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DOT Branch Reaffirms Support For Proposed Airline Merger

June 4, 1986

MINNEAPOLIS (AP) _ A semi-independent division of the U.S. Transportation Department says the Justice Department’s opposition to the proposed merger of Northwest and Republic airlines ″totally ignored the real world economic evidence″ of competition within the airline industry.

The Office of Aviation Enforcement and Proceedings also said the Justice Department’s opposition represents ″a theoretical world based on simplistic assumptions to reach a totally unrealistic conclusion.″

The Justice Department failed to prove its contention that merger of the airlines would substantially lessen competition in markets they serve, the office said.

The comments were contained in a brief prepared for Administrative Law Judge Ronnie Yoder, who will recommend whether the merger should go through.

The Transportation Department must approve the deal before Northwest can proceed with its agreement to purchase control of Republic for $884 million.

The Office of Aviation Enforcement and Proceedings is known as the ″public counsel″ in merger cases. It acts as a neutral third party during formal hearings and questions the data and positions of all parties.

The office, in preliminary briefs filed last week, strongly endorsed the Northwest-Republic merger and said the Justice Department had failed to demonstrate that a monopoly situation would be created in which rates would rise and service would decline in cities now served by the two.

According to a Justice Department brief, other major airlines would not enter the Minneapolis-St. Paul market because of the dominance of an enlarged Northwest Airlines and the relative geographic isolation of the Twin Cities. Commuter airlines would not be able to offer competition in smaller markets, it said.

The evidence offered by the Justice Department failed to back up its claims and was based solely on untried economic theories, the Transportation Department said.

Justice Department documents filed Tuesday disputed the position of the Transportation Department attorneys and the airlines but failed to provide any explanation other than to say that many of the statements made by the attorneys and the airlines were ″not supported by the weight of the evidence.″

Yoder, who conducted a two-week hearing on the matter in April, is scheduled to make a recommendation by the end of the month. A final decision then will be made by Transportation Secretary Elizabeth Dole.

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