Turbulence for US Airways CEO - East Valley Tribune: Business

Turbulence for US Airways CEO

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Posted: Thursday, January 25, 2007 5:36 am | Updated: 6:17 pm, Fri Oct 7, 2011.

Talk about hostile. In a U.S. Senate Commerce, Science and Transportation Committee session Wednesday, purported to be about the state of the airline industry and the potential impact of mergers and consolidation, it was all about one topic — the proposed US Airways hostile takeover of Delta Air Lines.

And other than Andrew Steinberg, assistant secretary of aviation for the U.S. Department of Transportation, US Airways CEO Doug Parker didn’t seem to have a friend in the packed meeting room.

Delta CEO Gerald Grinstein continued to blast the Tempebased carrier’s $10.2 billion proposal, calling it “blatantly anti-competitive” and “the company’s ill-conceived plan to eliminate its principal competitor,” while Sen. Trent Lott, R-Miss., lauded Grinstein’s efforts to go-it-alone and wished him luck in executing his plan to emerge from bankruptcy.

Sen. Maria Cantwell, D -Wash., pounded Parker for not grabbing back responsibility for the US Airways pensions taken over by the government when US Airways was in bankruptcy.

And Mark Cooper, of the Consumer Federation of America, said if the Delta-US Airways hookup happens, more will follow, and, “If these mergers go through, small communities won’t have any service.”

Grinstein insisted Parker’s plan to slim down services by 10 percent will eliminate 10,000 jobs and raise fares, virtually calling Parker a liar for saying he won’t cut operational jobs or dump routes.

“You believe in Tinkerbell if you believe the merger won’t result in reduced services and (jobs),” Grinstein said.

Sen. Claire McCaskill, D-Mo., said American Airlines promised it wouldn’t cut staff when it took over TWA, but did so anyway.

But Parker bristled at the comparison. He said TWA was practically in liquidation when American rescued it, the unions determined seniority and stuck the TWA workers at the bottom of the list, and when the entire U.S. airline industry nearly imploded after 9/11, all carriers cut back staff and at American, the former TWA workers were the first to get laid off.

Parker said the “new Delta” would be a stronger, healthier airline and in fact, stronger carriers will make the industry better able to serve the smaller communities — a key issue for all of the committee members.

Steinberg agreed that healthy hub-and-spoke airlines generally provide more and better service to smaller communities.

“Consolidation is part of the natural evolution of the business,“ he said.

Steinberg even said it wouldn’t be worrisome to have only three major carriers as long as they were all profitable.

“Without sufficient consolidation, there has been a decline in service to the small communities,” he said. “Healthy network carriers will support more service.” But the committee conversations took a strange turn toward advocating reregulation of the industry to solve worries about service cutbacks.

The U.S. airline industry was deregulated in 1978. At least on that issue, Parker and Grinstein seemed to be of like mind that reregulation was neither necessary nor helpful. And in a bizarre aside to a committee question, Parker said he’d rather own Southwest Airlines than his own. “But for the record, I don’t own either,” he said.

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