Downbeat on Mergers

Mergers seem a neat way out of trouble for airlines and railroads. Deficit-ridden Eastern Air Lines has asked the Civil Aeronautics Board for permission to merge with moneymaking American Airlines; troubled Trans World Airlines hopes to merge with solid Pan American. Twelve of the nation's major railroads have applied to the Interstate Commerce Commission for permission to enter into regional mergers. The ICC's approval last December of the rich Chesapeake & Ohio's application to take over the hard-up Baltimore & Ohio encouraged railroad and airline executives to believe that the official climate in Washington might be shifting in favor of mergers.

But last week all these hopefuls got some sobering news from the White House: a set of tough "merger criteria" that establishes a unified Administration policy for the first time. The guidelines were devised after a year's study by four experts, including Presidential Economic Adviser Walter Heller and Chief Trustbuster Lee Loevinger.

The four recommend that any rail or air merger should be judged in terms of whether it 1) threatens to reduce competition and thus inconvenience the traveling public, 2) makes a merged company so strong that it might injure its competitors, or 3) would be a more efficacious solution to the carrier's ills than bankruptcy or dissolution.

Though the CAB and ICC are technically independent agencies, the Administration's downbeat attitude towards merger: is bound to have an effect on them. The proposed airline mergers would create lines substantially more powerful than most of their competitors, and the chief aim of the rail mergers is to cut costs by eliminating jobs and duplicate facilities.

This file is automatically generated by a robot program, so reader's discretion is required.