U.S. Justice Department Closes Delta/Northwest Investigation without Challenge

Today the Department of Justice Antitrust Division announced that it is closing its investigation of the proposed merger of Delta Air Lines and Northwest Airlines. Among the several airlines whose possible mergers have been discussed in the last year, these two carriers had particularly little city-pair overlap. Nevertheless, the DOJ statement suggests that it took into account the types of procompetitive benefits that these and other airlines have sought in merger considerations.

The DOJ acknowledged that, on the vast majority of their overlap routes, Delta and Northwest have competition from other legacy airlines and low cost carriers. More importantly for merging parties in any industry, the DOJ indicated its analysis relied on the efficiencies the merger is expected to produce, stating that "the merger likely will result in efficiencies such as cost savings in airport operations, information technology, supply chain economics, and fleet optimization that will benefit consumers. Consumers are also likely to benefit from improved service made possible by combining the complementary aspects of the airlines' networks." In recent years, the DOJ has relied more on the likely procompetitive upsides of proposed mergers to justify possible anticompetitive effects.

This is the largest airline merger the DOJ has allowed in years. In 2001, the DOJ announced it would oppose the combination of United and US Air, which abandoned their proposal. In 1998, the DOJ filed a challenge to Northwest’s proposed acquisition of Continental. Meanwhile, the America West/US Air (2005) and AirTran/Midwest (2006, but not completed) proposals went unchallenged. Although it is not known in what direction the airline industry-or antitrust enforcement-will go in 2009, U.S. legacy airlines in recent years have looked to mergers, along with expanded global alliances, to combat high fuel costs, domestic competition from low cost carriers, and international competition from stronger foreign carriers.