Delta and Northwest to merge

Delta Air Lines and Northwest Airlines are to merge to create a new airline under the Delta name.

The airlines said the new $17.7 billion company will provide “a more stable platform for future growth in the face of significant economic pressures from rising fuel costs and intense competition”.

Delta will have executive offices in Atlanta, Minneapolis/St. Paul and New York, and international executive offices in Amsterdam, Paris and Tokyo. The company’s world headquarters will be in Atlanta.

But the airlines said they were also committed to retaining “significant jobs, operations and facilities” in Minnesota.

“In an industry where the US network carriers have shed more than 150,000 jobs and lost more than $29 billion since 2001, the combination of Delta and Northwest creates a company with a more resilient business model that is better able to withstand volatile fuel prices than either can on a standalone basis,” said the merger statement.

“Merging Delta and Northwest is the most effective way to offset higher fuel prices and improve efficiencies, increase international presence and fund long-term investment in the business.”

But the news was met with opposition from the US airline workers union, The International Association of Machinists and Aerospace Workers’ (IAM).

Its general vice president Robert Roach, Jr. said: “Airline industry consolidation will come at tremendous public expense. We firmly believe this merger is not in the best interest of passengers, employees or the communities these airlines currently serve.

“We will do everything legally possible to oppose any merger that threatens our members’ jobs, labour contracts, pensions, seniority, and their right to union representation.”

Under the new merged company, Delta CEO Richard Anderson will be chief executive officer, while Delta chairman of the Board Daniel Carp will become chairman of the new Board of Directors.

Northwest chairman Roy Bostock will become vice chairman.

Ed Bastian will be president and chief financial officer. The board of directors will be made up of 13 members, seven of whom will come from Delta’s board, and five of whom will come from Northwest’s board, plus one from the Air Line Pilots Association.

Delta and Northwest, together, will have more than $35 billion in aggregate annual revenues, a mainline fleet of nearly 800 aircraft and employ around 75,000 people worldwide.

The transaction is expected to generate more than $1 billion in synergies from “more effective aircraft utilisation, a more comprehensive and diversified route system and cost synergies from reduced overhead and improved operational efficiency”.

The merger is subject to the approval of Delta and Northwest shareholders and regulatory approvals. It is expected that the regulatory review period will be completed later this year.

See today’s Travelmole Guest Comment

By :Bev Fearis

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