Monday, November 29, 1999

United/Continental grilled on merger in U.S. House

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U.S. lawmakers on Wednesday sought assurances on safety, pensions and job security from executives of United Airlines and Continental Airlines ahead of their merger to create the world's biggest carrier.United's Glenn Tilton and his counterpart at Continental, Jeff Smisek, received a frosty reception from the House of Representatives aviation subcommittee, and faced the sharpest public questioning yet on specifics of the deal."I will continue to vigorously oppose it," said Representative James Oberstar, the chairman of the full Transportation Committee who says the deal will harm competition, raise fares and reduce choice for consumers.Representative Dennis Kucinich of Ohio, which could be vulnerable to job and service cuts as a result of the merger, said his subcommittee, the domestic policy panel, would investigate Continental's marketing alliance with United, approved by regulators in 2009.Kucinich questioned why Continental would reject the idea of a merger before regulators and then say such a deal was necessary just a year later."It is easy to see that the merger was Continental's plan all along," Kucinich said.Tilton was questioned closely on pilot training of overseas alliance partners and had a sharp exchange over outsourcing heavy maintenance on some aircraft to China under an agreement with Germany's Lufthansa.But Smisek was grilled on safety following the February 2009 midair stall and crash of a plane operated by regional partner Colgan Air near Buffalo that killed 49 people. Family members of some of the victims of Flight 3407 attended the hearing.Smisek called the crash tragic and regrettable, and said Continental was not aware that the pilots of the ill-fated aircraft were undertrained, as crash investigators concluded.Tilton and Smisek said the merger was necessary for the two airlines to compete effectively with global airlines like American Airlines, Delta Air Lines and Air France-KLM."This is a brutally competitive industry. It is today and will be after this merger," Smisek said.If the deal is approved by antitrust officials at the Justice Department, United/Continental operating as new United, would join Delta, which merged with Northwest in 2008, and American as the three largest domestic carriers. They would hold a combined 35 percent share of the market and new United would command about half of that.On pensions, Smisek said the current retirement system for Continental employees will remain after the merger. Additionally, Tilton said United employees will not see a return of retirement plans that were terminated and assumed by U.S. pension insurers during the carrier's bankruptcy.United and Continental pledge minimal job losses among the combined company's 90,000 workers.Both carriers are trying to negotiate contracts with their respective pilots' unions before the end of the year, the time-frame they have set to win government approval of their deal.Other workers could face more hurdles in contract talks as unions overall are looking for richer deals to offset concessions taken during industry restructuring from 2002-07.The hearing came amid fresh data showing the industry continuing to cement its recovery from the 2008-09 recession-fueled downturn. Airline executives are predicting stronger second-quarter revenues driven by rebounding business and international traffic, pluses on both counts for the global operations of United and Continental.(Reporting by John Crawley; Editing by Dave Zimmerman, Phil Berlowitz)
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