January 16, 2008 / 11:40 PM / 13 years ago

UPDATE 1-Delta in merger talks with Northwest-congressman

(Adds Isakson, Costello comment, carrier reaction)

WASHINGTON, Jan 16 (Reuters) - Delta Air Lines Inc (DAL.N) has begun merger talks with Northwest Airlines Corp NWA.N, the office of U.S. House of Representatives Transportation Committee Chairman James Oberstar said on Wednesday.

The Minnesota Democrat met Tuesday with senior Northwest executives, who told him that discussions were underway and that Northwest does “see a benefit” in a merger with Delta, Oberstar spokesman Jim Berard said.

Northwest also told Oberstar that Delta is looking at UAL Corp’s UAUA.O United Airlines.

Delta spokeswoman Betsy Talton would not confirm that Delta was talking with Northwest or United. Officials at United and Northwest would not comment on the Oberstar comments.

Separately, Sen. Johnny Isakson, a Georgia Republican, told Reuters he spoke with Delta Chief Executive Richard Anderson last week.

Isakson said the two did not discuss specifics of consolidation, but the lawmaker wanted to know if Anderson stood by an earlier promise that Delta’s name and Atlanta headquarters would survive if he merged with another carrier.

“I wanted him to reaffirm his commitment, and he did so,” Isakson said.

Oberstar generally does not favor consolidation involving major carriers because of the potential impact on competition, prices and service, especially to small communities. The current situation concerns him even more because he believes a Delta merger will spur other deals.

“They would have to do a good job of convincing him that this is a good thing on a wide scale, not just to the shareholders,” Berard said.

Berard said Oberstar would likely hold hearings on any proposed merger.

Northwest is the largest employer in Minnesota.

Congress cannot stop a merger outright, but it can pressure antitrust regulators and companies. Delta successfully leveraged its muscle on Capitol Hill to beat back a hostile bid by US Airways Group Inc LCC.N last year.

Isakson said aviation is a “tough business,” and mergers are possible.

“They are operating with oil at a terribly high level. All their costs are variable. I understand they have to look to see what’s best for the company,” Isakson said.

Nevertheless, Isakson said he would watch the process carefully as will U.S. Rep. Jerry Costello, a Democrat and chairman of the Transportation panel’s aviation subcommittee.

“I will review any proposals on a case-by-case basis, but the history of these deals is not a positive one for consumers and airline employees,” Costello said in a statement.

United is based in Costello’s home state of Illinois. (Reporting by John Crawley; Editing by Tim Dobbyn/Jeffrey Benkoe)

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