Fair competition is critical to a freemarket area and competition spurs innovation and assures that resources are allocated efficiently. Because the free market cannot flourish without competition, a merger that decreases competition can undermine a freemarket. Thus, antitrust laws set limits on companies. Specifically, section seven of the clayton act prohibits mergers that lessen competition or tend to create a monopoly. This is meant to strike a balance between companies freedom to organize their affairs. Two of the four legacy carriers, American Airlines, which is then in chapter 11 bankruptcy since late 2011, and u. S. Airways, announced plans to merge. It would be called American Airlines but be led by u. S. Heirs chief executive officer. Chief executive officer. This is a highly technical inquiry and the department should be guided surely by the facts and the law, not politics or ideology. The basic question the department should seek to answer is, how this mergers impact on competition would affect consumer welfare. Congress has an oversight responsibility to ensure the department of justice conducts its merger reviews in a thorough, fair, and reasonably prompt fashion. The department should ask whether the merger would enable them to raise ticket prices or other fees or reduce services on particular roots. Especially roots routes. Come petition on these routes, from lowCost Carriers, to keep a post merger American Airlines in check. It should also ask whether post merger, a new carrier would move into a rout and begin to compete. To put it mildly. New airlines with new Business Models of sprung up to serve consumers. Other airlines have gone bankrupt. Some of the laughter have returned from bankruptcy. Others have merged. Others have failed altogether. The House Judiciary Committee has held hearings on two major mergers, delta northwest and united continental. They now control 80 of the domestic market. If this goes through, that number will decline to four. Should this be the last merger in the Airline Industry . Would allowing this merger finally strike the right balance between competition and the cyclical bankruptcy that has occurred in the industry recently e a major concern any time there is fluctuation in the Airline Industry is have smaller airports, how smaller airports would be effective. Affected. U. S. Airheads invested heavily in charlotte. Would american maintain or this have or not . Can maintain their routes are mostly counsel mentor, not overlapping, and the merger will enhance competition by giving the current fourth and fifth Largest Airlines a stronger position from which to compete the other three. Congress has no formal role in the department of justices merger review process. Congressional hearings provide important public venues to ask, debate, and identify possible answers to these questions which are of great importance. Rather than rushing to judgment, my hope is that everyone involved will take care to evaluate the evidence and do it is best for competition and consumers. I look forward to the testimony of the witnesses. In the end, i look forward to a wise decision by the department of justice that ensures a competitive future for the Airline Industry and protect the welfare of american travelers. Thank you. The subcommittee chairman is recognized. Thank you. This is the first hearing of the newly renamed subcommittee. We used to call it cal. Thanks chairman baucus, and i look forward to what i hope will be a productive working relationship of the 113 congress. As an initial matter, unlike with previous mergers, the Union Representing workers at both the is airlines are expecting strong support for the merger. That is encouraging. The union said American Airlines were instrumental in agreeing to this move. The final joint release dated february 14 between the different unions be entered into the record. Without objection. Also, a letter from the president of the association of National Flight attendants and the Pilots Association expressing support for the merger be entered into the record. Without objection. I understand why labor supports this merger. They are forced to get a better deal than they would otherwise. That is more than i can say for the employees of former northwest airlines, many of whom are my constituents in memphis. As we consider the merits, we should look back of similar mergers in the recent past to see how it benefits consumers and what happens. I respect the reviews of labor in support of this merger and recognize that no two mergers of airlines or any other entities are necessarily unlike, the merger of northwest and delta has shaped my image of Airline Mergers. Prior to that, northwest had a significant hub in memphis. Given memphiss proximity to the headquarters in atlanta, a concern about the potential cost of the merger to consumers and employees in my home district. In this room in 2008, the delta ceo said about the future of the memphis held it will be additional. It will be more is this for memphis, not less. I expressed concern to them about reduced service or out right illumination of the hub and asked about continuation about a piece about which we have great pride. He testified there would be no horrible closures. He said the merger would maintain interNational Flight to amsterdam. We did expect more flights for memphis and suggested that memphis to paris would happen. More flights, this would enhance the status of traffic and service at the Memphis International airport. He said it would add, not delay not take away from Memphis International airport. He knew memphis from when he was at northwest, he loved the ribs, he looked the city, he knew how well managed the airport was, how the time on the tarmac and taking off was less. It was the best connection they could possibly have. Those facts were true. His response was not. I asked u. S. Air and when other airlines did not come to memphis, u. S. Airways did. They added additional flights from memphis to washington at a better price. I appreciate that. We like that competition. U. S. Airways did something other airlines did not. When Frontier Airlines that about coming into memphis, northwest cut their prices. That eliminated the opportunity for frontier to come in. Later, people expressed an interest. Because delta had a market share, people express did not come in. The opportunity is there in memphis. Before the merger, there were 240 flights a day. Since december, 40 of that service, 96 flights. It would not surprise me to see further cuts. Saturdays looks like dodge city. There are opportunities for u. S. Airways to come into memphis and fly these routes. Delta has used its base in memphis to lower, keep people out and not have competition. This has caused businesses to not choose memphis is a place they want to come, because they do not get the service. Fedex needs the service and supplies it. They take some of their product and puts it on the airlines, which could help your airlines serve memphis. Call fred smith. He will tell you, come to memphis. So do i. There are plenty of reasons why we look at this merger, i understand wonderful things about mr. Johnson and mr. Kennedy, we have heard from richard anderson. We do not want a repeat performance. The basis upon which he made his untrue statements are still valid. Memphis International Airport is a fine airport, great service, great weather, great opportunities to save on fuel and a great city to serve. I appreciate your being here, i appreciate mr. Baucus scheduling this hearing. I look forward to u. S. Airways and american serving memphis. The great airport that it is. Thank you. Enter a statement from mr. Mcgee, the consumers union, expressing concern from this merger. I dont like the balance of my time, which doesnt exist, but it is traditional to yield back. [laughter] mr. Cohen does not want you to merge with delta airlines. [laughter] our first witness, without objections, other members Opening Statements will be made a part of the record. This time, i will introduce the witnesses. Gary kennedy, representing usair american, you are going to go first. Senior Vice President and chief Compliance Officer at American Airlines, mr. Kennedy directs all of American Legal Affairs worldwide. He also directs americans Corporate Compliance program and overseas Corporate Governance matters. Before joining American Airlines in 1980 four, key practice law in salt lake city. Mr. Kennedy is a magna cum laude graduate of the university of utah where he was a member of a fraternity. He got his degree from the university of utah school of law. We look forward to your testimony. As i told you privately, before the hearing started, i have seen tremendous improvement in the airways operations. In the staff, the service, it has been a real transformation. I compliment you on you and the Management Team at u. S. Airways. Your american i shouldve been, meant to mr. Johnson. I apologize for that. I will get to mr. Johnson and compliment you. Mr. Johnson, executive Vice President of corporate and Government Affairs at u. S. Airways. Prior to joining us airways, in 2009 he was a partner of indigo partners, a private equity firm specializing in acquisitions and Strategic Investments in the airline and aerospace industries. He also served as executive Vice President with American WestCorporation Prior to this merger with us airways. He earned his mba from the university of california berkeley and a ba in economics from Cal State University in sacramento. Thank you for testifying. What is said to mr. Kennedy about us airways, obviously applies to you. I did tell both of you, i was thinking the testimony would be flipped. It really is a wellmanaged airline. Dont travel american i dont have that many locations to travel on american. When i did, they were very professional. Our third witness is mr. Kevin mitchell with the Business Travel coalition. Chairman and founder of the coalition, where he advocates for the Corporate Travel community in north america, europe, and asia. He has over 40 Years Experience in restaurant, hospitality, sport management, Business Aviation and Business Travel industries. Before founding btc, inservice Vice President of Cigna Corporation and received his ba in International Relations from st. Josephs university in philadelphia in 1980. We thank you for testifying. Our fourth witness, professor sagers, professor of law in cleveland ohio. He specializes in administrative law, antitrust, law and economics and business regulation. Before joining the economy academy, he was in private practice in washington d. C. At the law firm of arnold and porter and shea and garner. He got his degree from Michigan School of law. We thank you for testifying. Our last witness is dr. Clifton it is clifford, isnt it . Livered Winston Clifford winston, phd. Senior fellow in economic studies. His research focuses on analysis of industrial organization, regulation and transportation. Coeditor of the annual microeconomic edition of brookings paper on Economic Activity and has authored numerous books. Before coming to brookings, dr. Winston is an associate professor at 90 mit. He went to the university of california berkeley and got his masters from the London School of economics. Thank you for testifying. Mr. Kennedy, you will go first with your opening statement. Each of the witnesses written statements will be made entered into the record in their entirety. I ask each witness to summarize his testimony in five minutes or less. To help you stay within that time, there is a timing light on that table, when the light switches from green to love green to yellow, you have when the light turns to read your time has expired. I am more lenient than most people. If you need to go on another minute, that is fine with me. I recognize mr. Kennedy. Chairman, members of the subcommittee, thank you for the opportunity to testify today. My name is gary kennedy, the senior Vice President of American Airlines. Ive been intimately involved in the chapter 11 restructuring of our company and the proposed merger between american and he u. S. Airways. The Airline Industry has experienced severe economic turbulence over the past decade. The events of 9 11 created difficulty in this industry and we grappled with ways to survive in wake of the emotional and economic a people created by this terrible events. In 2003, American Airlines is on the brink of filing for a the protection. Thanks to the willingness of our organized labor representatives to take the steps necessary, at that time, to reduce costs, we avoided a chapter 11 filing. The next years, we struggle to find a way to rental stability. Despite our best efforts, our losses continue to mount, 12hing 12 lien dollars billion. We came to the painful conclusion in 2011 that time had run out areas the only viable path forward was to restructure our business under chapter 11 of the bankruptcy code. There is no easy way to describe how difficult our bankruptcy reorganization has been for the company and our employees. Beginning at the top of the organization, we reduced our Senior Management ranks by 35 . We then moved, making necessary changes, including the reduction of 15 of total management. We began renegotiating our secured obligations, our leases, and our contracts with vendors. We also negotiated new, long Term Contracts with each of our organized labor groups. These new contract include productivity improvements and changes to health and retirement benefits. At the same time, we increased pay for our employees and mitigated job losses by offering retirement incentives. One of the most important objectives we achieved was to freeze rather then terminate the play pension plans. We now expect to fulfill the supplications rather than unload the monday pbgc as other airlines have done. All that we accomplished was done in the context i our chapter 11 case, and in consultation with the Creditors Committee appointed by the United States trustee. A midsummer last year, we made sufficient progress that we decided in conjunction with the Creditors Committee, to embark on a formal process to consider a merger with u. S. Airways. It was clear from the outset of our review that a merger with u. S. Airways could create significant value for our stakeholders and bring substantial benefits to the traveling public. We conservatively estimated that by 2015, revenue and cost synergies will outweigh the negative by over 1 billion. This will make our company a much stronger competitor against the other large airlines. We are under no illusions that mergers are easy or seamless. We have agreed from the outset to do everything in our power to do learn from the success of mistakes that came before us. Most decisions have already been made. The combined company will use the great American Airlines brand. It will remain headquartered in the dallas, fort worth area. Busey hubs in both both systems will continue to be held. Our ceo, tom horton, and the u. S. Airways ceo will jointly lead of the Transition Team and the new american as it emerges from bankruptcy. Mr. Parker will be ceo of the new company, mr. Horton will be chairman of the board. I understand and recognize that many members of congress are skeptical of promises made in the situations. Often concerned about industry concentration. We do not intend to make commitments we cannot keep. Above all, i would urge you to consider the facts with which i began my testimony. Nothing has been more damaging for the Airline Industry, our employees, our customers, and our shareholders and the years of economic term or turmoil be experienced. This transaction is unique in that it is endorsed by all of our labor unions and embraced by management and the boards of both companies. We know we have a solemn obligation to implement this transaction with great care and thought. We are eager to do so. Thank you for the opportunity to testify today. Mr. Johnson. Thank you chairman and ranking members. Thank you to the entire committee for having us here today. It is an honor to testify about a merger of u. S. Airways and American Airlines. On the creation will be good for competition, and choice. Expanding the network for the benefit of our customers, our employees, our shareholders and