WASHINGTON, Jan. 24, 2007 (PRIME NEWSWIRE) -- Delta Air Lines today released the following oral testimony of CEO Gerald Grinstein as prepared for the Senate Commerce, Science and Transportation Committee hearing on the impact of consolidation on the airline industry.
"Thank you Mr. Chairman and Members of the Committee for the
opportunity to discuss my views about the impact of consolidation
on the airline industry generally, and US Airways' hostile takeover
attempt of Delta specifically.
Congress is right to carefully examine this important public policy
issue because the decisions made now will affect the competitive
landscape for years to come. Your decisions on consolidation,
including any decisions made about the proposed
US Airways/Delta merger, will impact consumers and communities
across the country. If this deal is allowed to go forward, it most
certainly will trigger broad industry consolidation. And the likely
outcome of follow-on consolidation would leave the combined Delta
and US Airways the weakest of the carriers, with little West Coast
and Asia presence and a staggering debt load of $24 billion.
In many ways the market has already helped restructure the airline
industry, so it is not clear to me that consolidation is inevitable.
But if consolidation does happen, it should happen in a way that
does not unfairly penalize employees, does not harm consumers and
communities, and provides long-term value for all stakeholders. To
ensure this, each transaction should be evaluated on its own merits.
A Delta-US Airways merger -- a merger that is even more
anti-competitive than the proposed United/US Air merger rejected in
2001 by the Department of Justice -- is the poster child of the
worst kind of merger and on its merits it should be rejected.
Of course, we take seriously our fiduciary duty to maximize the
value of our company for our creditors. Some of our work in this
area has generated rumors and speculation. One such is that Delta
is negotiating with Northwest. To be very clear: we are not
negotiating any such deal with Northwest.
Importantly, the US Airways deal would reverse the hard work and
remarkable progress Delta people have made restructuring our
airline. In just 16 short months since filing for Chapter 11, Delta
is poised to emerge from bankruptcy this spring as a strong,
fiercely competitive, standalone airline.
Using the bankruptcy process the right way, Delta people have
transformed our company's business model and will soon realize a
healthy, financially viable company with the best balance sheet and
the lowest cost structure among the network carriers.
Delta has:
* significantly reduced its debt load from $17 billion to a
projected $7.5 billion by the end of this year;
* vastly increased productivity and eliminated $2 billion in
annual costs;
* generated a sound liquidity position and profitability;
* right-sized its domestic network, adding more profitable
international routes. Delta provides service to over 200
domestic and 95 foreign destinations. Having undertaken the
largest international expansion in our history, we are now the
number one U.S. carrier across the Atlantic.
As a real testament to Delta people, during this time of upheaval
and uncertainty, the company's operating performance and customer
satisfaction scores actually improved, earning Delta the number two
spot in the 2006 J.D. Power & Associates customer satisfaction
survey for airlines.
As a result of Delta peoples' efforts, our company will emerge as a
formidable global competitor with an estimated consolidated equity
value of between $9.4 billion and $12 billion and one of the
strongest balance sheets in the industry.
So unlike US Airways' situation before it was acquired by America
West, Delta does not need to be acquired to be saved. Nothing
could be further from the truth.
It is clear that what Delta employees have worked and sacrificed
together to realize is achievable and well in-sight. This is the
moment they deserve. And this is the moment US Airways' merger
proposal would unfairly, and unnecessarily, take away from them.
Delta people deserve to determine their own destiny. With me today
are Captain Lee Moak, chairman of Delta ALPA, the union representing
some 6,500 Delta pilots; members of Delta's Board Council -- the
group representing nearly 40,000 Delta employees; and Cathy Cone,
chairman of Delta's retiree committees, representing more than
36,000 retired Delta people and their families. They are
steadfastly united in their opposition to the US Airways' deal.
Among their many issues of concern, they are justifiably worried
about the estimated 10,000 jobs that likely will be eliminated due
to the 10% capacity reduction US Airways has said will take place as
a result of a merger with Delta.
Each has prepared a statement for the Committee that provides
compelling rejection reasons. With your permission, Mr. Chairman, I
request that they be submitted for the record.
The US Airways/Delta merger also must be rejected and opposed
because it is blatantly anti-competitive. As the overlapping route
chart on the easel here graphically conveys, Delta and US Airways
compete extensively up and down the eastern seaboard and in routes
to many western states. Our hubs are natural competitors due to
their geographic proximity. We jokingly refer to them as the three
twins and a triplet.
My written submission has substantial analysis and data on the
anti-competitive impact of this proposed merger. Rather than going
into detail, in the interest of time I want to leave you with just a
few statistics that illustrate the magnitude of the anti-competitive
nature of this deal:
This merger will create a near monopoly -- over 90% passenger share
-- in more than 1,500 markets affecting over 8.5 million passengers.
And, in nearly 4,000 city pair markets, over 33 million passengers
will see a significant reduction in competitive choice.
Small communities most certainly will suffer. Though US Airways
denies this, its track record tells another story. Since its merger
with America West, service has been reduced in 66 small communities
-- more than double the number where it increased flights. Low cost
carriers have not filled the void. This deal is even worse. As
structured, it will put at risk critical air service in small
communities by creating an airline that is the largest service
provider in 127 small communities.
With less competition, fares will increase. Again, US Airways
denies this. Again, one only has to look at its track record:
Since its merger with American West, for every market where US
Airways lowered fares, the average fares increased in four times as
many markets.
Maybe that's why tens of thousand of people, from all 50 states and
105 countries, have joined Delta peoples' rallying cry to "Keep
Delta My Delta" by signing the campaign's e-petition and sending you
more than 155,000 letters in opposition to this deal.
They, like we, understand that this deal is:
* Bad for Delta people who don't want their jobs and benefits
jeopardized;
* Bad for the traveling public who want to keep air fares low and
customer service high; and
* Bad for small communities who want to keep their access to air
service and their economies healthy.
In sum, US Airways' hostile takeover attempt is nothing more than
one company's ill-conceived plan to eliminate its principal
competitor, and it should be rejected.
Again, thank you for the opportunity to address this issue of
paramount importance to Delta, its people, customers, creditors,
business partners and suppliers, and the hundreds of small
communities that rely on us.
We appreciate the Committee's interest, and I look forward to
answering your questions."
Delta Air Lines (Other OTC: DALRQ) offers customers service to more destinations than any global airline with Delta and Delta Connection carrier service to 304 destinations in 52 countries. With more than 50 new international routes added in the last year, Delta is America's fastest growing international airline and is a leader across the Atlantic with flights to 31 trans-Atlantic destinations. To Latin America and the Caribbean, Delta offers nearly 600 weekly flights to 58 destinations. Delta's marketing alliances also allow customers to earn and redeem SkyMiles on more than 14,000 flights offered by SkyTeam and other partners. Delta is a founding member of SkyTeam, a global airline alliance that provides customers with extensive worldwide destinations, flights and services. Including its SkyTeam and worldwide codeshare partners, Delta offers flights to 457 worldwide destinations in 97 countries. Customers can check in for flights, print boarding passes and check flight status at delta.com.
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