Meeting News - May 5, 2008 - (Page 32)

Cover Story Merger continued from cover munities will benefit from their new global reach, with the consequences of this deal for travelers in this year, there’s no denying that an extra $1 billion with more than 130 of these destinations getting small and midsize markets, many of whom already could be key to keeping both airlines in the sky. access to international travel. have the fewest choices for air carriers today.” The all-stock Delta-Northwest transaction, with The company has also tried to allay meeting planMerger insiders have brushed those concerns a combined enterprise value of ners’ fears by stating that all pre- aside: “Approval should be easy because there is so $17.7 billion, would leave the viously negotiated contracts will little overlap,” said Jenkins.“There will not be many newly formed company—to be be honored. However, said Jenk- anti-competitive or monopolistic routes formed.” called Delta—with more than ins, those contracts will most Jenkins also noted that the timing of the merger $35 billion in aggregate annual likely be renegotiated next year. means that it will be reviewed under the Bush revenues, a fleet of nearly 800 If the new Delta focuses on Administration, which is more amenable to big planes flying to 390 destinations attracting global corporations— business than a potential Democrat-led alternative. across 67 countries, and a workwhich is highly likely—planners force approximately 75,000 peofor small and midsize compa- Cleared for Takeoff? ple strong. Branding itself as a nies may have less leverage dur- The biggest—and perhaps most alarming—impliglobal airline, the mergerd coming the renegotiations. Costs cation of the merger, if approved, is the wave of pany would marry Delta’s strong could go up even more if other mergers that may follow. It has been widely specu—Senator Herb Kohl, chairman, lated that United Airlines and Continental Airlines, presence in the Southeast, New airline mergers occur. Senate Antitrust Judiciary York, Latin American, and Euro“It’s difficult to see how this which have openly explored the idea of merging in Subcommittee pean markets with Northwest’s could be a positive thing for pas- the past, will forge a similar deal. Continental previdominance in the Midwest and Pacific Rim. sengers,”said Claes Fornell, founder of the Universi- ously resisted merger attempts, but chairman and “By combining Northwest and Delta, we are build- ty of Michigan’s American Customer Satisfaction CEO Larry Kellner and president Jeff Smisak released a message to the company’s employees a day ing a stronger, more resilient airline that will be a Index (ACSI). after the Delta-Northwest announcement that left leader in providing customer service and value,” said the door open to possibilities. Doug Steenland, president and CEO of Northwest. Obtaining Flight Approval “As we’ve said repeatedly for more than a year and In order for the merger to be completed, shareholdGetting Passengers Aboard er approval is required. More importantly, it must a half, our preference has been to remain independDespite Delta and Northwest’s sunny outlook, cus- pass before the Department Of Justice, where an ent as long as the competitive landscape remained tomers—including meeting planners—are con- antitrust review could take six to eight months. Many the same,” the letter read. “However, the landscape cerned about what the deal will mean for them. experts expect that the deal will go through, despite is changing. We will review our strategic alternatives Fare hikes, already on travelers’ minds due to fuel concerns of lawmakers— and make sure that we surcharges and more capacity on planes, are the mainly Democrats—who remain a strong long-term biggest concern, with fewer options in the market- have come out against the competitor.” place. With the Delta-Northwest merger, however, deal and its potential Should a deal be in the airline consultant Darryl Jenkins does not expect effects on the airline works, it likely would resulting price increases because the two airlines industry as a whole. move at an accelerated only fly about a dozen of the same routes. Senator Herb Kohl pace so that it can be “There are only fare increases if a tremendous (D-WI), chairman of the reviewed simultaneously —Darryl Jenkins, airline consultant amount of capacity is removed,” explained Jenkins, Senate Antitrust Judiciary with the Delta-Northwest who has worked with both Northwest and Delta for Subcommittee, said that merger plan by the Justice more than 20 years and advised a third-party con- the group would hold hearings on the impact of the Department. It is expected that a Continental-United sultant during merger talks.“This merger won’t fac- merger—and further airline consolidation—on merger would have more effect on passengers due to tor in because there is so little overlap.” competitors and consumers. “While we understand the carriers’ service overlap and the monopoly the Another concern is that smaller cities will lose the financial pressures under which the major air- company could hold over certain routes. service, but Delta and Northwest executives have said lines have been operating, it is nonetheless also vital It could be almost a year before the dust settles, that they have no intention to close any hubs or can- that this deal does not lead to fare increases and serv- but it’s clear that economic factors are forcing the cel any routes. In fact, they claim that smaller com- ice reductions,”he said.“We are especially concerned airline industry to adapt. H It is this “doesvital lead deal not to fare increases and service reductions. ” “Approval should is be easy because there little [service] overlap. ” I CHALLENGE YOU Governor Deval Patrick Massachusetts to put Boston to the test CON V CEN ENTIO N T THE ER OF YEA R 200 7 Arrange your special V.I.P. Challenge site visit. www.AdvantageBOSTON.com/challenge The Massachusetts Convention Center Authority owns and operates the Boston Convention & Exhibition Center and the Hynes Convention Center. 32 MeetingNews May 5, 2008 www.meetingnews.com http://www.AdvantageBOSTON.com/challenge http://www.AdvantageBOSTON.com/challenge http://www.meetingnews.com

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