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American Airlines and US Airways, file. REUTERS Kevin Lamarque

Congress fears AMR-US Airways deal would mean fewer U.S. hubs

2/27/2013 COMMENTS (0)

By David Ingram 

WASHINGTON, Feb 27 (Reuters) - U.S. Representative Steve Cohen recalled the golden days of air travel in Memphis, Tennessee. Northwest Airlines operated a hub there, and the airport had 240 outbound flights a day including a prized international route to Amsterdam.

That was before the 2008 merger between Northwest and Delta Air Lines Inc toppled Memphis from its perch, helping to push flights down to 96 a day as of December, Cohen said at a congressional hearing on Tuesday.

"It would not surprise me to see further cuts, and on Saturdays it looks like Dodge City," said Cohen, a Democrat.

U.S. cities take pride in the symbolic importance and economic benefits of hosting a major airline hub, so the possibility of yet two more big carriers merging had Cohen and other lawmakers worrying that the woes of the Memphis airport could befall other cities.

Representative Keith Rothfus, a Republican from Pennsylvania, said the Pittsburgh airport faced similar difficulties after US Airways cut it as a hub.

The hearing before the U.S. House's antitrust subcommittee was the first congressional look at the proposed deal between AMR Corp's American Airlines and US Airways Group. The deal is undergoing U.S. Justice Department review.

The two carriers combined have eight mainland U.S. hubs, the same as Delta. United Air Lines Inc says it has nine.

"As we consider the merits of this merger, we ought to look back though at the effects of mergers that were similar in the past," Cohen said. "The merger of Northwest and Delta has indelibly shaped my image of airline mergers."

Delta still considers Memphis one of its eight hubs, although it does not dispute the reduction in flights there since before the Northwest merger. The direct flight to Amsterdam stopped running last year.

Delta spokesman Anthony Black said on Tuesday that three factors would account for a reduction in flights: the price of fuel, consumer demand and the type of aircraft involved.

EIGHT HUBS TOO MANY?

Several cities are potential candidates for change.

US Airways hubs in Charlotte, Philadelphia and Phoenix could see an impact "because of the geography of adjacent hubs," Kevin Mitchell, chairman of the Business Travel Coalition, said in subcommittee testimony. Mitchell's group represents corporate travel interests.

Miami, one of five American Airlines hubs, wants to make sure it remains a hub, Representative Luis Garcia, a Florida Democrat, said at the hearing.

Representative Blake Farenthold, a Texas Republican, noted the large number of hubs and asked: "What assurance can you give us that you're not going to shut one of those babies down?"

American Airlines Senior Vice President Gary Kennedy replied, "We have a high level of confidence that the hubs that we have today will remain in place."

A hub often means more direct flights from home to a given destination, a perk that is attractive not only to residents but to businesses thinking of moving to or expanding in an area.

The higher volume also translates into money for airport authorities, which can use the funding to finance expansions.

Moody's Investors Service warned last week that the American-US Airways deal threatens the credit quality of some airports, including several existing hubs.

Local officials in American or US Airways hub cities have so far shown little fear they could lose their status.

"While other cities in the country may have had challenges in merger situations, they did not have the passenger traffic that we do here at one of the nation's Top 10 airports and that makes all the difference," Phoenix Mayor Greg Stanton said in a statement after the merger announcement.

"All indications are this merger will be good for Charlotte," the city's mayor, Anthony Foxx, told The Charlotte Observer. "Charlotte's going to be just fine."

(Additional reporting by Diane Bartz)

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