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Leo Mullin tries to force consolidation

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Leo Mullin tries to force consolidation

Old 20th Nov 2001, 07:42
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Thumbs down Leo Mullin tries to force consolidation

By meddling in the deliberative process of the Air Transportation Stabilization Board, Leo Mullin of Delta Air Lines is trying to force a consolidation of the US industry down to three or four major carriers (presumably including his own). Does this sound as anticompetitive to you as it does to me?

Wednesday November 14, 9:44 pm Eastern Time

Delta CEO calls for loan board to encourage mergers

NEW YORK, Nov 14 (Reuters) - Delta Air Lines Inc.'s (NYSEAL - news) chief executive on Wednesday called for the board approving federal airline loans to encourage consolidation in an industry badly bruised by September's attacks.

Speaking at the Wings Club in New York, Delta CEO and Chairman Leo Mullin said the loan guarantee board has an important opportunity to influence the industry's long-term health.

Mullin said that the board could impose minimum capital reserves for loan applicants to ensure the viability of the applying airlines. In some cases, he said, the board should also push carriers to seek out mergers.

"The loan authority board should promote -- and perhaps encourage -- combinations of carriers. Consolidation is an accepted method in all industries of improving performance -- operationally and financially,'' he said.

U.S. airlines, already buffeted by the economic slowdown, could report as much as $6 billion in losses this year as they struggle to recover from the sharp drop in air traffic demand after the Sept. 11 disaster.

Soon after the attacks, the Bush administration provided a $15-billion bailout package for the airline industry, which includes $5 billion in cash compensation and $10 billion in loan guarantees.

The newly formed Air Transportation Stabilization Board to decide on airline financing includes Transportation Secretary Norman Mineta, Federal Reserve Chairman Alan Greenspan and Treasury Secretary Paul O'Neill.

While other major carriers have not dismissed the option, so far only America West Airlines, a unit of America West Holdings (NYSE:AWA - news), has said it would apply for the federal loan program. On Tuesday the Phoenix-based carrier applied for $400 million in government loans guarantees.

Delta shares gained 5.23 percent or $1.29 during Wednesday trading to close at $25.97 on the New York Stock Exchange.
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