Re-Regulation Rears Head In Senate Merger Hearing

Once every few years, someone comes along and questions whether the domestic airline industry should be run like a utility, with a few national carriers planning routes, selling fares and providing air services under the tutelage of the federal government. Sen. Herb Kohl (D-Wisc.) was the latest to mull over that model during a Senate Judiciary Committee Subcommittee on Antitrust, Competition Policy and Consumer Rights hearing last week.

The hearing showcased chief executives of United Airlines and Continental Airlines as they seek a blessing from regulators on their pending nuptials, which they cast as a necessary move toward a more sustainable domestic airline industry.

United CEO Glenn Tilton outlined the litany of woes that have beset the airline industry. "Serial bankruptcy is not a strategy for an industry that is going to benefit any constituent—not employees, not shareholders and not consumers," Tilton said, adding, "There is not one single thing that can benefit from the continued economic fragmentation and fragility of this industry—not one thing."

Kohl responded, "No argument, but doesn't that at least provoke the argument that we'd be better off with fewer airlines, nationally regulated with rules and regulations, forcing you to offer certain levels of service and allow you to make certain amounts of reasonable profit?" The CEOs, however, resisted the suggestion of an industry-wide bailout at the hands of the government, arguing instead for market-based solutions—namely, their merger—as the key to their financial salvation.