February 20, 2008 in Business

Delta, Northwest appear close to merger

Harry R. Weber Associated Press
 

Creating a giant

A combination of Delta and Eagan, Minn.-based Northwest would create the world’s largest airline in terms of traffic. There also has been speculation about a combination of United Airlines and Continental Airlines Inc., which would be a bigger airline than Delta-Northwest in terms of traffic.

ATLANTA – The boards of directors of Delta Air Lines Inc. and Northwest Airlines Corp. were expected to vote today on a combination, provided their pilots unions can reach their own integration deal by then, people briefed on the discussions said Tuesday.

If the pilot agreement can’t be reached by the time of the meeting, the boards were expected to just get an update on the status of merger talks between the two airlines, according to three people familiar with the situation who asked not to be named because the talks were in a sensitive stage.

A fourth person familiar with the talks also confirmed that Delta’s board was expected to meet today, and the company is mulling a Thursday announcement if everything falls into place.

As of midday Tuesday, there was no deal between the pilots unions, according to one of the people briefed on the talks.

Another person briefed on the talks said that as far as the aftermath of a combination of Delta and Northwest is concerned, there would be staff reductions at the senior level only. At the bottom levels there will be very little, the person said.

Delta has said that if it combines with another carrier, it wants to keep the airline based in Atlanta and called Delta. Officially, all it has said in recent weeks is that its board is considering strategic options, including a possible consolidation transaction.

A Delta spokeswoman declined to elaborate Tuesday on the company’s previous statements.

Talk of airline consolidation has heightened in recent months amid persistently high fuel prices, which are eating away at the industry’s bottom line.

A combination of Delta and Eagan, Minn.-based Northwest would create the world’s largest airline in terms of traffic. That’s before any divestitures regulators might require them to make if they combine. There also has been speculation about a possible combination of Chicago-based UAL Corp.’s United Airlines and Houston-based Continental Airlines Inc., which would be a bigger airline than Delta-Northwest in terms of traffic.

The clock is ticking to get any deals accomplished quickly, some observers say. That’s because industry observers believe a combination has a better chance of surmounting the considerable political and regulatory hurdles under the current administration than under President Bush’s successor.

Delta and Northwest don’t need a labor agreement between their pilots unions before announcing a combination, but having one in place now could help them speed up the integration of the two carriers down the line.

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