Capabilities of the Online Travel agencies the director general of ir stated in a press interview, we have done a great job of improving efficiency and bringing down costs, but we have handed that benefit straight to our customers. As soon as someone has a cost advantage, instead of charging the same price and making a better profit, they use it to undercut their competitors and handy value straight to passengers or cargo shippers and you have to ask why. I think one of the reasons is the way we sell our product. It forces us to do this. How does this work echo digg resolution codifies that airlines have agreed that they have the right to demand from consumers, before they would be privileged to receive a fair quote, personal information, including name, age, nationality, contact details, frequent flyer numbers, whether the purse purpose of the trip is business or pleasure, travel history, and marital status. Why is this program so toxic ech . Airfares would not be publicly filed and available. They could anonymously comparison shop through travel agencies. Instead, each price would be unique, depending on the profile of the consumer area did this personal information can be used to extract higher prices from less price sensitive travelers, such as Business Travelers. In contrast, when a consumer wants to travel today, she can go to a travel agency that has the fares and schedules. All options in the marketplace are returned, so she can easily compare prices without having to doug welch personal information. Personalds divulge information. Price transparency is even more important today, because there were six network carriers, then there were five, then there were four, now we are heading to three. By transparency, they will have created a new system of completely opaque pricing and with it, the ability to raise all fares across all systems. The nexus between ndc and this merger, this merger eliminates u. S. Airways. And maverick on Airline Distribution issues. It will be far easier to coordinate expressly or passively among three network competitors. And far easier to impose this model. Especially given the clout that the new american would have as the biggest carrier on the planet. The lack of transparency created by ndc further cements the dominance of these mega carriers. Once it is established here in the Worlds Largest market, it will be lights out, game over, for consumers. Two remedies. Dot has the authority to a proof this. Given its anticompetitive effects and unprecedented invasion of privacy, deities should reject it without condition. Number two, doj. They should serve the members who have been here heading the scheme with a cid to discover the purpose and objectives of the and the process by which horizontal competitors reached a binding agreement on how they would price and sell tickets. Thank you mr. Chairman. I would like to add that the American Antitrust Institute is looking at the competitive effects of ndc itself. Thank you. My friend of the American Antitrust Institute only that i should be getting hazard pay for being here today. I am here, im afraid, to suggest some reasons not to be so optimistic about this merger. There are a lot of captains behind me. I am a little afraid that when i leave her to go home, will be on some kind of nofly list. I hope that is not true. They are all very friendly. I will not say what airline im on. Dr. Winston, to my left, is probably going to say a few things in disagreement with me. He is an eminent person. No person could study the antitrust treatment and competition in airline markets without studying his work. He and i are going to disagree about a few things. The most encouraging thing i heard today was chairman goodlattes statement describing antitrust laws. I could not agree more. It is nonideological. I do not have my own phalanx of supporters behind me. I do not have any staff to support me in these things, because i am only here to speak in favor of a policy that is supposed to protect everybody, including us average folks. So here is my basic thought in the brief time i have to describe this complex field. In policy consideration of transactions like these, complexity is the defendants friend. It is the merging parties friend. It is not the friend of most other people affected by the transaction. I want to try to describe a few things that seem to me to be relatively simple. First of all, there would be a lot of discussion, and it will seem complex, because it to rick wire a lot of understanding of complicated industry facts. Benefits proposed by the merger. A lot of complexity surrounding the purported benefits. I am not even going to talk about the benefits. I do not think they are worth dwelling on, at least not in this setting. We all have been to this rodeo before. We have seen many mergers in Many Industries and seen many mergers in the airlines since the regulation. I have always been said to propose these same benefits or benefits like them. Quite often, they have been disappointing. My sense is the problems are not promises are not kept. I am going to talk instead about what i also think is relatively simple, the competitive effects. There is not time for me to address it fully. I will say this in the written statements that i read last night, i read them all. A most remarkable statement was that in this merger, among the thousands of daily flights to cities all across the United States that are controlled by these two carriers, the only overlaps that matter in the whole combined network will be 12 overlaps. 12 flights. We could delve into some complexities, i would rather focus on what seems simple. We should ask ourselves, among those thousands and thousands of flights, are there really only 12 cities in which these two carriers provide competition to each other that would be lost through this merger . I dont think so. For a brief introductory analysis for the more likely effects, you can look at the white paper produced from the antitrust institute which is attached to the statement. Unfortunately i have refraining time to say this, the dominating seen of Airline Mergers since deregulation has been the economic difficulties of the carriers. The claim is, we have to merge, we have to consolidate to strengthen ourselves so that we can perform. A few thoughts about that. First of all, the carriers really have never offered any plausible explanation why a merger. It has to be merger that is going to solve our economic problems. They can and often has suggested a lot of detailed arguments. I think the response is a relatively simple one, that is, we have had a long time. We had 35 years with dozens of mergers. Every single one of which has been sold on the claim that synergies, cost savings will make us competitive. It has not worked. The airlines have remained mostly economically in dire straits throughout that whole time. Thank you. Mr. Winston. Thank you. I am happy to be able to testify at this merger. I testified at the delta northwest merger in 2008 in support of that merger. I support this merger. I have some new perspective to bring. I will not just read my own testimony. What i think i will do in the short amount of time, given what we have heard, is repackage marita and presentation my oral presentation. Beginning with my conclusion. All mergers involve water called the williamson tradeoffs, mergers trade off benefits from economies and expansion to get lowercost. That is the positive claim to them. The anticompetitive concern that you are losing a competitor and you will raise prices. Traditionally, when we think of these things, we start with tradeoffs. You will hear them, you have heard them, as expected. What i think is interesting about airlines, and i did not stress this before, but it is increasingly true, we do not have to think of these anymore as tradeoffs. Admittedly i will be bringing in an additional policy perspective, but that was done by mr. Mitchell raising his concerns about what is going on with how tickets are distributed. The additional policy perspective is the growing reality of where this industry is going. That is to globalization. This is a global Airline Industry. Where are we really going to be going . When i mean globalization, something we have been moving toward, and allowing foreign carriers to serve in the u. S. If you think that is a strange policy, consider the Automobile Industry and imagine what it would be like if we did not have honda, toyota, etc. Building and assembling cars here. One wonders what is wrong with a picture like that. What is the cases that once you bring that perspective into mind, things change radically. You do not have tradeoffs. It is quite clear that the airlines job is to be as efficient as possible and reduce costs. What policymakers job is to do is to promote globalization and policy. Molting opens guys promoting open skies. An influx of competitors to make sure improvements are largely transferred to consumers. The concerns about competition go out the window when you start thinking about that. Something else very important becomes clear. You get a deeper and more intuitive understanding of why carriers are merging. It is a risky investment. The limbs of dollars billions of dollars in the sky. There are a lot of shocks. What you want to deal with risk is to have a portfolio. You could allocate was those seats in response to shocks and risks. You can imagine what people will do, when things are tough in one place, they move their capacity to another place. Mergers and able you to do that. I would suggest that the main justification for mergers, which has not been emphasized enough, is really a way of dealing with risk. That is the inherent challenge in this industry. Let me turn to that. Why i think that. As all comes out of deregulation. Recall that airlines operated under 55 , billions of dollars of capacity, only using half of it. In retrospect, you can see how crazy regulation was. At the same time, airlines were shielded from the fundamental challenge that is matching capacity with command. Demand. You think you know what demand is, then you have to deal with fuel shocks. Macroeconomic shocks. The gulf war. September 11. Sequestration. That is a very challenging thing to do. You want to have the ability to diversify. Be able to allocate your seat appropriately. That is what mergers do, and that is why the airline has been doing it for all these decades. In the process of doing that, what do we see going on in the industry . Prices continue to go down, the below the standard industry fair level under regulations, so the benefits are preserved. The key efficiency thing we want to look at we are not operating at 55 . Were much closer to 8080 or 90 . I would suggest these mergers are just part of a tool. Not the only tool, but to deal with where this industry is going, that is globalization. In the end, congress is critical here in pushing for that. Then we get a winwin, then the airlines should go along with it. We are allowing you to be more efficient, you allow us to spur competition in this industry. Thank you. We will now proceed under the fiveminute rule with questions. I will begin by recognizing myself for five minutes. One thing, mr. Mitchell, e did not address, you talked about some possible negative implications of this merger. If it does not go through, there are some demonstratable negatives. Very many. I just wonder if you consider that. The failure of American Airlines. Being financially unsustainable. American airlines is exiting will exit and courtesy bankruptcy reorganization as a lowercost carrier with aliens of dollars in cash billions of dollars in cash. Their ceo has said countless times that they will be operable as a standalone carrier. U. S. Airways is enjoying some of its most successful earnings in its history. I just dont buy into the notion that these are failing firms. It certainly does not apply as a failing firm against the guidelines. They are fit and able to compete. To make the argument as you hear now that they need to be large enough to compete effectively with the new delta or the continental united, they claimed themselves they can compete against them. If you use the logic that you always have to get eager to compete with in next biggest carrier, we will end up with two mega carriers. The logic is flawed. Finally, there are many smaller, independent carriers that do fine. I would like to add one thing. I think this is this seems like the biggest issue. My first point is, i agree with mr. Mitchell that it is unlikely. We dont see airline liquidations that often besides the huge financial and difficulty the industry has had. We have all had a very painful, unhappy experience during the past few years with the same basic problem. We in the United States do not have a stomach for business failure. By not being willing to tolerate it once in a while, we hope we create a very serious problem. Firms know that they will be rescued. Fail to learn how to compete in difficult markets. In this case, we have a Bankruptcy Law which allows you to go into anchored see and allows the creditors, the company to agree on the best route out of bankruptcy. That agreement has been made. We do have a Bankruptcy Law. What these companies are doing is exactly what the law avails of any company. They have made a decision through the bankruptcy process that this is their best reorganization. You could argue with that, but that is they have availed themselves of the legal process. I disagree. I know you do. One thing i have read your statement and what you said. Airline failures, you talked about they have escalated, but actually as far as taking into account and laois and, they are one of the inflation, they are one of the best. The only reason they have been as cheap as they have is that investors have pumped billions of dollars into failing airlines. You both mentioned that they maybe had a few more complementary routes duplications. I cant recall a merger of airlines that had fewer duplications than this. I will reply, if youll allow me. Just of all, they arent doing what Bankruptcy Law allows. They are emerging from bankruptcy with a merger, which is anticompetitive. The subsidy we give to the banks during the bailout that is their bankruptcy plan, that is legal. Yes, sir. Most people who emerge from Chapter Seven do not do it through they attached an option. An option that the law gives them. I am a railroad paternity attorney and i remember when the government continued turning rock allen down. You lost 10,000 miles of rail and stranded over 4000 shippers because you did not allow a merger. I can tell you that everything i have read, this will make a stronger airline and you could have stopped those mergers before delta and northwest. Before continental and united. You did not. And you created other airlines with a distinct advantage if you do not these two airlines merge. The employee is our for this. The employees are for this. Ive never seen him such support from unions. The pension benefit guarantee corporation, which is not unimportant. From abc news, we talk about the 12 overlapping routes. There are 100 cities where they currently compete on routes. That were said to 4900 routes. If you call competing, i saw a list that if you fly from birmingham to d. C. And want to fly through dallas and take 12 hours as opposed to two hours from arming him to d. C. , you can call that that they share the route. I dont know anyone who would take a 12 hour flight or eight hour flight when they could go nonstop. That was on somebodys list. The real point is that the 12 overlapping routes. They are not as important as four or five years ago. Thank you. View all thrown flown to atlanta . Have any of you flown through memphis . Mr. Mitchell, is it more convenient and messaging be in the or Atlanta Airport . [laughter] every time im there i feel like i am living the dream. You got it, man. Any of the rest of you think atlanta is a better experience for your consumers and memphis . I am not familiar with the memphis airport. After your escutcheon about it, i am going to see the memphis airport. You will like it. If he likes the ribs. Meant this airport is small, easy get around, it smells good. Atlanta is gigantic. The only smell you get is congestion. Will American Airways is there a likelihood he would look into memphis . Will you leave memphis to be the stepchild of delta, or would you look into coming in there and providing competition as u. S. Airways has . Both airlines serve memphis now. We serve memphis to a variety of our hub is hubs. Our written testimony, the creation of a network that will come about that will create opportunities to provide Additional Service for cities we serve. We hope memphis will be among that. At this point, we have not had the opportunity to plan or talk about that. Memphis will certainly be on our list. One of the things mr. Anderson said, the memphis airport is so much better than airlines had to stand the tarmac, they save money on fuel. Is that accurate that that would be attractive to an airline to come to memphis . There is abundant evidence of that. All you have to do is look at the statements over time. Southwest airlines, they stay away from any airport where expenses and charges are too high for them. It makes an impact on the decisionmaking at airlines. You supported the delta northwest merger. Did you take into consideration the horrific conditions that would result in a city like memphis because of this . No, i did not. I had a broader perspective on the merger. I qualified the danger of prospective assessments of mergers because we know, after the mergers, there are so many changes in the network, entry and exit, that may relate to the merger. In this case, we know, probably had nothing to do with the merger because april 2008 was when we had our hearing and the merger went forward and then we had the recession. How one could isolate what the merger did versus the recession is very difficult. Shouldnt the Great Recession have made memphis a better airport because of the fact that you save money and have less time burning fuel waiting to take off . The recession should have made memphis a more Profitable Airline for delta. The problem with memphis and other and not the largest hubs is traffic. If you are an airline and want to fill your blame with people, you want to go with where the people are. It is become airport the airlines use people and Federal Express uses packages. There are places where you move move people around. Memphis is the place. Mr. Winston thinks it would be good to have international, edition. Do you want to have air shanghai be our primary carrier . I personally do not fly them. [laughter] they fly out of memphis . The notion that you can justify a merger based upon some future change in the marketplace like open skies is really not responsible. It will not happen in our lifetime. And of the 30 pilots or however many are behind may want to wake up one morning working for the spanish government. It is too complicated. It is no justification for a merger. Thank you. I was in raleighdurham recently and had a fight on u. S. Airways. I had some time and was able to look at the scheduling chart. American had much better prices and deals on your frequent flyers going to washington from raleighdurham. Is that one of the 12 ritz . Oure talking about f that is one of the 12. What will happen there . I think we will maintain a high level of service. At what prices . We have not talked about that at all. We announced this merger 12 days ago. Those are things we will work on over the coming year. Notches memphis, st. Louis, cincinnati, pittsburgh. A lot of cities who put a lot of investment in their airports. A business important to their, suffered because of mergers. Do you see any of the cities seeing a similar fate as memphis, pittsburgh, san luis, cincinnati and others have because of mergers . It is possible. I will have to be a fact intensive analysis. Philadelphia could be impacted, charlotte, phoenix because of the geography of adjacent hubs. When you come to memphis, let me know and we will get some ribs and see fred met. Smith. You mention some of the airlines had gone away. The great Texas Airline i grew up with. It really looks like the only thing consumers in the u. S. Are looking at on airlines right now is price. Go back to the days when southwestern brenna for computing were competing. Something other than price
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