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Tough Questions Surface at USAirways/AMR Merger Hearing

Tickers in this article: AAMRQ.PK DAL LCC

CHARLOTTE, N.C. ( TheStreet) -- The first congressional hearing on the proposed merger between US Airways (LCC) and American (AAMRQ.PK) seemed generally favorable, as expected, for the carriers.

But some tough questions surfaced, involving such decisions as the futures of US Airways' Pittsburgh operations center and of American's flight from Raleigh/Durham, N.C., to London. Additionally, consumer advocates suggested that fares will rise as a result of the merger.

Few congressmen opposed the merger, and U.S. Rep. Spencer Bachus, R.-Ala., chairman of the House Judiciary Subcommittee on Regulatory Reform, Commercial and Antitrust Law, said he backs it.

"This is one of the most persuasive arguments, from everything I've read, for a merger," Bachus said, in closing remarks. "As with any merger, there is the chance there will be price increases, but I guarantee there will be price increases in either respect."

Officially, Congress has no role to play in the Justice Department's antitrust review, but congressional hearings on airline mergers typically provide a good early indication of public sentiment.

Bachus suggested the recent trend of major airline mergers began with the 2008 combination of Delta (DAL) and Northwest. Once that happened, he said, "You created other airlines with a distinct advantage if you don't let these airlines merge." Additionally, he said, "I've never seen more favorable support from an airline's employees," an indication that US Airways' strategy of gaining union support for its bid to merge with American continues to pay dividends, even beyond its impact on American's bankruptcy creditors, who pushed for the deal that was announced on Feb. 14.

Rep. Keith Rothus, R.-Pa., questioned the future of the Pittsburgh operations center, which employs 600 people. US Airways signed a 20-year lease when the facility opened in 2008, but airlines typically operate just one operations center, and American has one in Dallas. US Airways said it has not yet made any operational decisions, a position that Executive Vice President Steve Johnson reiterated at the hearing.

Meanwhile, Rep.George Holding, R.-N.C., questioned the prospects for American's Raleigh/Durham to London flight. US Airways serves London from nearby Charlotte, the country's fourth-largest single airline hub with 602 daily departures. Gary Kennedy, American senior vice president, responded: "We have a lot of London service. I would hope that service continues."

Several witnesses suggested fares will rise. "Last year, there were 15 proposed fare hikes, and eight were rejected by one or two carriers," said Kevin Mitchell, chairman of the Business Travel Coalition. "The probability that they will be rejected goes way down." Holding said it costs less to fly from Raleigh-Durham to Washington Reagan National Airport than it does to fly from Charlotte to National.

"Do you anticipate that fares would go up significantly in the future on Raleigh-Durham to Washington?" Holding asked Johnson, who responded that the airlines have not yet developed new fares. Raleigh/Durham to National is one of just 12 routes, out of the combined 900 they serve, where American and US Airways offer competing service