US Airways: New Delta will be 'low-cost maverick'

Calling itself "a pro-consumer maverick," US Airways moved quickly Friday to head off an antitrust challenge to its proposed $8 billion takeover of Delta Air Lines, asserting in a government filing that the "New Delta" will offer "consumer-friendly fares" and will not stifle competition in a market in which LCCs play a significant role.

Delta CEO Gerald Grinstein, meanwhile, reportedly held multiple conference calls with the bankrupt carrier's creditors to argue against the takeover and for Delta's re-emergence from Chapter 11 as a standalone airline. Creditors will play a big role in determining the fate of DL, and both Grinstein and US Chairman and CEO Doug Parker likely will court them aggressively.

The merger also could be derailed by US Dept. of Justice antitrust officials (ATWOnline, Nov. 17), who blocked the proposed merger of the former US Airways and United Airlines on grounds that it was anticompetitive and likely would offer consumers diminished service for higher fares. In a filing Friday with the US SEC, US Airways argued that the domestic "airline industry will remain unconcentrated" after the merger and that the rise of LCCs since 2000 ensures robust competition.

US said the combined carrier will use the Delta name and would have a domestic market share of 18.2% based on ASMs. "The Dept. of Justice has not challenged a merger in over 30 years where the leading firm has less than a 30% market share," the carrier said in the filing. It added that a projected $1.65 billion in synergies generated by the proposed merger "are real and can be achieved. The expected synergies should overcome any theoretical antitrust concerns about the merger."

US also emphasized "rapid LCC growth since 2000," arguing that the US airline market has changed fundamentally since the UA/US merger was rejected. "Today's airline industry is far more competitive than at the start of the decade," US said. "In 2000, LCCs carried only 13% of East Coast traffic vs. 34% in 2006. Since 2000, JetBlue and Frontier have joined Southwest and AirTran as truly national carriers."

Even SWA, already firmly established as a major force in 2000, has emerged in the last five years as a transcontinental carrier after formerly avoiding long-haul domestic flights, US said, noting that "today the carrier flies between the East and West coasts from numerous cities...A combined US Airways/Delta will face significant competition at most of the carrier's hubs...After a merger, 81% of US Airways/Delta passengers will have LCC competition at their local airport. An additional 13% will have access to LCC service within 100 miles."

US reminded SEC that its management team "began at America West Airlines, which has a history as an industry maverick...Since the merger with US Airways, the airline has continued to be a pro-consumer maverick [by reducing both business and leisure fares]. New Delta would continue to be a low-cost maverick."

In a separate but deeply ironic announcement, Delta said it will launch daily New York JFK-Phoenix service on Feb. 15 aboard a 737-800.