Northwest Airlines employees demonstrate outside the White House
TWA is officially headed into oblivion after U.S. bankruptcy judge Peter Walsh announced Monday that he'd accept American Airlines' $742 million bid for the carcass of the once-venerable airline. The ruling came just in time for American to dash off a $130 million check — part of an overall assumption of $3.5 billion in TWA debt —to keep the repo men away from TWA's planes. And so Trans World Airlines and its bustling St. Louis hub will survive. The TWA name will not.
"We want everyone to be part of one big family," said American spokesman John Hotard. "You're better off from an employees' standpoint and marketing standpoint to have everyone under a single name."
Trouble is, that's where the airline business is headed too — and the family's getting awfully small. The Justice Department — with a very nervous Congress looking on — now faces a potential rash of mergers that could leave as few as three major airlines in control of the U.S. skies.
The TWA-American merger has politics on its side. Though there are a few routes, mainly to the Caribbean, where the two airlines essentially share the market, now that Judge Walsh has tossed out the competing bids and blessed the acquisition, the only alternative is liquidation — which would wreak economic havoc on the employees at TWA's bustling St. Louis hub.
But the next stops are trickier. American's proposed purchase of a chunk of US Airways and its attendant asset-shuffling with United Airlines would leave American and United sharing half of the U.S. air travel market. Continental, Northwest and Delta have already squawked that such a state of affairs would force them to seek combinations of their own, most likely with each other. And thus would the present Big Seven airlines quickly become the Big Three.
Would that be so horrible? Maybe. Studies indicate that ticket prices are indeed higher in noncompetitive markets, and with three airlines dominating the skies, the smaller, low-fare regional carriers (such as Southwest) that have kept prices as low as they are (which isn't very low now) could quickly be stomped out of existence.
But the more pressing problem would seem to be the airlines' unreliable relationship with their employees. Bush cited the fragile economy as his main motivation for preempting a Northwest mechanics' strike that would have begun Monday, but some industry watchers think Bush has succeeded only in putting off the issue until the busy summer season. And with labor problems brewing seemingly across the industry — United is squabbling with its flight attendants, Delta with its pilots, and American recently went to court to stop work slowdowns by its mechanics and ramp workers — the power of unions in a three-airline sky has to be giving Bush some serious pause. And consolidations and its discontents will be the topic of conversation Tuesday as the Senate Commerce, Science and Transportation Committee opens a round of hearings on airline mergers.
But that's for another day. Monday was a happy day for an industry that hasn't had too many lately. TWA ticketholders find themselves with a solvent airline, the St. Louis hub will live on, and Northwest is flying its full schedule now that its mechanics remain on the job.
The ones picketing the White House on Monday morning, presumably, already had the day off.