Delta, Northwest Shares Drop as DOJ Merger Reviews Continue
Delta and Northwest Airlines shares fell on Tuesday after the Justice Department said it is interested in examining the proposed merger between the two companies, a deal some lawmakers say will tamper with competition.
We will look at the competitive effects of the transaction and how it would affect consumers, Justice Department spokeswoman Gina Talamona said Tuesday.
The airlines will need antitrust approval from federal regulators, although most antitrust experts said they expect the antitrust agency to approve the deal.
The airlines said they want to complete the transaction by the end of the year, which would be during the merger-friendly Bush administration.
Shares of both companies fell in morning trading Tuesday after rising on premarket dealings. Northwest shares fell 65 cents, or 5.8 percent, to $10.57 in late morning trading while Delta shares lost $1.18, or 11.3 percent, to $9.30.
We are confident the transaction will go forward and be approved, Northwest CEO Doug Steenland said.
Sen. Herb Kohl, D-Wis., chairman of the Senate antitrust judiciary subcommittee, also said that group plans to hold hearings and closely examine the merger.
While we understand the financial pressures under which the major airlines have been operating, it is nonetheless also vital that this deal does not lead to fare increases and service reductions, Kohl said in a statement released late Monday.
Antitrust concerns have already rejected potential deals before. In 2001, an attempt merger of United Airlines and US Airways fell apart amid concerns that the combined carrier would control too much of the Washington, D.C., market and dominate over several other key routes
The third and fifth largest US airlines will merge under the name Delta with a combined value of 17.7 billion dollars, and will be run by Delta CEO Richard Anderson, the two companies announced after their boards approved the merger late Monday.
The merger creates the world's largest airline in terms of fleet, destinations and total passengers.
Combining Delta and Northwest will create a global US flag carrier strongly positioned to compete with foreign airlines that are continuing to increase service to the United States, a joint statement said.
Fellow airlines are hot in pursuit, with claims that Continental Airlines and United Airlines ready to merge pretty quickly once Delta- Northwest deal is confirmed, according to reports released by Reuters on Monday.
A merger between United and Continental, the second and fourth-largest U.S. airlines respectively, would surpass a Delta-Northwest combination as the world's largest carrier.
© Copyright IBTimes 2024. All rights reserved.