Jump to content
Sign in to follow this  
Christine

Delta, Northwest boards OK merger

Recommended Posts

Delta, Northwest boards OK merger

Airline, to be run by Delta CEO, will be based in Atlanta

 

The Associated Press

updated 8:50 p.m. ET, Mon., April. 14, 2008

ATLANTA - Delta Air Lines Inc. and Northwest Airlines Corp., squeezed by record high fuel prices and a slowing economy, are combining in a stock-swap deal that would create the worldâ€s biggest carrier.

 

The boards of both companies gave the deal the go-ahead Monday.

 

Delta said the combined airline, which will be called Delta, will have an enterprise value of $17.7 billion. It will be based in Atlanta, and Delta CEO Richard Anderson will head the combined company.

 

Under the terms of the transaction, Northwest shareholders will receive 1.25 Delta shares for each Northwest share they own. The exchange ratio represents a premium to Northwest shareholders of 16.8 percent based on Mondayâ€s closing stock prices.

 

Delta Chairman Daniel Carp will become chairman of the new board of directors and Northwest Chairman Roy Bostock will become vice chairman. Delta President and Chief Financial Officer Ed Bastian will retain those titles.

 

The new board will be made up of 13 members, seven of whom will come from Deltaâ€s board, including Anderson, and five of whom will come from Northwestâ€s board, including Bostock and Doug Steenland, the current Northwest CEO. One director will come from the Air Line Pilots Association, the union that represents pilots from both carriers.

 

Delta also said that it has agreed with its pilot leadership to extend its existing collective bargaining agreement through the end of 2012. The agreement, which is subject to pilot ratification, facilitates the realization of the revenue synergies of the combined companies once the transaction is completed, Delta said. It also provides the Delta pilots a 3.5 percent equity stake in the new company and other enhancements to their current contract.

 

The agreement does not cover Northwest pilots.

 

Delta said it will use its best efforts to reach a combined Delta-Northwest pilot agreement, including resolution of pilot seniority integration, prior to the closing of the merger.

 

The announcement comes a year after the two carriers emerged from Chapter 11 bankruptcy protection. Both carriers are losing money again but are in much better shape than the four much-smaller airlines that have filed for bankruptcy or gone out of business in recent weeks.

 

 

The deal will need antitrust approval, and integrating the work forces of fully unionized Northwest and Delta, where pilots are currently the only major unionized work group, will be tricky.

 

The joining of Atlanta-based Delta and Eagan, Minn.-based Northwest, if approved by regulators, will result in combined annual revenue of $31.7 billion, vaulting it ahead of Fort Worth, Texas-based AMR Corp.â€s American Airlines for the top spot in the U.S.

 

It would be the biggest carrier in the world in terms of traffic, before any further domestic capacity cuts and any divestitures that might be required by antitrust regulators.

 

 

The agreement comes after several months of merger discussions between Delta and Northwest and at one time between Delta and Chicago-based UAL Corp.â€s United Airlines. Analysts believe a Delta-Northwest combination will stand up better to regulatory scrutiny because the two carriers have less overlap, even though a Delta-United combination could create more scale and have greater synergies.

 

Years of mounting losses forced Delta and Northwest to file for bankruptcy protection in New York on Sept. 14, 2005. Both emerged from bankruptcy as leaner carriers last spring, after shedding billions in costs during their reorganizations.

 

While in bankruptcy, Delta fended off a hostile takeover bid by Tempe, Ariz.-based US Airways Group Inc.

 

Delta said its plan to remain on its own would create more value than US Airways†$9.8 billion bid, which Delta argued would not pass regulatory hurdles. The value argument never materialized, as Deltaâ€s post-emergence market capitalization started out $1 billion less than US Airways†bid and less than the $9.4 billion to $12 billion Delta projected. Its market value has fallen precipitously in the months since amid airline industry woes, including high fuel prices and a general inability to gain traction raising ticket prices.

 

Many analysts predicted an eventual Delta-Northwest merger after Anderson, a former Northwest CEO, was named last August to be the chief executive officer of Delta.

 

Anderson, who was Northwestâ€s CEO from 2001 to 2004, immediately sought to quiet those suggestions, telling Deltaâ€s pilots union chairman the morning his appointment was announced that he believed in Deltaâ€s standalone plan and that “he was not coming in as CEO to facilitate a merger with Northwest.â€

 

But eight months later, thatâ€s what Anderson is doing, and many analysts believe he didnâ€t have a choice amid plummeting airline market values and soaring fuel prices.

 

Wall Street and some airline executives have pushed for consolidation for years, arguing that too many seats are chasing too few passengers. The resulting discounting has made it hard for airlines to cover their expenses.

 

 

However, Northwest and Delta overlap relatively little in the U.S. — which could actually help them gain antitrust approval. Deltaâ€s routes are strongest in the eastern U.S. and to Latin America and Europe. Northwest would complement that with its near-lock in the Midwest along with flights to its Tokyo hub and other points in Asia.

 

Northwestâ€s Asian routes have been one of its main appeals to other carriers. It and United are the only two U.S. carriers with the rights to pick up new passengers in Japan and fly them farther into Asia. Delta and Northwest also complement each other internationally because they are both part of a marketing alliance that includes Air France-KLM.

 

U.S. airlines get the majority of their revenue from domestic service, though that trend has shifted in recent years as more carriers, particularly Delta and Northwest, have sought to increase international service.

 

 

© 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

URL: Delta, Northwest boards OK merger - Aviation - MSNBC.com

 

 

--------------------------------------------------------------------------------

 

MSN Privacy . Legal

© 2008 MSNBC.com

Share this post


Link to post
Share on other sites

well, they're saying they are maintaining the hub (NWA is based out of here), and they say they're maintaining (and possibly increasing) the travel options - but I'll believe that when I see it. and i know a lot of people will lose their jobs here. i won't be traveling as much now, but I still don't like to see NEW leave MN.

Share this post


Link to post
Share on other sites

that makes sense, I guess we will have to see what they do, I hope too many people don't lose jobs.

Share this post


Link to post
Share on other sites

wow that's freaking amazing! i would never have thought.

Share this post


Link to post
Share on other sites

My friend (one of the few of my friends that is still with the airlines) said the Delta flight attendants are pretty unhappy with this. I'm sure this is true of the NW flight attendants too. The whole integration thing is tricky when everything is based on seniority. The old Pan Am FAs were still bitter with the original Delta FAs for decades after that merger.

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
Sign in to follow this  


  • Best Destination Wedding Sponsors



    Facebook Pinterest Google+ Twitter
  • Posts

    • I and my partner are going to get married on August 12th. We met each other through a lesbian dating website. Both of us want that day to be a memorable day. We are in confused on which dress to wear for the wedding ceremony. Any suggestion on lesbian wedding dress? I prefer white, whereas my partner prefers of-white. Which one do you think will look good? Should we go for same dress or different one? Share your thoughts.
    • Choose the flower that is matching with the bride and gown dress.
    • Hotmail gmail login: How to change your gmail password and how to delete your Gmail account? GMAIL is the most popular emailing service, with almost had a billion people worldwide logging on every day to check their emails. Google has recently added a number of new updates to make it easier to secure your Gmail, as well as safely deleting your email account. How do you change your password or delete your hotmail account?
    • Việc tìm kiếm một phòng khám bệnh trĩ uy tín sẽ giúp người bệnh giảm bớt được cơn ác mộng đối với căn bệnh này. Bài viết dưới đây sẽ cung cấp giúp các bạn một số những thông tin về phòng khám bệnh trĩ Thái Hà http://benhtrithaiha.com
    • Hi! This was Daytona beach.  
  • Topics

×