More Government Meddling (and some BOD incompetence)

US Airways and Delta executives were called to testify in front of the Senate the other day. The hearing was another example of the incompetence of lawmakers and the misuse of power. Senator Dorgan stated the following:

"I am not a fan of mergers. I don't think that (mergers) give consumers more choices, it gives them fewer choices," he said.

It is amazing that Sen. Dorgan is so omniscient when it comes to economics and finance. For him to predict the results of a US Air-Delta merger is pretty impressive. There are numerous issues that he obviously knows the answers to:

-Will they gain pricing power through the merger which could raise prices?
-Is the airline industry competitive enough that the merger won't effect prices?
-Will scale economies result from the merger resulting in either lower (not higher) prices or better service?
-Will this create more or less routes for travelers?
-Will the merged company be able to pay off its debt load?

Even Republican Senators got in on the action:

"We're going to lose service, and also I think lose out on higher prices," Sen. Olympia Snowe, R-Maine, told Parker. "It's hard to believe that you will continue the same service."

It is amazing that they know the answers to these questions. They should retire and start making money on Wall Street since they understand M&A so well.

One last note: I think it is criminal for the Board of Delta to reject the hostile takeover. Delta is going down the drain. Poor service, Chapter 11 status, etc. The takeover is an opportunity for shareholders to recover what is left of their stock's value. We shall see what the creditor's decide on in the coming week. If you are a betting man, buy DALRQ now. As for me, I will pass.

To read more about Delta's decision regarding the US Airways hostile takeover attempt, go to Delta's Press Release. I will admit that they have some strong arguments.