Rep Oberstar Against Mergers

Government Regulation, Mergers/Finance

It sounds like some bad news is on the horizon for all the potential airline mergers out there. Rep. James Oberstar (D-MN) has publicly come out against all major airline mergers. Normally, that wouldn’t matter, but Oberstar is the next chairman of the House Committee on Commerce and Transportation, so he does hold some power here.

This news came out of a New York Times article yesterday in which Oberstar was quoted as saying “I don’t think there’s any benefit from mergers except for the benefit of stockholders and airline officials. There is no benefit to the traveling public.”

You’d think that Rep Oberstar would be a little more sensitive to the plight of airlines considering that Northwest is based in his home state, but apparently not. He seems to think that low fares are good no matter what regardless of the health of the airlines involved. Maybe he should look at the other side of the coin here. There is a strong argument that shrinking the number of airlines will help reduce capacity to a more sustainable level and enable airlines to weather downturns far better than they can now.

This means that while fares would probably be higher, there’s a much better chance of stability in the industry. And that means that airline employees would be more secure in their jobs as well. Somehow I get the feeling that if you posed the question to him in regards to the welfare of airline employees, he would begin speaking out of the other side of his mouth.

If you’re really concerned about airline fares getting too high, remember this. If the lack of competition means that airline fares get so high that they start producing windfall profits, some other airline will step in with lower fares and still be successful. That’s what AirTran, JetBlue, Southwest, and others thrive on and there’s no reason to think that would change.

What can Oberstar actually do here? He doesn’t have any direct control over the mergers, but he promised to call hearings if the Justice Department doesn’t block the mergers. Oh man, what a ridiculous proposition. This is a business and mergers should be allowed to proceed if the Justice Department does not deem them to be anticompetitive. For Oberstar to think he can step in and do what he wants is an unfair obstruction of the course of business. Hopefully it doesn’t come to that.

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1 comment on “Rep Oberstar Against Mergers

  1. Let us remember: 99.95% of politicians are pandering, spineless boobs who give as little thought to the true economics of the business situations as mice do of astrophysics.

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