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Apr-22-2008

Delta Chief's Fancy Footwork

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CONTENTS:

Delta's Pilots: Of all the groups affected by the proposed combination of Delta Air Lines and Northwest Airlines, the pilots of the Atlanta airline seem to have come out the best. (More...)
Right now, Delta pilots will get a 3.5 percent equity stake in the new airline. (More...)
Delta shares have slumped roughly 17% since the announcement late Monday. (More...)
In Oberstar's view, the coming wave of mergers "will put all of labor at risk." (More...)
Delta is based in Atlanta. (More...)
"While we all recognize that there are two sides to every story, an extended tit for tat exchange is counterproductive and only serves to pit pilots against one another, a tactic that has traditionally been reserved for airline management," Moak wrote. (More...)
The Northwest-KLM joint venture (a longstanding marketing, sales, and route agreement between the two airlines on service between the U.S. and Europe) is very successful. (More...)
The two principal manufacturers used by Delta and Northwest - Boeing and Airbus - are booked with orders for several years. (More...)
"Whenever you put two airlines together, union members always pay a price," said Evergreen-based aviation consultant Mike Boyd. (More...)
While '''open skies''' liberalisation offers up an opportunity on international routes, the financial clout and modern planes of the big European network carriers, like Air France-KLM and Lufthansa, remain a threat. (More...)
"But what is an issue is the cost. (More...)
Had that takeover attempt succeeded, it would have cost thousands of jobs, created monopolization in key business markets, and eliminated customer choice, all in the name of a short-term financial gain for a few. (More...)
Oil prices hit another record high Friday, reaching over the $116-a-barrel mark for the first time, more than double the $55-a-barrel price of a year ago. (More...)
The two companies cited record high fuel prices and a slowing economy as reasons to combine in a stock-swap deal. (More...)
Q: You are trying to blend a lot of union employees with a lot of non-union employees. (More...)

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Delta's Pilots: Of all the groups affected by the proposed combination of Delta Air Lines and Northwest Airlines, the pilots of the Atlanta airline seem to have come out the best. They hammered out a new agreement with Delta's management last weekend prior to the merger being announced. According to the agreement, the pilots stand to get a 17% increase in pay over the next four years, a 3.5% equity stake in the merged carrier, a higher contribution to their pension plan and a guarantee that none in their ranks will be furloughed for two years after the deal closes, according to the Chicago Tribune. That means Delta's pilots and Northwest's pilots face very different financial prospects. [1] After more than four months of negotiations with Northwest Airlines Corp. for a merger agreement that aims to create the world's largest passenger carrier, Richard Anderson, chief executive of Delta Air Lines Inc., must convince regulators, shareholders, employees, and investors that the deal makes sense. In an interview at Delta's red-brick headquarters near Hartsfield-Jackson Atlanta International Airport, Mr. Anderson discussed his motivation for pursuing the deal, the Delta board's desire to consider consolidation, lackluster investor response to the merger, and the opportunities for integration with Northwest if the transaction gets approved.[2] No employees at the Salt Lake City International Airport will be laid off as result of Delta Air Lines' pending merger with Northwest Airlines, Delta CEO Richard Anderson said Friday.[3] SALT LAKE CITY The proposed merger of Delta Air Lines and Northwest Airlines would give the combined carrier access to prized international hubs, possibly opening more direct flights from Utah, aides to Gov. Jon Huntsman and a Delta official said Friday.[4] Delta Air Lines executives barnstormed Salt Lake City on Friday to make their case that a merger with Northwest Airlines is a good idea, and they raised the possibility that the combined carrier might fly nonstop from Utah to Amsterdam and Tokyo.[5]

One benefit of the proposed merger of Delta Air Lines and Northwest Airlines may be the opportunity to cut costs by combining their 1,000 or so planes into one fleet and retiring the oldest aircraft. The airlines' executives contend that this mammoth fleet will be able to deliver on the promise of a single U.S. carrier capable of connecting the world. All those 1,097 aircraft could be a mammoth headache to manage, as well.[6] Older planes guzzle fuel and are expensive to inspect, mantain and update. One benefit of the proposed merger of Delta Air Lines Inc. and Northwest Airlines Corp. may be the opportunity to cut costs by combining their 975 planes into one fleet and retiring the oldest aircraft.[7]

That's the combined estimated fuel cost for Delta Air Lines and Northwest Airlines Corp. this year. Last week, the airlines announced a merger that they said would help them better handle their biggest expense.[8]

With that in mind, Delta Air Lines, the No. 3 U.S. carrier, and Northwest, the fifth largest, finally hammered out a merger agreement last week that would create the world's largest airline, with a mainline fleet of nearly 800 planes generating about $35 billion in revenue annually. Analysts say more big mergers are certain to follow, further changing the travel game for both the industry and its customers.[9] Many workers were still jittery after the bankruptcy and an ultimately unsuccessful hostile takeover bid for Delta by U.S. Airways Group Inc. Workers voiced fears that Mr. Anderson had been hired to orchestrate a merger with Northwest. "Between Northwest and Delta there is no plan and no intention of any merger or acquisition," Mr. Anderson said after his appointment was announced. Behind closed doors, a merger with Northwest or another airline was exactly what the board was telling Mr. Anderson to pursue, if it made sense, people familiar with his appointment said. "It was at the top of the list of priorities" for the new chief executive, said Jim Feltman, an industry consultant who advised the committee of Delta creditors, which picked the airline's board. Some creditors were still disappointed that Delta rejected U.S. Airways' $9.5 billion offer -- which would now have a value of about $5.8 billion -- and were concerned that Delta wasn't living up to its rosy projections in its recovery plans. Mr. Anderson said he never misled employees or anyone else. He said his view on consolidation changed as the industry's outlook worsened. In November, hedge fund Pardus Capital Management LP, a minority investor in both Delta and UAL Corp.' s United Airlines, made public a letter it had sent to managers of both airlines, urging the two to consider a merger.[10]

Most observers believe the deal will trigger more mergers - although they're split on who that helps and hurts. "There are those who think consolidation benefits nobody," said Henry Hardeveldt, a transportation analyst for Forrester Research in San Francisco. Consolidation could result in fewer and fuller flights, meaning less comfortable, more expensive trips, he said. He said, "If you end up with financially stronger airlines, the public benefits because they have the money to invest in fleets, good maintenance and other things." When Delta executives started to consider whether to merge with another carrier, they looked for a combination that was "right for all the constituencies," in the words of Delta president and CFO Ed Bastian. Keep domestic service strong, protecting all of its hubs, while building more profitable international traffic - especially foreign nationals coming to America, given the weak U.S. dollar. Protect the jobs of "frontline" workers such as ticket agents and mechanics, while cutting administrative jobs and costs. Create a new airline that was financially strong, so it could withstand their industry's uncertainties in times of high oil prices and U.S. economic weakness.[11] In addition to generating more revenue, the merged airline by 2012 plans to eliminate at least $1 billion in costs because of greater efficiency, better use of aircraft, and streamlining of operations. The combination, he said, is about creating "the strongest, most durable of all the airlines. that will provide a lot of durability and security that we wouldn't have were we by ourselves." The two companies said they won't eliminate front-line worker jobs or close hubs, but they do plan to pare headquarters positions. Mr. Anderson likely "will keep quite a few of the Northwest operating people" as well as key players he knows in sales and marketing, predicted one acquaintance who has stayed in contact with Mr. Anderson. For now, Mr. Anderson, his deputies and executives from Northwest are stumping state capitals, hub cities, and Washington, D.C., hoping to win over antitrust officials at the Justice Department, shareholders of both airlines, and a combined work force of nearly 80,000 people. Northwest's pilots already have vowed to kill the deal because Mr. Anderson at the last moment found a way to give Delta pilots a new contract, but not those at Northwest.[10]

Delta has 117 McDonnell Douglas MD-88s with an average age of 18 years; Northwest soldiers on with more than 90 DC-9s with an average age nudging 40 years. These planes are up to 40 percent thirstier than their more modern counterparts, a crippling burden given the price of fuel. They are also more difficult to maintain -- as the recent grounding of American Airlines' similarly elderly MD-80s highlighted. Delta and Northwest have little scope to cut front-line staff or replace their aging fleets any time soon -- production lines at Boeing and Airbus are fully booked until 2012. They think they can secure cost reductions of about $1 billion a year by centralizing their back-office operations and cutting management jobs. They also hope to increase revenue by combining route networks and strengthening their appeal to lucrative corporate customers. Northwest's attempt to merge with Continental was blocked in 1998, but regulatory approval is more likely this time, given the absence of route overlap between Delta and Northwest.[12] Delta's 117 McDonnell Douglas MD-88s have an average age of 18 years, while Northwest's more than 90 DC-9s are nudging 40. Planes of this vintage are up to 40 per cent thirstier than their more modern counterparts at a time when fuel efficiency has never been so important. They are also harder to maintain. With few other options open to them, Delta and Northwest are hoping to cut costs by about $1 billion a year by centralising their back-office operations and cutting management staff. They are also looking to boost revenue by combining route networks and strengthening their appeal to lucrative corporate customers.[13]

The merger can lower fuel costs through retirement of some of the airlines' oldest planes. While old planes aren't unsafe, they often are gas hogs. "Both have aging fleets that are not particularly fuel-efficient," said Ernest Arvai, president of the Arvai Group, an airline consulting firm based in Windham, N.H. "The high cost of fuel has created difficulties in operating older aircraft profitably, and neither has the cash to pay for the new aircraft they need as quickly as possible." By retiring the oldest workhorses, such as McDonnell Douglas DC-9s, the merged airlines can eliminate their worst fuel guzzlers of their 957-plane fleet. Earlier this year, Northwest said it would ground about a third of its 103 DC-9s, which average more than 30 years of service. By parking some of those planes, Northwest already has lowered its fleet age to fewer than 19 years, but it still has the oldest fleet among the six largest U.S. carriers, according to Airsafe.com, a Web site that collects aviation data. Delta spokesman Kent Landers said it's too early in the merger process to say just how many planes would be retired, but at least some DC-9s would continue flying because they have roughly 100 seats, a good size for some routes. The immediate goal is not simply to retire planes, but to have "an aircraft to fit every market so that we can most efficiently match customer demand," he said. For the months to come, until the merger is realized, the companies will continue to operate as separate entities -- and they'll be trimming their fuel costs when and where they can. For every gallon of jet fuel they don't use, they save at least $3 a gallon, at today's prices.[8] Besides, some cheer leaders for the merger suggest that higher domestic fares would be in travellers' interests. Both airlines have geriatric fleets. Experts are estimating that it will cost the new Delta about $20 billion to upgrade its fleet. That's good news for aircraft leasing companies and for Airbus, if Northwest has its way, or Boeing, if Delta's recent preferences are any guide to future orders. It is not unreasonable to assume that a financially healthier carrier will "accelerate the upgrading of existing international aircraft with lie-flat seats and personal on-demand entertainment", as the new Delta claims it will. Nor will Delta, which now serves Manchester and London from its American hubs, have a free hand on international routes. Ed Bastian, Delta's president, expects international routes to provide "the majority of the growth. in this combined entity".[14] With the merger, the new Delta can move Northwest's 747s to higher-density routes -- Atlanta to Tokyo, for example -- and instead use Delta's new Boeing 777 jets, which seat around 280 passengers, on the lower-density international operations, said Terry Trippler, an industry analyst and founder of TripplerTravel.com in Minneapolis. "It makes sense because fewer empty seats means a better profit," Trippler said. "There's no sense flying a half-empty plane when it's burning so much expensive fuel." Analysts said there are hundreds of routes Northwest and Delta fly that could probably have a better aircraft serving them. While it's difficult for airlines to bring down their fuel costs, they aren't completely powerless.[8]

Delta and Northwest executives will appear Thursday before U.S. House and Senate committees looking at the impact of consolidation in the financially battered airline industry, hit by soaring oil prices and a softening economy. Congress has no authority to stop the merger, but committee appearances often become public forums for lawmakers who oppose or support such plans. It could take eight months to finalize the merger, during which officials from Delta and Eagan, Minn. -based Northwest will attend a series of congressional hearings and community outreach meetings to build support for the idea. The merger has to be approved by both carriers' shareholders and by regulators with the U. S. Department of Justice. "Given the complexity and scope of the transaction, it's important that we spend the time to inform our constituencies why building a global airline in the face of these fuel prices and economic conditions is good for our customers and our communities," said Delta spokesman Kent Landers.[15] With two of the biggest carriers based in the United States announcing an official merger proposition which would create the biggest airline not only in the U.S. but the world, the last year'''s speculative chatter has made even the skeptics sit up ad pay attention. The merger still has a few hurdles to jump before its implementation can become a reality, but with an official announcement from Delta and Northwest saying the proposition was on the table means that if the boxes are checked and the deal is given the go-ahead, the Air France-KLM merger will son be dwarfed in global aviation significance. How- or more directly- how will passengers benefit from such a move? Many experts say: not much. The merger will certainly allow the two airlines to clean up a few loose ends they had lying around and claim it in the name of the merger, and with another massive airline being formed and low-costers going bust at the mercy of high fuel prices, the dystopian aviation monopoly seems one major step closer to reality. The next few weeks will be tell-tale, as this summer shapes up to be another stinker as far as air travel is concerned.[16]

While the complementary network structures are not likely to spur major Justice Department concerns, follow-on U.S. airline merger scenarios seeking a nod could cast doubt over an easy approval from the government of a Delta-Northwest tie-up. While Delta heads into the merger with the blessings of its pilot union leaders - it only took the pilots getting a pay rise and a stake in the merged company - Northwest's pilots say they were essentially shut out of the deal and risk being on lower pay scales for years. That is not exactly an ideal way to open negotiations to reach a single contract. Disgruntled employees rarely make achieving desired revenue targets easy for carrier managements, who ultimately are responsible to their respective shareholders.[17] In a letter to fellow pilots Monday, Lee Moak, the chairman of the executive committee at Delta's pilots union, said union leaders are committed to the idea that seniority integration should be accomplished after negotiation of a single joint contract and, if necessary, "expedited arbitration to be completed before closing of a corporate transaction." The two carriers tried and failed to get a pilot seniority integration deal in advance of their combination announcement. Before Delta's April 14 announcement that it was acquiring Northwest, Moak had said he opposed binding arbitration. The Northwest pilots union has said repeatedly that it supports arbitration, though that was before Delta's pilots cut a deal with management days before the merger announcement to give them a voting board seat, future pay raises and an equity stake in the combined airline.[18] ATLANTA -- The head of Delta's pilots union suggested Monday that he's open to submitting to arbitration with Northwest pilots to reach a seniority integration agreement. The two sides were unable to reach a deal before their companies announced the merger this month. Lee Moak, the chairman of the executive committee at Delta's pilots union, previously said that he opposed binding arbitration. The Northwest pilots union has said repeatedly that it supports arbitration, though that was before Delta's pilots cut a deal with management to give them a voting board seat, future pay raises and an equity stake in the combined airline.[19]

Delta executives credit Moak and his lieutenants in the Delta pilots union with salvaging a foundering merger deal and driving forward creation of the world's biggest airline. They expect to rely on him to help sell politicians and regulators on the $17.7 billion deal.[20] At an employees event that was more celebration than meeting last week, Delta's top officers heaped praise on an unlikely ally of management. Lee Moak had a key role in the Delta-Northwest merger when, as head of the Delta pilots union, he struck a labor deal directly with airline management.[20] Shortly after the merger announcement last week, the head of the Northwest pilots union called Moak's actions "very unfortunate." Both groups are part of the Air Line Pilots Association. David Stevens, the chairman of Northwest's pilot group, declined to comment for this story. In a recent letter to members, he wrote, "The Delta pilot leadership and Delta management have made an arrangement to try to disadvantage the Northwest pilots economically and with respect to our seniority." He added that "no amount of money can sustain a carrier which creates this level of discord. This is a recipe for failure." With such bad blood, Moak faces another challenge. "If he can do that, he's Superman," said Ted Reed, a veteran aviation reporter in Charlotte who covers the industry for TheStreet.com.[20]

From Business Spectator, April 18: It's a measure of the panic currently sweeping the airline industry that Delta and Northwest said this week they would push ahead with their $US3.6 billion merger to create the world's biggest airline by traffic, says The Economist. Having failed to get the blessing of their 11,000 unionised pilots over pay and conditions ''' something both companies previously described as an essential pre-condition to the deal ''' the two U.S. carriers are risking a potentially long-drawn-out and fractious integration of their operations in the belief that a merger is their best chance of survival.[13] It is a measure of the panic sweeping the industry that Delta and Northwest said this week that they would push ahead with their $3.6 billion merger to create the world's biggest airline by traffic. Previously, both firms had said that gaining agreement with their 11,000 unionized pilots over pay and conditions was an essential pre-condition to the deal. Even though Northwest's pilots remain bitterly opposed, mainly because of unresolved seniority issues, the two airlines have decided to take the risk of a potentially long-drawn-out and fractious integration of their operations because they calculate that a merger is their best chance of survival as the industry's woes deepen.[12]

The $7.12-billion merger proposal between Delta Air Lines and Northwest Airlines soared above an otherwise meager crowd of transactions last week, as dealmakers could come up with only three deals worth more than $1 billion.[21] Airline Action: The chief executives of Delta Air Lines and Northwest Airlines testify in Congress Thursday about the carriers' planned merger. Delta, Northwest, United Air Lines and U.S. Airways are all expected to post quarterly losses this week.[22] Turns out the embattled Mr. Siegel may have been right after all. Another round of consolidation in the U.S. airline industry began last week as Delta Air Lines and Northwest Airlines unveiled a proposed tie-up that would supplant American Airlines as the world's largest air carrier.[23]

Months of speculation about Delta Air Lines merging with another carrier ended last week as Delta executives held news conferences, put up a Web site touting a new global airline and visited Cincinnati and other cities to sell the deal with Northwest Airlines.[11] Even before Richard Anderson became chief executive of Delta Air Lines Inc. seven months ago, the board made it clear he should come to the dance ready to find a partner. How he got to the day last week when he announced a deal to merge with Northwest Airlines Corp. that would make him the head of the world's biggest airline is a tale filled with fancy footwork.[10] Delta Air Lines Inc. and Northwest Airlines Corp., after three months of twists and turns, agreed to merge in a deal that would create the world's largest airline by traffic -- if the agreement can pass regulatory muster and overcome potentially serious employee resistance.[24]

Mr. Anderson, a 52-year-old former Harris County, Texas, prosecutor and veteran of Continental Airlines Inc. and Northwest, proved to be a wily and remorseless negotiator who overcame opposition from nearly every corner. In the months that led up to an agreement, Mr. Anderson showed himself willing to surprise his own employees, challenge old friends at Northwest, rile that airline's powerful pilots, and quickly reverse his own statements about Delta's lack of interest in merging. In an interview Monday, Mr. Anderson sidestepped questions about his role in doing the deal, saying the merger is "not about me." He argued that by matching Delta's strengths on the East Coast, across the Atlantic and to Latin America, with Northwest's presence in the Midwest and across the Pacific, the two airlines together make up what each lacks individually.[10] At the end of March, as rising fuel prices continued to stalk all airlines, Mr. Steenland suggested reviving the plan without the pilots. Mr. Anderson got his way -- essentially by pitting the pilots against each other. He negotiated a last-minute contract that takes care of Delta's 6,000 aviators, leaving Northwest's 5,000 pilots to try to catch up in later negotiations. Mr. Anderson promises to resume negotiations with Northwest pilots promptly, even as their union vows to do everything it can to defeat the merger. "The bottom line is what we're doing here is in the best interests of employees of both airlines," Mr. Anderson said. "This business grows two ways, through organic growth and acquisitions. This is an opportunity that doesn't come along very often."[10] I've been here 23 years. We've never had a CEO that impresses me this much." Speaking to reporters in the mayor's office, Anderson said Delta's hub would continue to be an important part of the combined airline after the merger is complete, possibly by the end of this year. With crude oil prices pushing toward 117 a barrel Friday, he didn't rule out the possibility that Delta would be forced to make further capacity cuts in Salt Lake City and elsewhere. "We will, independent of this transaction, just as we have over the past six months, make adjustments in capacity, based upon these fuel prices and demand," Anderson said. "But with that said, this transaction is, overall, very positive for Delta, very positive for its employees and very positive for the communities that we serve."[5]

Some analysts noted there was little in what Bastian said that would rule out a change of heart, especially if record-breaking crude oil prices continue to climb, and the economy grows weaker. "The mantra of consolidation has been reduction in excess capacity, and in announcing this merger not one single hub has been identified as surplus capacity," said Scott Hamilton, a Seattle-based aviation consultant with the Leeham Co. "It makes no sense, more or less in a straight line, to have hubs in Detroit, Cincinnati, Memphis and Atlanta. Those are all much too close to each other." Mike Boyd, an airline consultant in Evergreen, Colo., who was a vocal critic of U.S. Airways' failed bid for Delta last year, argues that Delta and Northwest executives would not have promised to retain the hubs if they weren't serious.[25] The proposed merger would create the world's largest airline, with headquarters in Atlanta, a fleet of about 1,000 aircraft and the potential for 35 billion in annual revenues. Delta CEO Richard Anderson would retain that title as head of the merged airline, Northwest CEO Douglas Steenland would take a seat on the new board of directors and Bastian would retain his titles. Although industry analysts are skeptical of pledges by all three executives that the new airline will continue to operate both airlines' existing hubs, the execs insist that they are sincere.[25]

The cutting of unprofitable flights and hubs is always a delicate political issue -- one reason why it has taken airlines so long to do it. Last week, Delta and Northwest tried to address such concerns by predicting their merger would save $1 billion a year without closing hubs or firing front-line employees.[23] Northwest executives last week downplayed any merger-related economic woe that might befall Minnesota or the airline's 11,500 statewide employees. They said Delta will maintain a hub in the Twin Cities where Northwest and its regional carriers control 80 percent of air traffic. The swallowing of the nation's fifth-largest airline shouldn't unduly harm Northwest's $12.8 billion annual economic impact on the region, they added. CEO Doug Steenland said "meaningful" and "significant" numbers of Northwest's corporate employees will keep their jobs.[26]

Now, Delta wants to acquire Northwest in a stock-swap deal that carries neither a cash payout nor the U.S. flight cuts Wall Street expected. The airlines are trying to sell the deal to the public, employees, the communities they serve, regulators in Washington and investors on Wall Street. Ads promoting the deal ran in newspapers Friday, a new Web site touts the global presence of the combined airline, and top executives at both carriers have been talking up the deal in recent days.[27] A bidding war for either of the airlines started by another carrier or a private equity firm could help. Observers say that's not likely, given the risky business of investing in airlines these days. Soaring fuel prices have hit all airline stocks hard, but especially Delta's and Northwest's after they said this week they do not plan to cut capacity further or close any of their hubs as part of the deal. That approach may make it hard to realize their goal of "earning a return for shareholders who have committed their capital."[27] 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 world's biggest carrier.[28] HEBRON - Ed Bastian, the president and chief financial officer of Delta Air Lines, reiterated the company's position that its hub at the Cincinnati/Northern Kentucky International Airport will be saved under the carrier's merger with Northwest Airlines.[29] Analysts agree that the proposed merger between Delta Air Lines and Northwest Airlines could lead to a consolidation of hubs and elimination of overlapping routes, but it is uncertain how this would affect regional airline partners that operate under contract with the carriers.[30] Northwest Airlines said it would boost the payout for Chief Executive Doug Steenland if he stays until the carrier finishes its merger with Delta Air Lines.[31] Northwest Airlines is boosting the payout for Chief Executive Doug Steenland if he stays until the carrier combines with Delta Air Lines. At current share prices, Steenland would get $11.4 million dollars if he sticks around. That's up from almost $8 million dollars he would have gotten under his old contract.[32] St. Paul, Minn. Gov. Tim Pawlenty met with the chief executives of Northwest Airlines and Delta Air Lines to talk about how their combination will affect Minnesota. Pawlenty spokesman Brian McClung said the governor told Northwest's Doug Steenland and Delta's Richard Anderson on Thursday that he expects them to honor the commitments Northwest made to Minnesota. Those commitments secured the airline $545 million worth of loans and lease breaks.[33]

Minneapolis -- Here's a blurb from the city's latest PR campaign: "Denver has more days below zero than Minneapolis." Catchy, eh? Stung by a 2007 national survey that portrayed the Twin Cities as "small, dull, white-bread, stoic and cold," this perennially upbeat and progressive region put up $2.5 million to combat the somewhat inaccurate portrayal. Minnesotans' collective psyche, though, took another blow when hometown favorite Northwest Airlines -- a local fixture since 1926 -- announced a merger with Atlanta-based Delta Air Lines.[26] The nation'''s major airports will likely see repeats of 2007'''s record flight delays, detours and cancellations. This year, those disruptions could come against the backdrop of a Northwest Airlines and Delta Air Lines merger. '''This summer should be like any summer, unpleasant and ugly.[34] Unlike operating on their own, a combined Delta Air Lines and Northwest Airlines would have the size and muscle to open routes across the world. That would bode well for Delta's hub at Salt Lake City International Airport, which has had to be content with funneling passengers bound for foreign destinations to other Delta hubs. The airport's traditional role of providing flights to other domestic airports will begin to change in June, when Delta launches its first trans-Atlantic flight from Salt Lake City to Paris.[25] Salt Lake Mayor Ralph Becker, Salt Lake City Councilman Carlton Christensen and representatives from the governor's office and airport were reassured during a 45-minute meeting with Delta brass Friday morning that local furloughs will not be a consequence of the merger. "We have been enormously encouraged, both in terms of where we are today with the airlines and the Salt Lake City hub and what the opportunities for us are in the future," Becker said. Delta and Northwest on Monday jointly announced their intentions to merge, along with plans to keep open all existing hubs.[3]

"The principal reason for the merger, the benefit to Delta, is the Northwest routes to Asia. I think there's a real possibility Salt Lake would be connected to those Pacific routes," said David Swierenga, a Texas-based airline consultant and former chief economist for the Air Transport Association, an industry trade group.[25] A Tokyo flight would help open Asian markets for Utah business, a priority for Huntsman, a former U.S. ambassador to Singapore who as governor has led trade delegations to China and India. ''He can certainly appreciate the significance of that direct flight, spokeswoman Lisa Roskelley said. ''The merger provides great opportunity for Salt Lake City to have direct flights to Asia, which is a tremendous opportunity, she said. Aides to Huntsman made the request for a Tokyo connection as Delta executives shopped their merger plans with Northwest on Friday in Salt Lake City. Delta CEO Richard Anderson said hed put the request on his merger list but didnt promise anything.[4]

The inability of Delta management to get Northwest pilots to approve the merger agreement ahead of time, and the decision instead to reach a pact solely with the Delta pilots, could pose a similar threat. With the two companies now in high gear to sell their merger to the government, Delta and Northwest management could overlook staying on top of the details of day-to-day operations, Pilarski said. He foresees a scenario where underlings inform top management that the airlines are losing more bags at the airport and getting little reply from the executives. '''That'''s a real danger. You concentrate on future problems instead of concentrating on the problems right now,''' he said.[34] While we have thus far been unable to reach agreement on some key issues with our Northwest counterparts, the Delta pilots union has reached an agreement with Delta management that provides modifications to our pilot contract in order to facilitate a successful and efficient merger.[35] We tried to address that uncertainty (through provisions in the merger agreement). The first point is that we can do this without frontline layoffs and we've made that commitment. We have programs (announced earlier this year) that are well underway that will allow us to reduce employee counts through voluntary (departures). The second point is that we provided a 4% equity stake in the combined company for non-pilot employees. (Pilots would receive their own 3.5% stake in the merged airline, according to an agreement hammered out with leaders of Delta's pilots union.)[2] Stark said Moak and his team have gone to social events with Delta bosses, including president Bastian's birthday party last year. Many labor leaders would eschew such events, viewing it as inappropriate for people in their position. Moak dismisses such complaints. The union group, which represents 6,000 Delta pilots, helped craft a merger that gives employees and the company "a substantially viable future," he said. "If that's what they want to call 'chummy,' that's what it is.[20]

Pilots find that the control panels on the other planes differ; baggage losses mount; merged reservation systems collapse; employees strike, enraged by inferior pension packages, or the degrading of seniority. All of these are in the new Delta's future (the Northwest brand is to disappear), with a strike by Northwest's pilots the largest looming obstacle to a peaceful integration. Delta's pilots, on the other hand, seem likely to ratify a deal that hands them a 17% pay rise over four years, better pensions, 3.5% of the equity in the new company and guaranteed jobs for two years.[14] The two airlines' shareholders and creditors, who include employees and big mutual funds, have suffered years of losses. The shares that existed before Delta and Northwest -- Michigan's largest airliner -- filed for bankruptcy on the same day in 2005 were canceled when the two carriers emerged from Chapter 11 last year, wiping out any hope those holders would recover their losses. The airlines paid back fractions of the billions of dollars they owed creditors in their bankruptcy cases with new shares that have lost more than half their value in the last 12 months.[27]

A combined carrier still faces oil prices that have recently settled at more than $110 a barrel, and if little is done to shrink the two carriers' existing operations, what remains is a monolith airline battling those energy costs, instead of two of the top six major U.S. airlines scrutinising every aspect of their business to find ways to offset fuel costs that could reach well over a billion dollars for some U.S. airlines in 2008. Two variables also need clarification for the efficiencies Delta and Northwest are seeking through their proposed combination - anti-trust clearance and labour.[17] Five discount carriers have either shut down or declared bankruptcy over the last few weeks as fuel prices have soared, and many carriers see consolidation as a way to cut costs. Mann said Delta and Northwest officials might have to make repeat visits to some congressional committees if other mergers are announced in their wake.[15] Long-term, the merger would let the new Delta Air Lines trim other costs that can help offset growing jet fuel prices, the airlines say.[8] The proposed new airline will be much better positioned to "weather the storm" of rising fuel costs than other airlines, and be better positioned "if others fail," Bastian said. Delta has reduced its fleet by about 75 airplanes in the past year, cutting capacity in response to rising fuel costs, Anderson said. The airline will continue to make those capacity adjustments as fuel prices dictate, while the merger awaits approval and during an anticipated yearlong year-long transition phase, he said.[3]

Delta and Northwest each have fuel networks, and a merger between the companies will help the proposed new airline get the best fuel prices, Bastian said.[3] Standing in for Huntsman, Jason Perry, director of the Governors Office of Economic Development, endorsed the merger. He said it would help Delta and Northwest withstand pressure from spiraling fuel prices. ''It helps build a stronger, more durable airline over the long run, he said.[4]

With a merger that executives say is focused more on "addition" (more revenue) than "subtraction" (cuts in routes, jobs and hubs), combining No. 3 Delta with No. 5 Northwest into the world's largest airline wouldn't reduce fuel consumption by much.[8] "Two drunks holding each other up is not a good idea." Last week, Delta executives said their deal will be a different kind of airline merger, pairing airlines of equal strength. Customers will benefit from a larger combined route network offering greater travel choice in Asia, where Northwest has extensive operations, and Europe, where Delta thrives, they said.[36] A great deal can happen in six or eight months, perhaps even a merger between Delta Air Lines and Northwest Airlines.[17] HEBRON, Ky. - Delta Air Lines' president reassured local and state officials that the proposed merger with Northwest Airlines will not affect service at Delta's Cincinnati-area hub and will not hurt its regional subsidiary Comair.[37] The Department of Justice's antitrust division is expected to approve the proposed merger of Delta Air Lines and Northwest Airlines by the end of the year.[5] The merger of Delta Air Lines Inc. and Northwest Airlines Corp. is likely to have a financial consequence for the Northwest Arkansas Regional Airport. It's why folks in Northwest Arkansas should care about how the big airline merger plays out.[38] According to local officials, the merger between Northwest Airlines Corp. and Delta Air Lines Inc. could affect the area indirectly through state economics. "I think it's extremely important just about in any way you can think of to the community, whether it be the businesses or the individual traveling," said Albert Lea-Freeborn County Chamber of Commerce Executive Director Randy Kehr.[39] WASHINGTON - Delta Air Lines has put together a heavyweight team of lobbying and law firms to help clear the way for its proposed merger with Northwest. Top executives from both airlines are to launch their campaign in Washington this week by testifying before two Senate hearings.[40]

Merger discussions between Eagan-based Northwest Airlines and Atlanta-based Delta Air Lines appear to be on a fast track.[33] The proposed merger of Delta Air Lines and Northwest Airlines is expected to trigger further consolidation, including a possible pairing of United and Continental airlines.[41]

Delta Air Lines Inc.' s stock-swap deal to acquire Northwest Airlines Corp., if approved by regulators and shareholders, would create the world's biggest carrier. Investors have sent shares of both airlines down sharply since the deal was announced.[18] Delta Air Line's stock-swap deal to acquire Northwest Airlines, if approved, would create the world's biggest carrier. Investors have sent shares of both airlines down sharply since the deal was announced. Copyright 2008 by cbs46.com. The Associated Press contributed to this report. This material may not be published, broadcast, rewritten or redistributed.[19]

Delta Air Lines Inc. to buy Northwest Airlines Corp. for $7.12 billion Eagan, Minn. -based Northwest definitively agreed to be acquired by Atlanta-based Delta in an exchange of 1.25 shares of Delta for each Northwest share.[21]

ATLANTA (AP) - Weary shareholders and creditors of Delta Air Lines and Northwest Airlines could lose out again amid falling stock prices since the carriers announced their intent to combine.[42] Many financial analysts and others insist the time for long-anticipated airline consolidation has finally arrived. On April 14, the boards of Delta Air Lines and Northwest Airlines announced their intent to merge the two carriers under the Delta brand.[35]

For the first time in the history of airline mergers, the Delta pilots, represented by the Air Line Pilots Association, have been involved from the earliest formative stages of the proposed merger. This merger will create a strong, investable airline with a sustainable long-term future. That is good for labor and good for the shareholders and other stakeholders of the merged corporation.[35]

Anderson and Delta chief financial officer Edward Bastian paid a visit to Utah Friday to meet with government leaders, LDS Church officials, employees and airport officials to discuss the merger and respond to questions about how it will affect the airline's western hub. Delta and Northwest have typically served different markets, and only 12 city pairs are served by both airlines, Bastian said. That means competition in most cities will not be affected and prices will not rise.[3] Northwest Airlines Corp. and Delta Airlines Inc., already in an agreement to merger since Monday, would need to pay the other $165 million to stop the process under certain conditions, according to a securities filing. Get stories by e-mail on this topic.[43] "Delta and Northwest, regardless of any merger, have about 125 too many 50-seaters that have to go quick. They are losing money on every flight, with or without a merger." Prior to the merger negotiations, DL said it would terminate its agreement as of May 3 with Mesa subsidiary Freedom Airlines, which operates 34 ERJ-145s on behalf of Delta Connection ( ATWOnline, April 9).[30]

For airlines, few new trips are generated simply because one airline can offer more destinations - airlines end up fighting to steal customers from competitors. History has shown that competitors can take away customers of the merged airlines when their flights run late or labor groups stage protests. Another pitfall is the losing alliance partners. Continental Airlines is partnered with Delta and Northwest, but could well enter into its own merger feeling the need to get bigger. That could result in the Delta-Northwest combination losing substantial presence in New York and Houston, two of the four biggest cities in the country.[36] At one point, management's suspicions of labor was so great, there were no doors on staff toilet stalls at Northwest's Minnesota head office, or "bunker," as some employees called it. No windows in the building, either; the CEO didn't want his office workers "wasting time" looking out any windows. At this early stage in the Delta-Northwest combination, federal regulatory approval will have to wait out several months of congressional hearings, employee seniority lists will still have to be sorted out, credit card companies may have to adjust to different partners and new terms and once-sacred frequent flyer programs will be even more difficult as flights are inevitably combined. Good luck to both Delta and Northwest in seeking employee support - and fresh financing - with the nation's economy in its current tail-spin. If you have frequent flyer miles in the "bank" at either Delta or Northwest, you had better empty those accounts, now. A merger signals it's going to be harder to grab an upgrade or a bonus flight as schedules are combined to eliminate any duplication. In their review of any merger proposal, the feds will look for potential political backlashes in addition to monopoly threats.[44]

When that approach failed, Moak cut a new labor deal directly with Delta. That allowed the merger to be announced last week but stranded Northwest pilots on the sidelines.[20]

Delta and Northwest agreed last week to merge in a $17.7 billion deal that would make the combined carrier the largest airline in the United States. The merged company will maintain its headquarters in Atlanta, where Delta is based.[45] Delta and Northwest airlines will argue their case to create the world's biggest airline to congressional lawmakers this week. The two carriers, which want to combine to create a single mega-airline called Delta and based in Atlanta, announced their proposed merger last week.[15] Boards of the two airlines voted last Monday to approve the merger, which must be approved by the U. S. Justice Department. The new Delta as it is expected to be called could reduce how much the airlines spend to rent space at XNA. Airlines' contracts with XNA expire at the end of this year, and there's a decent chance the new Delta will need less space. For instance, Delta and Northwest currently have their own ticket counters, separated by the Continental Airlines ticket counter. It's possible that the new Delta can sell tickets and welcome arriving passengers with one counter, and the airline won't need that other counter. That means less rent revenue.[38] There was also new speculation about a union between U.S. Airways and United Airlines (nixed once already in 2000 because of regulatory concerns), United and Continental Airlines, or American and U.S. Airways (which was rebuffed last year in a takeover attempt of Delta). Behind this latest merger talk is a belief that airlines cannot survive an era of $115-a-barrel oil, strong overseas rivals, low-fare upstarts and a possible recession without the savings and revenues that come from larger combinations.[23] The Delta-Northwest hookup announced last week "makes sense" and "the next most likely combination is Continental-United," Mr. Siegel said. American, he added, may be weary of mergers after its union with TWA earlier this decade did not go well, but he can also see American combining with either Alaska or U.S. Airways. "Consolidation, if managed appropriately," he said, "can be good for everybody." There will be fewer jobs, but "those jobs will be more secure." There will be fewer carriers, he said, but enough competition to keep prices low. "Right now these airlines are on an unsustainable path," he said, and "everybody shares the responsibility.[23] The high prices and long lines could get worse once the Northwest-Delta merger is completed, although that probably won'''t happen before summer begins. It could be worse if the unions at Northwest or other airlines take out frustrations with a proposed merger while on the job.[34]

Regardless of party, though, you'd hate to be governor of a state that has lost a corporate headquarters and 5,000 jobs. In the wake of the merger between U.S. Air and America West two and a half years ago, the airlines continue to have problems getting their computerized reservations systems to talk to each other. Bookings have been lost, baggage misdirected - it's still an open question whether this is a computer problem or a reflection on disgruntled employees - and airport check-in lines are longer. Mergers are usually sold on a promise they will be good for consumers, that fares will dip dramatically.[44] I get out a lot and walk in hangars and walk in airports and pilot meetingsand employees basically want to understand what the rationale is behind (the merger). They want to understand their right to seniority protection and whether it's going to make Delta stronger and more secure. At least in the case of Delta employees, a year ago they were the subject of bankruptcy and the hostile takeover bid (by U.S. Airways Group Inc.).[2] One of the first was U.S. Airways, led at the time by Mr. Siegel. Once the airline reemerged from its first bankruptcy, Mr. Siegel began looking for merger partners; he even gave thought to a takeover of United, calling the idea "Project Minnow." Early in 2004, he made his prediction that the industry would eventually winnow to three large U.S. carriers (and three discount carriers), saying he did not want U.S. Airways to be left out. The next year, after having been removed as CEO of U.S. Airways, he detailed how that might happen in a February 2005 speech at Georgetown University.[23] Today, the airline business is splintered among 10 major carriers in the U.S., and executives have argued that the industry would be financially stronger with fewer players. With oil topping 115 a barrel and recession perhaps at hand, airline CEOs who have slashed salaries and service, and reorganized their businesses, feel there are few arrows left in their quivers other than mergers to ride out the next major downturn. "It's the only real big idea we have left," U.S. Airways CEO Douglas Parker said at a recent conference.[36]

"You could get significant expansions of services if the mergers are pretty much end-to-end," seamlessly connecting two large networks with dominance in different parts of the country, Ash said. Murphy counters that the large airlines have little choice but to deemphasize their domestic service. "They cannot compete head-to-head on price with newer carriers, who have 40 percent lower costs," said Murphy, a partner in Gerchick-Murphy Associates, a consulting firm based in Washington. The capacity of low-fare carriers has grown by 73 percent since 2000 because of their relative advantages over the network carriers. From 2000 through late 2006, the domestic revenue of U.S. network carriers, such as Northwest, declined by 15 percent.[28]

Oasis Hong Kong, a pioneer of low-cost long-haul services, abruptly collapsed April 9. Nothing links these airlines, which span every conceivable business model in aviation, other than their inability to cope with the brutal economics of the business, especially the near-doubling of fuel prices in the past 18 months. Delta and Northwest are not yet in such a hole, but having only recently emerged from Chapter 11 bankruptcy protection themselves, they know that time is not on their side. After a strong recovery by U.S. airlines in the past few years, profitability has fallen fast this year.[12] Alitalia is facing a similar fate unless a takeover by Air France-KLM can be revived. Nothing links these airlines, which span every conceivable business model in aviation, other than their inability to cope with the brutal economics of the business, especially the near-doubling of fuel prices in the past 18 months. Profitability has fallen particularly fast in America this year, with balance sheets remaining weak, even at the big network carriers, says The Economist. The industry has reduced its workforce by 39 per cent, cut wages by 30 per cent and defaulted on pensions to the tune of $20 billion, leaving "little, if any, fat left to trim." To make matters worse still, as carriers elsewhere in the world ordered around 7,000 new, fuel-efficient aircraft, broke American airlines sat on their hands, says the magazine.[13] IATA, the international organization that represents the industry, observed last September that American carriers were "vulnerable to shocks" -- and that was when oil was at $67 a barrel and the credit crunch had yet to bite. Adding to that vulnerability is the realization by America's airlines that there is little, if any, fat left to trim if they stay as they are. The industry has reduced its work force by 39 percent, cut wages by 30 percent and defaulted on pensions to the tune of $20 billion. To make matters still worse, as carriers elsewhere in the world ordered about 7,000 new, fuel-efficient aircraft in recent years, those fragile balance sheets meant U.S. airlines sat on their hands.[12]

Small carriers are already dropping like flies. Four smaller airlines have declared bankruptcy so far this year, with just one'Frontier Airlines'attempting to reorganize itself and keep flying. 'With the current fuel price environment, it's difficult to see a merged entity or a stand-alone carrier making any money into 2009,' said Mr. Warlick. Southwest Airlines, which analysts say has used hedges to lock in 70% to 80% of its fuel costs this year at the equivalent of $50 per barrel, may be the exception. Mr. Warlick estimates that pretax earnings for the industry are likely to fall by $10 billion to $15 billion this year if fuel prices remain at current levels.[9]

Street analysts. ''That's the first time I've heard that rationale,'' said Scott Hamilton, a Seattle-based aviation industry consultant with the Leeham Co. ''I thought that's what consolidation is all about.'' Hamilton said the merged airline over time will need to streamline its fleet and make it more homogenous in order to achieve the economies of scale and performance needed to reach management's goal of 1 billion in cost savings. Passengers eager to see something other than an aged Northwest DC-9 or a legacy Delta MD-88 pull up to the gate for their next flight might have to wait for some time.[6] Remember, the airline industry has not netted a profit over the more than 100 years since the Wright Brothers proved that man can fly. Both Delta and Northwest only recently emerged from bankruptcy, four smaller airlines filed for bankruptcy protection in recent weeks, and most carriers have found themselves under similar financial stress at one time or another. This tough environment hasn't got any easier.[14]

"Regionals exist to feed hubs.As a means of reducing industry capacity, consolidation is a process by which hubs are likely to be shuttered. It is difficult to imagine a consolidated Delta/Northwest operating hubs in Detroit and Cincinnati." While the airlines have promised that the combination will not result in hub closures ( ATWOnline, April 16), DL has made no secret that it would like to sell its wholly owned subsidiary Comair ( ATWOnline, Feb. 5). Northwest is likely to continue to rely on its new subsidiary Compass Airlines, which began last spring ( ATWOnline, April 7). Regional partners Republic Airways, Pinnacle Airlines, Mesa Air Group, SkyWest Airlines and ExpressJet all have contract agreements with one or both carriers.[30] Seven hubs are in the United States, including Delta's operations in Cincinnati and a Northwest's in Memphis. The latter two are close to bigger hubs in Atlanta, Detroit and Minneapolis and were thought to be vulnerable to consolidation. "Whether it's Memphis or Cincinnati or Salt Lake, I think all of those hubs are going to have a secure future in this merged identity going forward and are going to make a contribution to the profitability of the airline," Bastian told reporters last week. "So it's not a political decision. It's an economic decision based on the very good performance and the strong demand for the service that emanates from those communities."[25] Glen Hauenstein, Delta's executive vice president of network planning and revenue management, last week didn't brush off the possibility of flights from Salt Lake to Tokyo, where Northwest has coveted landing spots at Narita International Airport.[25] Delta's hub at Salt Lake City International Airport is likely to gain international flights should the Delta-Northwest merger go through.[25] Starting June 2, Delta will start a daily flight between Salt Lake City and Paris the first direct flight between Utah and Europe. Anderson made no specific promises in front of TV cameras at Mayor Ralph Beckers office, but he generally described the benefits of the merger, saying it would link 6,000 cities in 68 countries. ''If you live here in Salt Lake City, its nonstop or one-stop to anywhere you want to go in the world, he said. Becker said he was assured the merger would result in no layoffs at Salt Lakes airport. Anderson also met with Thomas S. Monson, president of The Church of Jesus Christ of Latter-day Saints, trading stories about their personal backgrounds.[4] High fuel costs have been cited as a catalyst for the merger and ultimately will determine the number of Delta flights in and out of Salt Lake City, Anderson said. "With fuel prices where they are," he said, "that does have an effect on capacity over the long term."[3]

The merger wouldn't help them reduce those costs by much. It would help them cut other costs and raise revenues, offsetting the hike in fuel expense. "This isn't a deal that's going to change how much they're paying for fuel," said Bill Swelbar, an industry analyst and research engineer for the International Center for Air Transportation at the Massachusetts Institute of Technology in Cambridge, Mass. "What it does do is give them more leverage over factors they can control, but jet fuel prices are inherently uncontrollable."[8] Moak's strategy is rare for a union leader, said Les Hough, a labor relations expert. "It's unprecedented" for a union leader to cut a deal with management that leaves out members of the same union, said Hough, the former director of Georgia State University's Usery Center for the Workplace. It's unusual for union leaders to have such an influential role in shaping a merger, he said. Generally, they oppose combinations because of the job losses that ensue. The closest situation Hough said he could recall was in the 1970s, when United Auto Workers chief Doug Fraser worked in tandem with Chrysler executives to save the auto maker during a recession and soaring oil prices.[20] Rather than waiting for management to fashion a deal and then present it for union approval, Moak's team seized an influential role early on. Top executives of both airlines waited for Moak's team to work out an agreement with Northwest pilots on seniority matters that control pay, routes and other working conditions.[20] The airline emerged from Chapter 11 protection last April. It's not clear why Delta's pilots union supports arbitration now when it didn't before. Moak also said in his letter that there have been a "number of ugly rumors, innuendo and factually inaccurate stories" that mischaracterize the Delta pilot leaders' motives in crafting the contract revision agreement with management. Moak did not specify in his letter what reports he was talking about.[18] Moak did say that Delta's pilots union hopes to reach a joint agreement with Northwest's pilots to take effect on the closing of the combination transaction that provides "immediate parity in rates of pay." He said the union also wants a "fair and equitable integrated seniority list to take effect on the effective date of the new joint agreement."[18]

ATLANTA (AP) - The head of Delta's pilots union says he's open to arbitration with Northwest pilots over how to merge their seniority lists of Delta takes over Northwest. The two sides failed to reach a pact before their airlines agreed to combine last week.[46] Moak and a spokesman for Northwest's pilots union could not immediately be reached for comment Monday. Seniority is important for pilots because those at the top of the list get first choice on vacations, the best routes and the bigger planes that they get paid more for flying. It's also the reason pilots don't often leave to go work for another airline.[18]

The role of union leader isn't particularly rewarding, said Reed of TheStreet.com. "It's a horrible time for airlines. He decided this was the best way to do what he can for his members." The job follows Moak everywhere, whether at his home in New Orleans, on routes to Europe he still flies for Delta or during what's supposed to be his down time.[20]

The optimistic view on the deal between Delta and Northwest, or any airline merger, is that a bigger airline has more opportunities to rationalize route networks and save on overhead expenses.[9] One of the main beneficiaries of a Delta-Northwest merger will be the man who doesn't get to run the resulting company. Delta CEO Richard Anderson stands to run the company, cutting out his former deputy when he ran Northwest, Doug Steenland. The Northwest board has now voted to increase Steenland's compensation by millions, to more than 11 million, if he stays until the deal is done. Until this happened, Steenland could have quit in a huff without losing a dime. Now he has to stay a minute and a huff.[47] Delta CEO Richard Anderson, right, worked out the merger deal with Northwest CEO Doug Steenland, an old friend.[10]

Anderson and Steenland were engaged in serious negotiations, beginning with a meeting at the New York offices of one of Delta's investment bankers, Greenhill & Co. Northwest laid out the logic of combining operations, how the deal could be accomplished, the way the employees would fit together and an update of the strides it was making since exiting its own bankruptcy reorganization. Mr. Anderson knew most of Northwest's team from his 14 years at the Eagan, Minn., carrier.[10] Delta and Northwest are looking to join to become the world's largest carrier, to be led by Delta CEO Richard Anderson. They hope to close the deal by the end of the year.[31]

The pitch to regulators: There will still be plenty of competition after Delta absorbs Northwest. Then there are shareholders, who need to be assured the deal will make them money at some point. The carriers said they have no current plans to cut more U.S. flights beyond what they have disclosed separately.[27] Delta, which like Northwest only recently emerged from bankruptcy, left no doubt about the reasons for the deal: '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,' the company said in a statement.[9]

Bastian said during a April 17 press conference at the airport the merger would help the company keep the hub open. He said there would be no impact on service levels at the airport, greater access to Asia and no loss of jobs in the frontline areas. He said it's "a merger of addition" where the strength of Northwest (Asia) and Delta's strength (Europe, south going into Atlanta and into the southern, South American regions of the world) are added. "This is not about overlap and redundancy. This is about growth and addition, not subtraction. We have been very public about our commitment to Cincinnati," he said.[29] Delta President Ed Bastian said at a news conference at the Cincinnati/Northern Kentucky International Airport that the merger could mean better access to overseas routes from the Cincinnati and northern Kentucky region. "This in fact will help us keep this hub open," he said of the merger, repeating earlier statements that the new Delta doesn't plan to close any of its or Northwest's hubs.[37] The merger of Northwest and Delta will create the world's largest passenger air carrier. It will be based in Atlanta, home of Hartsfield-Jackson International Airport.[26]

ATLANTA -- Delta Air Lines' top brass met with editors and reporters at The Atlanta Journal-Constitution last week after the carriers announced their proposed merger. In this edited transcript, Delta Chief Executive Richard Anderson, President Ed Bastian and Mike Campbell, executive vice president in charge of human resources, explain the merger.[48] If the merger receives approval from the Department of Justice and from shareholders, the new Delta would be the world's largest airline. The Delta executives this week also have visited other Delta hub cities - New York, Atlanta and Cincinnati.[3]

As long as low-cost AirTran maintains an aggressive stance at Delta-Northwest's Atlanta hub and on routes serving Tampa, we shouldn't be staggered by too many shocking fare hikes around here. Mergers are forced not only by spiraling oil prices and a weak economy but also by shareholders seeking to make a buck from their airline investments. Actually, it would be a far safer bet for them to buy a CD or an annuity or just keep their money in the bank. With oil prices doubled in the past three years, the ongoing housing slump and a nail-biting recession, it's no wonder the few remaining legacy airlines seek protection in a merger's promising economies of scale before their cash runs out again. This may be the right time to ask, "Who's next?" There aren't all that many credible merger partners left; Continental and United may try to be next to seek common air space.[44] What caused airlines to consider consolidation more seriously were the 9/11 attacks, which came roughly two months after a proposed United-US Airways merger collapsed due to Justice Department opposition. The aftermath of the attacks exposed the underlying weaknesses of large carriers that realized they could no longer rely on exorbitant fares to cover their high costs. They went after employee pay, benefits, retiree health care and pensions while cutting unprofitable hubs and duplicative routes.[23] All antitrust bets are off under a new administration, meaning it may be a race to the altar for the other major carriers. Continental Airlines CEO Larry Kellner, who has long maintained the company would remain independent, told his 45,000 employees in a memo last week that 'we will review our strategic alternatives and make sure we remain a strong long-term competitor.' That almost certainly means a merger with either United or American, with the possible, though unlikely, third option of USAir.[9] The retention agreement is designed to keep Steenland from resigning during the sale process. He previously waived his right to resign last spring as part of his employment agreement with the airline, when Northwest emerged from bankruptcy. That provision expires May 31, the company's one year anniversary on emerging from bankruptcy, and Steenland regains the right to leave the company by providing 30 days notice. If Steenland resigns before the merger is completed, he would owe a pro-rated portion of the bonus. The agreement also requires Steenland to repay the bonus if he is hired by a competitor airline, or courts Northwest employees to join another company.[49]

"On the other hand, the government has to balance that with an airline industry that can get you and me and the rest of the country from point A to point B to point C." Delta and Northwest propose that their merger will create a powerful global airline that will offer more choices for travel around the world and will be better able to compete with leading airlines from other countries.[41] Delta also has signed up government affairs firm Mehlman Vogel Castagnetti Inc., packed with former Capitol Hill senior staffers, and a law firm that employs R. Hewitt Pate, who ran the antitrust division at the U.S. Justice Department from 2003 to 2005. Those paid proponents could have their work cut of for them, Mann said, as the Delta-Northwest merger is likely to spawn even more airline industry consolidation.[15]

A irline mergers are making headlines again; Delta and Northwest plan to join forces after four other U.S. airlines have crashed (financially) in the past month.[44] Travellers can be forgiven if their first reaction to the proposed merger of Delta and Northwest is to wonder what additional atrocity will be inflicted on them. It can't be deterioration in the quality of the peanuts offered in lieu of meals. Nor can it be a reduction in leg room: knees-on-chest is already the posture deemed by most airlines to be in passengers' best interests. It might be a reduction in the value of frequent-flyer points, but since most of these are now good only at 3am on one Thursday each month, there isn't much to lose on that score.[14]

Four have ceased flying. "Not all airlines will survive the fuel prices and the economy right now, but Delta will with this merger.[5] Many airline executives argue that mergers are needed to survive. Soaring fuel prices have sent smaller carriers to bankruptcy this year, and overseas markets are becoming more competitive and deregulated.[28] The transaction is expected to unleash a wave of consolidation as U.S. carriers try to bulk up through mergers to endure deteriorating industry conditions caused by record fuel prices, the weakening economy and the credit crunch.[24]

The inevitability of consolidation perhaps can be traced to 1978, when Congress deregulated the airline industry, thinking it would increase competition, lower prices and allow more Americans to fly. Carriers never made lots of money during five decades of government involvement in the business, but they did enjoy protection from new competitors while unionized employees were well paid and benefitted from generous work rules, the costs passed onto well-heeled passengers. Consumers did well in the deregulated era as air fares went down dramatically in markets with new competition from upstarts such as Southwest Airlines.[23] Many of the premier names in the business did not survive -- Eastern Airlines, Pan American and Braniff Airlines. The carriers that transitioned from regulation to competition missed many opportunities to reduce their labor costs, instead choosing an array of temporary fixes (a hub-and-spoke system, frequent-flier programs, reservations systems, alliances) in exchange for employee peace and loyalty. Asked in 1991 to examine the economics of the business while working as a planner at Northwest, Mr. Siegel said he could see that the high costs would have to be dealt with eventually. "You could see then that consolidation was logical," he said. Because of the cultural difficulties involved, "It just was going to take a long time to get there.[23]

Mergers seldom solve anything, either for customers, employees, shareholders nor many of the airports served. They can help lower cost structures. That may make more cash available for the airlines to buy new, more fuel-efficient airliners.[44] "I think that's a possibility," said Kelly Johnson, the airport's director. "If that's what it takes to make them financially healthy, we're not opposed to that. Both of those airlines have been great business partners.” DHL'S OHIO FLIGHT Some of the money that would go away due to the Delta-Northwest merger is offset by new money from DHL. The company began once-a-day cargo flights last week from XNA to Airborne Airpark in Wilmington, Ohio.[38] Bastian acknowledged that Cincinnati passengers pay more for flights than customers at other airports, saying fares here come at a premium because Delta offers a level of service at CVG that exceeds the market's size. He said, the area's major corporations have told the airline they appreciate Delta's presence. Only 20 percent of Delta's local customers are corporate travelers, but they make up about half of the airline's local revenues. "The corporate customer pays a premium and, because of that, we need to be there when they need us," Bastian said. Those customers, including companies in Cincinnati are "very excited about the merger," he said. A survey released last Tuesday by the National Business Travel Association showed that 54 percent of its members believed customer service of what would become the world's largest airline would be poorer while 41 percent said flight frequencies to some markets would worsen.[11] How a Delta-Northwest merger could affect fares in the long term is uncertain. If Delta cuts many flights at the airport in Hebron, a low-cost carrier such as Southwest could decide to start service here. That would likely benefit travelers, especially small-business people and leisure fliers.[11]

When touting the benefits of the merger, Delta CEO Richard Anderson and President and Chief Financial Officer Ed Bastian said Delta's fleet had two major gaps: midrange jets seating between 60 and 125 passengers and long-haul, high-capacity planes capable of carrying more than 300 passengers along international routes. Northwest's planes fill those gaps.[8] If the proposed merger of Delta and Northwest is accomplished, more routes might be forged by the new Delta (as it would be called) from Salt Lake to other reaches of the globe.[25] Analysts are in agreement that the Salt Lake hub should be secure if the merger survives a tough antitrust review over the next several months, and if skeptical Northwest unions come around.[25] Mr. Siegel predicted that Salt Lake City, St. Louis, Charlotte, N.C., Indianapolis, Cincinnati and Memphis all would disappear as hub operations in the coming years. He also expects plenty of labor integration problems, with squabbling over pay and seniority sure to cause operational problems across the country (Pilots from the old Arlington, Va. -based U.S. Airways and Termpe, Ariz. -based America West Airways still are fighting about such issues two and half years after a merger of the two carriers).[23]

"The (Salt Lake City) hub is important to Delta today and will be an important part of the combined airline after we close the transaction toward the end of the year," said Anderson, who will lead the new airline.[3] Delta Chief Executive Richard Anderson, who would head the combined airline, said during a stop in Salt Lake City on Friday that the companies view the combination as a long-term strategic move. Anderson said, "This isn't about a short-run combination. This is about the long run, and as we have the opportunity to talk to people on Wall Street on the buy and sell side, I think we'll be successful in showing people. that we can do a much better job of providing returns over the long run."[27]

Not that long ago, Mr. Anderson seemed to be leaving the airline industry for good. After 14 years in various posts at Northwest, he quit the top job there in 2004 to take an executive vice president position at UnitedHealth Group Inc. for far more money.[10] MINNEAPOLIS A combined Delta and Northwest would have the size and reach that almost guarantees some competitors will respond in kind. United Airlines, Continental Airlines and American Airlines have already had preliminary discussions about possible combinations of their own, and some in the industry believe a United-Continental tie-up could come quickly, which would create another megacarrier like Delta-Northwest. That could mean the current six major domestic airlines shrink to three within a year, if regulators consent. That domino effect ups the stakes considerably as the government reviews the Delta-Northwest proposal.[28]

The merger needs approval by shareholders of Delta and Northwest and regulators. Bastian said he expects the deal to close by the end of the year.[29] As of Friday, the deal has yet to be approved by regulators and shareholders, but will result in the combined annual revenues of 31.7 billion. The merger announcement comes a year after both airlines emerged from Chapter 11 bankruptcy protection.[39]

Delta is projecting rather unambitious revenue and cost synergies of 'more than $1 billion,' which won't be fully realized until 2012. That will help, but it's more than a third less than the estimated savings from the Delta/USAir deal that would have brought Delta out of Chapter 11 bankruptcy several years ago had its creditors not balked. If the new Delta can reduce capacity in its route structure and improve pricing, it will go some way to offset soaring costs.[9] Fuel costs that have rocketed 77 percent in the past year as the price of oil has surged. Delta expects to spend $1.3 billion more than it had budgeted for fuel this year, Northwest $1 billion more.[8]

Where would the new Delta be able to cut spending? Combining some corporate and management functions is expected to save up to $400 million a year, the airline said.[8] The next year, Northwest filed for bankruptcy-court protection, as did Delta. In short order, his fellow directors passed over two internal candidates for CEO and selected Mr. Anderson. During the search, Mr. Anderson insisted he wasn't a candidate and had people close to him emphatically tell reporters that he wasn't a candidate. When Mr. Anderson arrived at Delta's Atlanta headquarters, he immediately sought to calm Delta's 48,000 employees, repeatedly vowing to preserve the standalone business plan that the previous management team had forged while reorganizing the company.[10] "The economic realities of today's marketplace make the case for consolidation more compelling than ever," United chief executive Glenn Tilton said in a message to employees. Delta and Northwest struck first, and Bastian said their timing should give the merged airline an advantage over their competitors in the event of more consolidation.[11] Airline consultant Patrick Murphy Jr. said that employees of Northwest and Delta are unlikely to be disruptive, whether by staging sick-outs or other actions.[34]

Mark Gurney, vice president of Northwest's WorldGateway operation at Metro Airport, the airline's largest hub, points to a number of small operational changes that have saved the airline money. Delta spokeswoman Susan Elliott said her company is utilizing many of the same tactics.[8] Joining Northwest'''s strong Pacific network with Delta'''s strong Atlantic routes would mean travelers could cover more of the globe on a single carrier rather than switching to an airline'''s partners, airline consultant Robert Mann said. '''That combination really opens up the east-west travel,''' Mann said. '''It would be a big plus.'''[34] Delta chief executive Richard Anderson believes the proposed deal is about "addition not subtraction", and indeed with only twelve routes between the two airlines having direct overlap, few communities risk losing service.[17] Messrs. Anderson and Steenland were both hired as Northwest lawyers in the early 1990s by the same executive, and they waged key battles together: Northwest's brush with insolvency in 1993, a disastrous pilot strike in 1998 and the searing events of 9/11. When Mr. Anderson was CEO and Mr. Steenland president of Northwest, they acted as equals and were friendly socially. Mr. Anderson was insistent that Delta be the acquirer in any deal, preserving its culture and headquarters.[10] Doug Steenland, Northwest's chief executive and an old friend of Mr. Anderson, had tried unsuccessfully since the fall of 2005 to interest previous Delta management in a deal.[10]

Moak's strategy came at a price. He enraged Northwest pilots, who felt he undercut them when Delta pilots made their own deal with management.[20] Moak's deal, while beneficial to the Delta pilots, stranded fellow union pilots at Northwest on the sidelines.[20] Ed Bastian, Delta's president who has worked closely with Moak, lauded the union chief's initiative. It "takes courage and it's a lot of risk," Bastian said, noting that the turning point came in the past two weeks when the Delta pilot leadership "stepped up and said they were willing to do a deal" on their own. "Had they not expressed a willingness to do that, it would have caused us real pause as to whether we should proceed," Bastian said.[20]

Delta's pilots, the carrier's only employee group represented by a union, backed the deal.[11] "Think flight delays and luggage mishaps are bad now?" asked St. Petersburg Times business columnist Steve Huettel. Union workers at Northwest don't like the deal, and unhappy employees can slow down an already thinly staffed carrier.[11]

The Northwest union guys wanted to SCREW the Delta pilots. They spent so much time on that, they left hundreds of millions on the table for their own members.[20] The bitter Northwest pilots are funny. The Northwest union guys were so busy trying to screw Delta pilots over on seniority, they missed out on hundreds of millions of dollars. That Mike Stark guy sounds like a toad. He gets it both ways.[20]

With that in mind, the Delta pilots union made the unprecedented decision to shatter the conventional labor merger mold and provide our pilot members and our company with an alternative to the traditional process.[35] History has often been a harsh judge of mergers. The financial synergies have generally been less than hoped for, with those that were achieved often coming at the expense of employees, customers and the communities served. That said, the position of the Delta pilots toward consolidation has never wavered.[35] Richard Anderson, Delta's chief executive officer, and Ed Bastian, president of the Atlanta-based carrier, met with Salt Lake-based employees, government officials and LDS Church leaders during a daylong series of appearances that culminated four days of meetings around the country to drum up support for the merger.[5] Bastian also reaffirmed Delta's commitment to a continuing relationship with Comair, whether it remains a subsidiary or becomes a stand-alone company. He said that the merger actually could enhance Comair's role with Delta. "Northwest regional carriers are smaller in size than Delta's, and this will give us greater opportunity for regional jet flying at Comair," Bastian said after meeting with Kentucky Gov. Steve Beshear and other officials.[37] By early January, it was clear that United and Northwest were the two most likely partners. Mr. Anderson got clearance that month from the Delta board to pursue full-fledged merger talks with both.[10] Anderson said Northwest would move to Deltas terminal after a merger takes place.[4]

A Northwest flight that picks up only 20 passengers a day in Minot, N.D., might pick up 40 to link to a larger network with far more East Coast destinations after a merger with Delta, Ash said.[28] Our early and proactive participation brings value to the financial transaction, but most importantly, as proposed, the merger between Delta and Northwest is the "right" merger.[35]

Last year, Delta had just 7.6 percent of the passengers at LAX. And Delta/Western is considered one of the more successful airline mergers.[36] The past two relatively strong years have allowed all the major airlines to build up sizable cash positions. Delta/Northwest, for example, expects to have 'nearly $7 billion at closing,' according to its merger announcement.[9] In 1987, the largest U.S. airlines included Trans World Airlines, Eastern Air Lines, Pan American World Airways, Western Airlines and Piedmont Airways - all names that have been painted over on the side of airplanes because of mergers.[36] We have never been interested in a transaction just for transaction's sake. That is why, just over a year ago, the Delta pilots played a key role in successfully opposing the U.S. Airways hostile takeover attempt of Delta Air Lines.[35]

A growing tide of steep fares, consolidations and bankruptices has the airline industry on edge. When David Siegel was in charge of U.S. Airways earlier this decade, he predicted the industry would be ruled in the future by just three giant U.S. carriers. Then the pilots union and U.S. Airways' chairman ousted him.[23] The 73-year-old native of Chisholm acknowledges that there's little Congress can legally do to block the deal. He has a track record of making things painful for the airline industry when it falls short of his standards of safety and fairness. Oberstar, who once watched a man die in a mine accident, was largely responsible for grounding hundreds of planes this month by insisting on rigorous FAA inspections. Federal regulators, he said, had been too "cozy" with the industry. Oberstar is fond of saying that "safety regulations are written in blood," and he draws a direct link between the mines and the skies. He views both industries with a union man's skepticism that management will act in the best interests of its customers and workers. For that, he has been criticized for favoring labor unions and burdensome government regulation over the long-term health of the airline industry. Said the Wall Street Journal: "We thought we'd left this hypernanny state mentality back in the 1970s."[50] Airline executives have yearned for years to consolidate the industry - and the Delta-Northwest deal clearly intensified interest among other airlines to pursue deals.[11]

We need to keep that in mind and not just trust in broken promises." Northwest executives last week said they'd honor financial agreements with the airport authority and the state. Gov. Tim Pawlenty, though, said he'd consider reworking the bond and loan deals with a newly merged airline.[26] Still it comes out a winner from the Northwest-Delta agreement. The reason? Continental was finally able to buy back its "golden share" from Northwest for $100, freeing Continental to act on the airline industry's urge to merge.[1] If global terrorism isn't laying waste to the country's airlines, cutthroat fare wars or soaring fuel costs are. Mr. Buffett's jaded views on the commercial airline business were undoubtedly a product of his disastrous $385 million investment in USAir in the mid-1990s, three-quarters of which he ultimately wrote off. His characterization of an industry that has lost more than $29 billion since 2001 is to the point.[9] Pate now directs the ''global competition'' practice for the Hunton & Williams law firm. On Capitol Hill, their job will be to demonstrate that the public won't suffer and that the merger is critical to the survival and prosperity of both airlines during a period of soaring fuel costs and a sagging economy.[40] WASHINGTON - The man who will be leading the charge in Congress against the world's biggest airline merger is a flinty miner's son from Minnesota's Iron Range. Jim Oberstar, the chairman of the House Transportation Committee, brings four decades in Washington and a lifetime of hard-knuckled labor politics to his post. In the proposed Delta-Northwest Airlines merger, which could cost jobs and competition in Minnesota, he doesn't like what he sees.[50]

Rep. John Kline, a Republican whose district includes the company's Eagan headquarters, takes a much less pessimistic view of the merger. "If you're trying to make sure that you've got a strong, viable airline that's going to continue to provide a hub kind of service and keep by far the bulk of the jobs -- and at the end of this.[50]

"The competitor now is (across) the globe and not the contiguous 48 states," said Bill Swelbar, an airline analyst at the Massachusetts Institute of Technology. The Delta-Northwest deal is expected to set a pattern for others in that it will call for few job cuts or route pairings the traditional objections such combinations face in getting approval and raise the promise of elevating service above its current, often dismal levels, which many passengers view as the equivalent of a bus ride at 35,000 feet.[28] The problem partly involves the delicate balancing act that the executives are trying to perform. They must assure employees that job cuts will be limited and seniority will be protected. Communities must be assured they are not going to lose service and airline operations.[27]

A year later, the airline fought off a hostile takeover bid from U.S. Airways while also imposing wage cuts on thousands of employees.[5] The union and other employees teamed up with management to help crush U.S. Airways' attempted hostile takeover of the airline.[20]

If the Delta-Northwest merger and a possible deal between Continental Airlines Inc. and United Airlines are successful, U.S. Airways would have a much smaller share of the domestic market, relatively. "That's a concern," Jim Corridore, an airline analyst at Standard & Poor's, said last month. "It seems that U.S. Airways would be left out in the cold."[45] Discounters often step in, too. Since its 2005 merger with America West Airlines, U.S. Airways mainline passenger boardings had dropped 16.5 percent in Philadelphia by last year; Southwest Airlines' increased 64.1 percent over the same two-year period.[36]

Some fear the merger and any resulting combinations may exacerbate customer service problems at U.S. airlines at a time when complaints are on the rise.[11]

Some are willing to bear somewhat higher air fares in exchange for carriers on firmer ground. "We need stability in this industry," said Minneapolis-St.Paul-based travel expert Terry Trippler. If airline mergers create stability, "it's well worth it."[41] Continental chief executive Larry Kellner and president Jeff Smisek said in a message to employees Tuesday that the Delta-Northwest merger "will change the competitive landscape for Continental and the entire airline industry."[11] Reaction from customers, the communities the airlines serve, employees and shareholders - the key constituencies Delta officials focused on - was mixed at best. "In this kind of volatile industry, nothing is ever certain and obviously things can change. That's why I would say I'm cautiously optimistic about the future and the commitments that they are making to us," said Kentucky Gov. Steve Beshear at a media briefing Thursday morning.[11]

WSJ: Many Delta employees were surprised that the airline changed course so quickly.[2]

Mary Rogers, who works at Delta's Crown Room Club at the airport, hopes the merger will smooth the turbulence employees have endured for several years.[5] Comair employees and workers at Delta's hub have been concerned that the merger might mean cutbacks. "It will still have a long, long-term contract relationship with Delta, and will be a Delta Connection flier for as long as the eye can see," Bastian said of Comair.[37] During merger talks, Delta was restricted by the Securities and Exchange Commission and its own rules from discussing details with employees.[3] According to an 8-K filing with the Securities and Exchange Commission on Friday, the agreement may be terminated if the merger isnt completed by the end of twelve months, a regulator blocks the sale, or if shareholders reject the sale in addition to other conditions. The agreement also discloses a retention package for current Northwest Chief Executive Doug Steenland to keep him on board during the regulatory review of the merger and possibly beyond if it is blocked. Under the retention agreement Northwest said he waived his right to resign for any reason in June and also to receive certain severance payments and benefits worth 7.8 million. If he stays through the anti-trust review and after if it is not blocked, he received 375,000 restricted retention units, according to the filing.[43] According to a filing with the Securities and Exchange Commission, Douglas Steenland has agreed to become a director of the combined company, which will keep the Delta (NYSE:DAL) name. He will lose his top executive post to Delta CEO Richard Anderson. Under the terms of Steenland's amended retention agreement, he will receive 375,000 units of phantom stock that will vest immediately if the buyout is completed.[45]

Now we want to do the same thing with the Northwest pilots. Q: What are your chances of doing that? The reality is they're not onboard. They're making a lot of noise with their political representatives. Anderson: Their motivation is the Delta pilots have a much better collective bargaining agreement than the Northwest pilots.[48] Rank-and-file Delta pilots must ratify the agreement. That agreement does not cover Northwest pilots.[18]

Moak stands up for Starks best interest. gets attacked by Northwest pilots. Stark benefits from Moak's controversial decision. and Stark throws spears at Moak while pocketing the money Moak negotiated for him! What a troll! (By the way I knew someone who used Mike Stark's investment service company. the pompous buffoon lost him a ton of dough!) From what I can see, Moak tried to treat all pilots (Delta & Northwest) like ONE group. fairly.[20] Not polite or a show of education on your part. I'm a 747-400 Captain with NWA, 3 years from retirement (10 years on the airplane)By the time Moak gets done with these two ALPA groups there's not going to be Delta, Northwest or New Global Delta.[20] Economics today do not allow that." "We talked to everybody we could find who owned Delta stock and said that we would be involved in any process that involved Delta," he said. In recent weeks, Moak grew more resolved as he watched oil top $110 a barrel and several smaller airlines fail or file for bankruptcy. "Time was running out," he said. "That was the catalyst for moving things forward."[20] Lee being refered to as an ex-Marine(vise "former") and a divisive ALPA who only strengthens the airlines management's hand. I've known Moak since college and I can assure you he was "lookin out for his Troops" as it were, doing what he thought was in the best interest of the "Delta" pilots when pitted against NWA. The thing is they are both APLA and the ALPA have been their own worst enemy since allowing differing wages/retirements/etc. between airlines.[20] Moak accused Delta management of "bullying tactics" but eventually agreed to additional pay cuts, though less than what the company had asked for a judge to impose. Moak searched for ways for the pilots to control their own future.[20]

Right now, Delta pilots will get a 3.5 percent equity stake in the new airline. [20] For a short-term gain for the Delta pilots, Lee Moak has alienated the NW pilots in the process. Let the whipsawing begin! No doubt he'll be up on the fourth floor within a few years, leaving us to work with 5200 angry and bitter coworkers.[20] Delta pilots union chief Lee Moak says union leaders are committed to seniority integration after negotiation of a single joint contract and arbitration, if needed.[46] Associated Press - April 21, 2008 8:04 PM ET ATLANTA (AP) - The head of Delta's pilots union says he's open to arbitration with Northwest pilots over how to merge their seniority lists of Delta[46] Arbitration can be a long, contentious process. The conventional wisdom has been that arbitration might not be desirable for Delta's pilots union because of concern that younger Delta pilots might lose the seniority they obtained after the mass exodus of older pilots ahead of Delta's bankruptcy filing in 2005.[18] Delta's pilots union agreed to make changes to the pilot contract that give management more flexibility.[18]

Pilots union boss Lee Moak, an ex-Marine fighter pilot, strode to the podium dressed in a crisp airline captain's uniform and unabashedly soaked up the applause.[20] Moak and a spokesman for Northwest's pilots union were unavailable for comment Monday.[19]

Delta shares have slumped roughly 17% since the announcement late Monday. The stock movement has shaved roughly $600 million off the value of the deal to Northwest shareholders, who would get 1.25 Delta shares for every Northwest share they own. [27] The units' value would equal whatever price Northwest's (NYSE: NWA) stock shares were worth at the time of the merger, but the value would cap at $22 per unit, or roughly $8.25 million.[49] If the merger is completed, the units would be vested immediately. At their closing price on Friday of $9.69 per share, the units would be worth $3.64 million. If regulators block the merger, he could stay at the company. In that case he would receive the units over a four year vesting period. If he leaves before that time, he would forfeit the units. This article is copyrighted by International Business Times.[43]

The combination sets the stage to create a stronger, sustainable and growing airline that will vigorously and successfully compete in the domestic and international marketplaces for years to come. That is a merger we can support.[35] Neither pays anything if the merger is blocked from outside. Standard & Poor's has posted a negative outlook on the debt of both United Airlines and Continental Airlines, given the conditions they both face this year. That gives them more impetus to merge -- which they're already discussing.[47]

The regulatory authorities in Washington or Brussels might kill the deal on the grounds that it would trigger a wave of airline mergers that would unreasonably increase the market power of the surviving carriers.[14] Some analysts and politicians say a Delta-Northwest deal would trigger other airline mergers, which would cut the overall number of seats - and potentially drive up fares.[11]

The companies didn't rule out further capacity cuts if fuel prices continue to rise. "They still have some flexibility," said Standard & Poor's analyst Philip Baggaley. Anderson gave the airlines more wiggle room during his comments in Salt Lake City. "Regardless of this transaction," he said, "we're going to continue this philosophy of adjusting capacity to demand as these fuel prices continue at these levels. That's the rational thing to do, and we'll continue to do that."[27] Executives immediately went on the road to sell the idea to newspaper editorial boards and airline employees in major hubs, like Atlanta, Minneapolis, Cincinnati and Salt Lake City.[15] Deltas western U.S. hub is Salt Lake City, while Northwest operates from a gate on a different concourse.[4] "We are going to open up the Far East for Salt Lake. My premium passengers, their biggest complaint is the lack of Asian routes on Delta Air Lines."[5] Delta would need a bigger, more expensive jet to reach Japan from Salt Lake, possibly a Boeing 787 Dreamliner, which is scheduled to enter service in 2009.[5]

"We have not run the numbers yet, but we will be working with the airport in terms of looking at future opportunities. We do think that this merger gives us greater strength to have a much more vibrant hub in Salt Lake City."[25] Gov. Jon Huntsman Jr. has been particularly interested in seeing the merger increase Salt Lake City's international reach for Utah companies that are increasingly doing more business abroad, said Jason Perry, executive director of the Governor's Office of Economic Development.[3] The subject of international flying also came up during a morning meeting with Salt Lake City Mayor Ralph Becker; Jason Perry, executive director of the Governor's Office of Economic Development; Maureen Riley, executive director of the airport; and others.[5]

Bastian also raised the possibility of an Amsterdam route at a packed meeting with employees at Salt Lake City International Airport.[5] After the meetings, some workers were still worried, including Bruce Church, a ramp worker at the Salt Lake airport who is helping organize employees. He's collecting signatures for a petition for an election to join the International Association of Machinists and Aerospace Workers, AFL-CIO. "It was a love-fest, happy talk - it always is," Church said.[3]

In Oberstar's view, the coming wave of mergers "will put all of labor at risk." It's by no means clear what portents the merger might bring for Northwest's 11,500 Minnesota employees. [50] Customers and employees at Nye's Polonaise Room, the 1940s-era polka bar and restaurant across the river from downtown Minneapolis, listed a litany of potential drawbacks to a super-sized airline no longer calling the Twin Cities home. "Northwest -- that's what I fly and I've always flown," said Michelle Ramsey, who helps manage the intentionally dark Nye's, with its mix of Naughahyde booths, red-velvet wallpaper and portraits of long-deceased Polish generals.[26]

Michigan's largest passenger air carrier says the money is aimed at making sure Northwest has a CEO through the combination process. The airlines have said they expect to avoid front-line layoffs but that some administrative positions will be cut.[32] Eagan, Minnesota-based Northwest is Michigan's leading passenger air carrier and the dominant airline at Detroit Metropolitan Airport.[46]

Northwest owes the airport commission $245 million for bonds issued on the airline's behalf.[26] The airline, one of the region's top donors, and its employees contributed $1.3 million last year to the nonprofit.[26] Not a word about possible fare increases - which is understandable, given the congressional and regulatory reviews now under way. Those reviews will focus on whether the formation of the largest airline in the world in terms of traffic, with 75,000 employees worldwide, $35 billion in annual revenue, serving 390 destinations in 67 countries with 800 aircraft and hubs in nine big cities, would have what airlines have been seeking since the protective blanket of regulation was removed, leaving them shivering in the competitive market: pricing power. That doesn't seem likely. Only 12 of the nonstop city pairs that both airlines serve overlap, so there isn't much competition to eliminate.[14]

The proposed new airline will have $7 billion at the end of the year in liquidity.[3] 'There's going to be more capacity to come out of the deal,' said Mr. MacAdoo. The pessimistic view? If oil prices stay over $100 a barrel, every airline will be hemorrhaging cash this year.[9] The carriers argue that a combined airline will create economies of scale to help offset oil prices that have topped $115 a barrel, up more than 70 percent over the last year.[15]

On the revenue side, the airlines predict a gain of $300 million a year.[8]

The two airlines have signed an agreement that if either airline walks away from the merger, it has to pay the other 165 million dollars.[47] "Northwest flies direct to just about everywhere we want to go." Monday the two airlines announced they agreed on a merger.[39] Then Mr. Anderson threw in another twist, asking that the airlines' two pilot groups reach a common labor contract and agree between themselves to a seniority integration plan before the merger was announced -- something never before attempted in an airline merger.[10]

Within a few weeks, though, according to people familiar with the process, Mr. Anderson was making the rounds at other airlines. He visited executives of Northwest, UAL, and Continental to discuss the potential of a tie-up with each one.[10] There has been growing speculation that Continental and United will combine. Delta and Northwest executives will have to respond to how the industry is going to change, Mann said, "and how they figure this is pro-competitive when you go from six carriers to possibly three."[15] The subsequent industry downturn put carriers into a financial tailspin, ultimately driving Delta, Northwest and others into bankruptcy.[6]

Delta is based in Atlanta. Northwest has its headquarters in Eagan, Minn. The merged airline will be based in Atlanta. [29] Before we get ahead of ourselves, though, it is important to remember a potential Continental-United Airlines pairingthe two have been reported to be in discussionsis likely to be more complicated than it is for Delta and Northwest.[1]

"We will continue to work with the governor to save as many jobs as possible for Northwest Airlines not as Democrats or Republicans but as Minnesotans," House Majority Leader Tony Sertich, DFL-Chisholm said Wednesday. CEO and President of Minnesota Aviation Inc., based in Albert Lea, Mike Nevins said there won't be an immediate overall impact on his flight school because his students find jobs across the country.[39] Loading. A Northwest Airlines DC-9, built in 1976, taxis in front of similar planes at the airline's Detroit hub in this 2006 photo.[7] "Minnesota will be a wonderful place to live, a great place to visit and a place where businesses, and the people working for them, will prosper long into the future -- the potential loss of Northwest Airlines' headquarters notwithstanding."[26]

American Airlines might mount a rival bid for Northwest, especially if United and Continental merge, displacing Delta-Northwest as the world's largest carrier.[14] Older airplanes tend to burn more fuel, and Delta and Northwest have two of the oldest fleets among the major carriers.[8] Mr. Warlick has a B rating on Delta and B- ratings on four of the other five major carriers. He does not rate Northwest's debt.[9]

WSJ: Northwest employees have lots of concerns, as well. Mr. Anderson: There's uncertainty for both Delta and Northwest.[2] Oberstar's lifelong affinity for people who work and sometimes take risks for a paycheck translates directly into a concern for Northwest's unionized pilots, flight attendants and ground workers. In the Delta workforce, only the pilots are unionized, and they haven't been able to come to terms with their counterparts at Northwest over a merged seniority system.[50] Ray DuFour, Northwest's chief pilot in Detroit, said the pilots have become very conscious of the need to reduce fuel consumption. They're working with air traffic controllers to reduce in-air and tarmac delays that burn fuel while engines are running, and filing reports to management when situations arise -- like a ground crew that's late to help dock an incoming flight -- that cause a plane to burn more fuel than necessary.[8] Northwest recently traded in older food and beverage carts for lighter-weight models, saving 1.4 million gallons of fuel a year on international flights.[8] Northwest signed agreements with the state to maintain a Twin Cities hub, a certain level of air traffic and the headquarters. If those agreements aren't met, the state could ask for faster repayment of 245 million in outstanding loans and cancel 200 million worth of lease breaks over the next 20 years.[39] The new agreement also takes away a financial incentive for Steenland to leave in June. Northwest added $3.6 million to his payout if he leaves after the company changes hands, to a total of roughly $11.4 million, according to a regulatory filing.[31]

After some back and forth, Mr. Steenland also reluctantly agreed to give up any executive role and remain only as a director. If he stays employed until Delta completes its takeover, he will collect severance of at least $7.4 million in cash and benefits -- including accelerated vesting of his supplemental pension, according to an analysis by James F. Reda & Associates LLC. He also may be eligible for as much as $2 million to cover related taxes, according to the New York pay consultancy.[10]

We won't know whether to accept Delta's invitation to "Come Fly With Me" until the deal is done, new fares are set and we can stretch out in the almost 300 new aircraft on order or under option by the merger partners.[14] The merger will bring an unknown number of job cuts or transfers because of overlapping corporate and administrative functions, according to Delta.[39] "So the merger makes the local governments take a greater interest to make sure jobs are taken care of the local economy is not overly affected." Local officials believe they hold leverage over the merged airline.[26]

Although Congress has no direct role in the merger decision, Oberstar has pledged to press the Justice Department for ''vigorous scrutiny'' of the plan, which would locate the new airline headquarters in Atlanta.[40] The blitz of facts and figures didn't end questions about whether a merger would be good for customers, employees, shareholders and the cities the airlines serve.[11] A merger also can be a painful process for employees, which can affect customer service. Labor unions at United have taken a defiant stance toward management, saying their concerns must be addressed in any merger involving United.[41] Unlike many past mergers in our industry, the proposed Delta-Northwest merger is a merger with little overlap and without the need for employee furloughs, hub closures or elimination of destinations.[35]

Bottom line is that hubs and routes that were able to generate profits before the merger typically survive, and air service that struggled to make money before a merger often disappears after a merger.[36] The head of the International Air Transport Association says there ought to be more mergers because there are too many airlines.[47]

Passengers use self-service kiosks to check in at the Delta Airlines terminal at Logan International Airport in Boston on Tuesday.[36] Mr. Anderson: Given the past performance of the airline, Delta had a pretty nice and robust plan.[2] The combined airline would be called Delta, be based in Atlanta and have an enterprise value of 17.7 billion adding market values and net debt.[39] American Airlines has $4.5 billion, United $3 billion. Those cushions should protect them for a few quarters, but given the industry's ability to burn through cash, don't bet on it.[9] "In an environment of $115-a-barrel oil, much more is going to need to be done to restructure the industry," said Calyon Securities airline analyst Ray Neidl.[27]

The airline industry is in the midst of a major transformation as it works to address high fuel costs and heavy competition.[41] What would in the near term is the airlines' pre-merger plans to trim domestic seat capacity. That would not only cut fuel costs, but also reduce the supply of airplane seats and increase demand, so airlines can charge more for them and increase revenue.[8] High jet fuel costs appear to be a problem that airlines will have to wrangle with for the foreseeable future, if not permanently.[8] In the current viciously competitive environment, airlines are struggling to attract customers and most have been unable to raise fares enough to cover rising fuel costs.[41]

With reason. The single largest cost component is jet fuel, and while a bigger Delta might wring concessions from its caterers, it is not likely to persuade Opec to lower the price of oil. Nor will labour costs come down if management sticks to its plan to minimise layoffs.[14] One way the new Delta plans to save money is by putting the right plane in the right place at the right time. Empty seats don't generate revenue, but they still cost money to move.[8] Which brings us to two key questions. The new Delta expects to be able to wring better terms from some of its suppliers, to save between $400m and $600m by using the combined fleets better to match supply to demand, and to gain $400m in additional revenue from passengers, especially big corporate accounts, attracted by improved connections and reduced travel times.[14]

Shares in Delta closed at $8.75, down 12.6 percent for the week, while Northwest's stock ended at $9.69, down 11.6 percent.[11] Delta shares fell 55 cents, or 6.3 percent, to close at $8.20 on Monday, while Northwest shares fell 63 cents, or 6.5 percent, to close at $9.06.[18]

Northwest disclosed Friday that Mr. Steenland will receive 375,000 restricted retention units that will pay out in cash equal to Northwest's stock price as much as $22 a share on deal consummation.[10]

We've made that commitment. WSJ: Shares of both airlines have gone down since the deal was announced. Mr. Anderson: Two things: Right in the middle of this we've had fuel climbing pretty precipitously.[2] The Senate Judiciary subcommittee that deals with antitrust issues will examine the proposed combination during an afternoon hearing. Airline analyst Robert Mann of R.W. Mann & Co. based in Port Washington, N.Y., said the carriers have lined up "a couple of million dollars' worth of lobbying to help them out."[15] Some industry analysts have said the Delta-Northwest deal could have a detrimental effect on US Airways Group Inc., the dominant carrier at Charlotte/Douglas International Airport.[45]

The open skies pact has set the clock ticking on U.S. carriers to improve service. While their foreign rivals, from Europe to the Middle East to Asia, are ordering fleets of newer, more efficient jets, U.S. carriers have bought a relative handful of the newer planes. Northwest, for example, will be the first U.S. carrier to get a new Boeing Dreamliner, but it is still in the process of phasing out its fleet of DC-9s, which are among the oldest domestic planes still in service.[28] Northwest, in particular, needs new planes. It has the oldest fleet in the U.S. But, it also has the worst labor relations in the business.[44]

The airline promised, in return, to build an engine maintenance facility in Hibbing (minimum 500 new jobs) and to maintain three hangars in Duluth (1,000-plus proposed jobs). Northwest also promised to keep intact its 18,000-member Minnesota work force.[26] The airline is eager to capitalize on Northwest hubs in Amsterdam and Tokyo.[4] Northwest certainly didn't have any presence in the West, and that's Delta's only true hub in the West.[25] I think there is a lot of happy talk." Delta is not giving enough details about seniority or what it's they're going to do in cities where there is job duplication between Northwest and Delta, Church said.[3] Moak assumed the pilot group's top job in a closely contested race just as Delta headed into bankruptcy in 2005. A tough-talking Moak defiantly pronounced to his fellow pilots: "We will not be victims." Before long, though, Delta dumped its pilot pension plan -- forcing a takeover by a federal agency.[20] According to the New Delta and CA. Moak, 5100 NWA pilots will be working for lesser pay until a common contract is negotiated for the combined group (2012).[20] Has anybody ever thought that the New Delta could transfer the flying from Moak's higher paid pilots to the lesser paid NWA pilots.[20]

"While we all recognize that there are two sides to every story, an extended tit for tat exchange is counterproductive and only serves to pit pilots against one another, a tactic that has traditionally been reserved for airline management," Moak wrote. "That type of response will get us no closer to our goal of a single unified pilot group in the merged airline." [18] All along, Moak's team prepared for consolidation. His group raised $1 million to analyze the prospects for mergers.[20] In all, there were 46 mergers or acquisitions involving North American companies, worth a total of $11.31 billion in the week ended Sunday.[21] The union quietly hired merger and acquisition lawyers. "What we decided to do is prepare and become a driver or partner" in the event of a merger they could back, Moak said last week.[20]

To steer the merger through the regulatory obstacles, Delta hired R. Hewitt Pate, who ran the anti-trust division at the U.S. Justice Department from 2003 to 2005.[40] WSJ: When you took office last summer, you said there were no immediate plans to look for a merger ' that Delta would stick to its'standalone' plan.[2]

We have a standalone plan that we're comfortable with. It gives us the ability to continue to slug it out, if you will. Q: You've hit the Northwest pilots with a stick by going forward with this merger without them.[48] "We do business with a lot of businesses -- restaurants, companies that service aircraft -- who depend on Northwest, so the merger will affect us. It's also going to take a bad housing market and make it worse."[26] Mergers could be a way for major U.S. carriers to have deeper pockets for global competition and, at the same time, pare less-profitable domestic service.[28] "As the economy becomes more and more global,. business travelers are often traveling to destinations overseas, so it certainly is important for companies to be able to get people there more quickly and easily and to have carriers that have global reach," said Caleb Tiller, spokesman for the National Business Travel Association. For that reason, he said, there's a degree to which higher costs resulting from a merger are going to be acceptable to businesses.[41] Mergers allow carriers to assume more routes, more customers and more pricing leverage. They also provide an opportunity to eliminate high costs.[23]

Traditional merger scenarios treat employees not as stakeholders, but as another cost to be synergized. That is a recipe for disaster.[35] I would hope that the net effect is that we even increase the total number of jobs." Kline and many other Republicans say they want to learn more about the merger proposal before they line up for or against it. "Mr. Oberstar is the dean of the delegation and he's going to try everything he can to try and stop the merger, and I'm not sure that's the best thing for Minnesota, and for the employees, either," Kline said. Oberstar, with a reputation for exhaustive mastery of policy detail, has signaled that he will try to at least slow the federal government review of the merger plan, a strategy that one of his aides called "running out the clock."[50]

'''I think employees are smart enough to realize that'''s not going to be useful,''' said Murphy, a partner in Gerchick-Murphy Associates, a Washington-based airline consulting firm. That view isn'''t unanimous. Airline consultant Adam Pilarski said as details of the Delta-Northwest pact emerge, some employees might decide they'''ll be losers in the deal.[34] Mr. Siegel says that view will change, in time. "I believe what will happen is the airlines will claim not to be reducing capacity and eliminating jobs and then they will do their deals and at some point in the future say 'economic conditions continue to be challenging' " -- providing the cover for the necessary reductions.[23] Analysts say that limits the cost savings or higher fares the airlines could reap from the deal.[27] How that affects consumers really is dictated by the market, Anderson said. "Over the long run, the price of an airline ticket - just like filling up your car with gas or paying your home utility bill - has to reflect the full cost of fueling," he said.[3] "Airlines are trying to adjust to a higher cost structure," said Frontier chief executive Sean Menke.[41]

The Northwest-KLM joint venture (a longstanding marketing, sales, and route agreement between the two airlines on service between the U.S. and Europe) is very successful. [2] The U.S. airline industry has gone through consolidation in the past, but it doesn't solve all of the industry's problems, Hamlin said.[41] One constant of the U.S. airline industry since it was deregulated in 1979 has been change.[36]

The airline industry announced in 2007, Nevins said, the highest rate of retirement in decades and is expecting a pilot shortage.[39] With near record high oil prices and facing a struggling economy, the airline industry's viability is in serious jeopardy for the second time since the terrorist attacks of Sept. 11, 2001.[35] In the future, if there are fewer airlines and less competition, "there are always going to be particular times in individual markets when there will be cheaper seats because that's when most people want to go, but there won't be as many of them," Hamlin said. "That's almost inevitable if this industry is going to get its financial act together."[41]

Recent casualties to the industry's worsening environment are Aloha Airgroup Inc., Skybus Airlines Inc. and ATA Airlines Inc., all of which have filed for bankruptcy and shut down.[23] Moak, who turns 51 today, charted what industry observers call an unprecedented strategy for airline labor.[20]

"Scale is not going to solve the problem of low-price competition and rising fuel prices. They gain some market power," Arvai said. "But, as we look at the history of this industry, no one is able to sustain market power." If this is the dawn of the age of megacarriers, the chief beneficiaries may be the executives, lawyers and investment bankers who engineer the combinations, said Kevin Mitchell, chairman of the Business Travel Coalition. "They'll leave three huge dysfunctional families out there for someone else to fix," Mitchell said.[28] As fuel prices continued to soar during the day the whole industry got battered. Where I take stock is the important owners and the companies, the people who invested hundreds of millions of dollars in capital in the enterprise, these firms are pleased.[48]

The sputtering U.S. economy and surging oil prices suggest the industry is once again headed for a rough ride, after enjoying the two best years of the decade in 2006 and 2007.[9]

Revenue linked to the domestic portions of international travel increased more than 20 percent, by Gerchick-Murphy's estimate. That's why the size of the largest U.S. airlines may have less effect on the domestic market than it would have only a few years ago, in the view of analysts.[28] The history of airline combinations shows that travelers face a couple of years of more frequent missed connections, vanished reservations and lost baggage, flight delays and unhappy employees. Equally daunting for the companies, many airlines have ended up losing the assets they bought.[36] Now you're in a position for the airline to be much stronger. You want this to be a good place to work for all employees.[2] Northwest employees also gathered 4,000 pounds of food, built furniture, sorted clothes and volunteered in myriad other ways for local United Way clients in 2007. "Even during tough times, their support for us has not wavered at all," Segal said.[26]

The two principal manufacturers used by Delta and Northwest - Boeing and Airbus - are booked with orders for several years. [6] Analysts predict Delta and Northwest will eventually have to cut more capacity.[27] Northwest (which has a strong route network to Asia, compared with Delta's strength across the Atlantic and to Latin America) is going to get a much more powerful network behind it.[2] Merging would let the new Delta better match each jet to the number of passengers on a route, executives said.[11] Stark said, Moak failed to get pilots enough pay and benefits from Delta executives.[20] "There is an arrogance and condescending attitude toward the pilots group," said Mike Stark, a Delta captain in Marietta who helped lead a recent unsuccessful campaign to oust union leaders.[20] Delta only flies Boeing and now with the Airbus aircraft what costs are not going to have to be factored in for mechanical work and cross training of pilots.[14]

The biggest cost savings -- up to $500 million a year -- would come from better matching planes to routes.[8] Northwest also stands to lose an additional $200 million in lower rent and airport concession revenues if the hub or the headquarters leaves.[26] "If the headquarters moves, the $245 million becomes due and payable," said Lanners, the airport commission chairman. "That's not chump change, even for a $10 -20 billion merged entity. That agreement will get us to the table and define the parameters of exactly what's going to happen."[26] Sweetener: Under his old agreement, Steenland would have received roughly $7.8 million for leaving after a deal. He could have received the same $7.8 million by leaving in June.[31]

Even if the proposed deal survives regulatory scrutiny and labour retaliation, achieving the estimated $35 billion in annual revenues touted by the carriers' top executives could prove to be arduous.[17] For the year to date, dealmaking rose to 1,109 deals valued at $183.92 billion, far below the 1,588 transactions worth $502.16 billion at the same time in 2007.[21] Record Energy Prices: Crude-oil futures closed Friday at a new high of $116.69 a barrel, up 6% for the week, while gasoline and heating-oil contracts also set records. Blockbuster Deal? Blockbuster made an unsolicited offer for Circuit City Stores of more than $1 billion; both companies have struggled recently.[22] In the prior week there were 51 deals valued at $18.04 billion, according to data provided to CFO.com by mergermarket.[21]

Jeffrey Immelt: The General Electric CEO's job is safe. Still the conglomerate's surprising earnings miss last Friday has raised questions about his strategy resulted in criticism from former CEO Jack Welch (he backed away from his remarks a day later) and renewed calls for the Dow component to be broken up. G. Kennedy Thompson: The Wachovia CEO is regretting his firm's $25 billion takeover of Golden West Financial this week, blaming it for the company's first-quarter travails. Wachovia announced this week it is raising about $7 billion in capital, slashing its dividend 41% and logging a first-quarter loss of $393 million.[1] Grove International Partners LLP, J.C. Flowers & Co. LLC, and Shinsei Bank Ltd. to buy a 24.9-percent stake in Hypo Real Estate Holding AG for $1.80 billion A consortium of New York-based private equity firm J.C. Flowers, Tokyo-based Shinsei Bank, and London-based investment bank and private equity firm Grove International agreed to acquire Munich-based Hypo Real Estate for $35.87 a share, a premium of 21.8 percent. Caja Madrid (Caja de Ahorros y Monte de Piedad de Madrid) to buy 83 percent of City National Bank of Florida from City National Bancshares for $927 million The Madrid-based credit and savings bank agreed to pay cash for the 83- percent stake in Miami-based City National Bank from its Newark, N.J. -based parent, a bank holding company.[21] Manitowoc Co. Inc. to buy Enodis Plc from for $2.07 billion The Manitowoc, Wis. industrial equipment and machinery company agreed to acquire all outstanding share capital of London-based Enodis in a $5.08-a-share ex-dividend cash transaction that offers a premium of 82.3 percent.[21]

Sure regulators may object to a more permanent pact, but at the very least, the test seems to have provided Yahoo some needed leverage as it tries to ward off an unwelcome $42 billion bid from Microsoft. John Thain: How strong is investor confidence in his ability to turn around Merrill Lynch? Consider this: Merrill posted a $1.96 billion first-quarter loss, is in the process of cutting 4,000 jobs, logged $6.6 billion in fresh write-downs in the quarter and its $2.19-a-share loss was steeper than the $1.99-a-share loss expected by analysts polled by Thomson Reuters. Instead of Merrill's shares tumbling, they jumped 4.1%.[1] Wall Street Woes: Merrill Lynch posted a $1.96 billion quarterly loss after $6.6 billion in write-downs and said it will cut 4,000 jobs.[22]

"You don't have to like it. It is what it is, and stuff's going to happen." This new period, he warned, "will be painful." More carriers will file for bankruptcy, he said, more flights will be cut, more jobs will be lost and more hubs will retract and close, just as Pittsburgh's did under Mr. Siegel's watch.[23] Independent of the consolidation, carriers including United -- the largest carrier at Denver International Airport -- and Continental are already planning to ground planes and cut back on domestic flight capacity.[41]

For beleaguered air travelers, further industry consolidation may lead to fewer flights, more confusion at the airport and even more crowded planes.[36] More than 100 planes from across the nation arrive at the DHL-owned Ohio airport between 10: 30 p.m. and 2: 30 a. m., and the freight is sorted so flights can depart later that morning, said Beth Huber, a spokesman for ABX Air, the company that runs the DHL airport.[38]

"If you think the service today isn't very good and the planes are old, maybe the customer would be better off with a bigger company, arguably able to compete on a global scale, arguably more profitable," said airline analyst Patrick Murphy.[28] Jon Ash, airline consultant at Global Aviation Associates in Washington, argues that bigger carriers might not necessarily pull back on domestic service, however.[28]

The combined forces would make the biggest airline carrier in the world when dealing with air traffic.[39]

An airline saves money by matching a plane's capacity to demand along a certain route. Some critics of the Delta-Northwest deal say their combined fleet would be a messy combination of numerous makes -- Boeing, Airbus, Bombardier, Saab and Embraer -- and would be costly to maintain.[8] Carriers plying Pacific routes are facing increased competition from low-cost, high-service Asian carriers, and the new "Open Skies" deal opens transatlantic routes to increased competition by allowing European and American carriers to invade each others' markets.[14]

Mr. Steenland agreed to give up the Northwest name and let the new carrier be based in Atlanta.[10] Northwest is scheduled to be the first U.S. carrier to get the widely anticipated Boeing 787 Dreamliner, but Boeing repeatedly has pushed back the delivery time, now into 2009. ''For the short term, they have to fly with what they have,'' Hamilton said.[6]

The past few weeks has seen four smaller U.S. airlines ''' Aloha, Skybus, ATA and Frontier ''' file for bankruptcy, says the magazine. "Maxjet, an all business-class transatlantic airline, went bust in December; its rival Silverjet is desperately looking for a buyer.[13] U.S. airlines were due to start making big investments in modern aircraft as the new century dawned, only to run up against a recession and the 9/11 terrorist attacks.[7]

"Whenever you put two airlines together, union members always pay a price," said Evergreen-based aviation consultant Mike Boyd. [41] '''There'''s no doubt in my mind fares are going to go up,''' said Rick Seaney, CEO of FareCompare.com, which tracks changes in airline ticket prices. '''Consumers are deluding themselves if they think that'''s not the case.'''[34] Ernie Arvai, an airline analyst in Windham, N.H., draws a similar conclusion about big airline marriages. "Does it solve their fundamental problems? No. Does it buy them some time? Yes," Arvai said.[28] No one is capable of pleasing everyone all the time, but at least Moak has the fortitude to do something rather than nothing. Sparton, anachronistic is a big word for someone who has put no thought what so ever into your post, in fact it is you out of touch unions are not dying out and most union members i know, know what there self worth is reason they are in a union in the first place, after all its there skills for sale why sell yourself short.[20]

Northwest is known for having very difficult unions, old old aircraft and not known for the best service.[14]

The Northwest saga strikes a more discordant note than just the loss of jobs and corporate prestige. For years, Minnesotans have taken pride in their state's robust economy and enviable standard of living.[26] Minnesota will retain, for now, a hub, call center and thousands of mechanic, flight attendant and pilot jobs.[26] Four Seasons Vacations President David Nelson said the Northwest hub in Minneapolis is one because the company is based and began there. With the corporate headquarters moving to Atlanta, he said it isn't practical to be a hub anymore because it is so far north, so travelers may see less direct flights.[39] In an interview with The Tribune, Bastian also raised the possibility of a flight to Northwest's hub in Amsterdam from SLC. "When we do run the numbers, we are going to see Salt Lake-to-Amsterdam also works."[25] Northwest now flies 16 Boeing 747-400 aircraft, which can carry about 400 passengers to points halfway around the world without stopping. They're used for flights between the Northwest hubs in Detroit and Minneapolis/St. Paul to destinations such as Tokyo, as well as on some intra-Asia flights.[8]

Northwest operates a hub in Tokyo and has routes to other cities in Japan, as well as to Thailand, the Philippines, Singapore and Taiwan.[3] United Airlines bought Pan American's Miami hub and South American routes - and lost all of it to competitors.[36] The thinking is that fewer, larger airlines will enjoy better pricing power, be able to cut marginal routes and seats,.[24]

Executives also acknowledge that there is tremendous complexity involved, and to merge airlines is far more difficult than simply changing airport signs and repainting airplanes.[36] The executives met with two different groups of employees Friday - employees at the Delta phone reservation center and employees at the airport.[3] Mike Campbell, Delta's executive vice president of human resources, said "there may be some involuntary furloughs on the management and the administrative side."[26]

Regarding Comair (a Delta subsidiary), Bastian said a decision has not been made as to whether Comair is owned by Delta or is a stand-alone company. He said even if the decision is made to make Comair a stand-alone company, the regional carrier will still have a long-term contractual relationship with Delta. He also said the local hub supports itself.[29] "We are confident that Delta's actions are not supported by the terms of the Connection Agreement, that we have complied with all of our obligations under that agreement and that Delta's effort to terminate the agreement will not be upheld in a court of law," Mesa Chairman and CEO Jonathan Ornstein said. Boyd said both SkyWest and Republic have a "good future" because they have invested heavily in larger regional jets. Many of the 50-seaters will have to go, he contended. "They are fast becoming litters of kittens--cute but nobody wants them."[30] While Steenland sits on the United Way board, and Delta CEO Richard Anderson, an ex-Northwest CEO, once did, there's no guarantee the million-dollar-a-year donations will continue.[26] Delta CEO Richard Anderson last week argued that the diversity of aircraft is a strength, not a weakness.[6]

Mr. Anderson agreed. Mr. Steenland, 56 years old, said Mr. Anderson dealt with him in good faith throughout the negotiations. "An overall merger transaction is very difficult and complex," he said. "It was helpful to have had the 15-year relationship Richard and I had."[10] After a two-hour meeting with 150 workers, Anderson said most support the merger, which would create the world's biggest carrier, measured by passenger traffic.[5]

Steenland now gives up the payout for leaving in June. He receives $11.4 million or more if he stays and the merger is consummated, or $3.6 millionvesting over four yearsif the merger falls apart.[31] Minnesota bailed out Northwest in 1992 with $761 million in loans and incentives.[26] In our M&A; Roundup for the week ended April 20, a tepid week was led by its $7.12-billion proposed acquisiton of Northwest.[21]

Moak predicted, "Northwest pilots will be on board shortly. It's a temporary problem and we'll work through it together."[20] The bitter retired pilot is funny. He wanted the active Delta pilots to take even MORE sacrifice to save him and HIS pension.[20] What we were trying to do is something that has never been tried before in the industry. This is the first time ever that anyone has approached the pilots in advance of a transaction to see if we could get it all done in advance.[48] Only 22 percent of the association's members - corporate travel managers responsible collectively for $170 billion in annual spending for about 7 million business travelers - said an industry consolidation was "a positive development."[11] The sum total of all that efficiency is $600 million to $800 million a year. It will take two or three years to get there.[48] Delta/Western carried 12.4 percent of all passengers at LAX in 1988, the first full year after their 1987 merger.[36]

Bastian: No. There were questions raised as to why we were not closing hubs. Strategically this is a merger of addition not subtraction.[48]

In exchange for hundreds of millions of dollars of state aid, Northwest vowed to build an engine facility, maintain three hangars, hire thousands of workers, and keep the hub and headquarters in Minnesota.[26]

While '''open skies''' liberalisation offers up an opportunity on international routes, the financial clout and modern planes of the big European network carriers, like Air France-KLM and Lufthansa, remain a threat. [13] The popularity of that flight will influence whether other international flights will come into Salt Lake City. "I think we'll have a better understanding of these international routes once we have (begun) that one," Bastian said.[3]

"At the end of the day, what does that mean for the consumer? At some point, if done properly, it is going to mean higher prices." While it remains unclear exactly how the changes will reshape the industry over the long term, it's likely to mean strained customer service, fewer flights and fewer choices of carriers for consumers.[41] Giovanni Bisignani says no carrier has more than 5% of the world market and no other industry are so fragmented.[47]

"But what is an issue is the cost. It's going to mean higher maintenance costs as the planes get older, and they will not be fuel-efficient." Another problem is that in a global market, U.S. carriers may well find themselves operating at a competitive disadvantage as foreign carriers leapfrog them, offering travelers quieter, more modern equipment. Reader Reaction These discussions and our forums are not moderated. [7] "Where's the room for Frontier?" Hamlin said. "It's a nice carrier, a good product, but they may find themselves in an atmosphere where (they're) starved for oxygen." Others, including Menke, say consolidation will help Frontier because it will be able to more easily raise fares to cover high fuel costs. Such issues are key in Frontier's efforts to restructure under bankruptcy protection.[41] In recent months, the cost of jet fuel has escalated to unprecedented levels, forcing five small carriers to declare bankruptcy.[5]

Had that takeover attempt succeeded, it would have cost thousands of jobs, created monopolization in key business markets, and eliminated customer choice, all in the name of a short-term financial gain for a few. [35] All of which has stirred the ire of shareholders, who want the board to turn up the heat on Thompson. Stan O'Neal: Perhaps we are piling on here, considering he left months ago. Merrill Lynch did post its third consecutive quarterly loss this week and will cut 4,000 jobs, thanks to the damage from its risky credit-market activities under O'Neal.[1]

Oil prices hit another record high Friday, reaching over the $116-a-barrel mark for the first time, more than double the $55-a-barrel price of a year ago. [8] Some analysts argue that the oil price is inflated, but that's a position many have held since it passed $30 a barrel in the run-up to the U.S. invasion of Iraq. Now, when they talk about a drop in prices, they mean to $80 or $85.[8]

The two companies cited record high fuel prices and a slowing economy as reasons to combine in a stock-swap deal. [39] What we saw over the course of the rest of the year was fuel go to $117 a barrel and the economy getting worse.[2]

Q: You are trying to blend a lot of union employees with a lot of non-union employees. Anderson: It's always a leadership challenge when you undertake putting two big companies together. [48] We came close, but through no fault of any party the pilots. couldn't reach agreement on seniority integration.[48] If the Letter of Agreement between DAL Pilots and DAL management is approved, we could see 5100 NWA pilots out of ALPA before the meger takes place.[20]

SOURCES

1. Deal Journal - WSJ.com : Winners & Losers From the Week That Was
2. Deal Journal - WSJ.com : Q&A; With Delta Chief Richard Anderson
3. Deseret News | S.L. workers are safe in merger, Delta says
4. Mohave Daily News: Business
5. Megacarrier elevates travel options - Salt Lake Tribune
6. Delta-Northwest merger: New carrier,old planes - Salt Lake Tribune
7. CapeCodTimes.com - Aging fleets pose challenge to US airlinesbsb
8. Airlines' merger would help offset cost of fuel
9. More airline deals readied for takeoff - Financial Week
10. Delta Chief's Fancy Footwork - WSJ.com
11. The Enquirer - What does airline deal mean?
12. LancasterOnline.com:Local Business:Delta, Northwest merger is flying in the face of fear
13. Delta & Northwest: two wrongs don't make a right - commentary > AviationRecord > Search Results
14. Delta flies into tie-up on a wing and a prayer - Times Online
15. Delta, Northwest take merger case to Congress | ajc.com
16. What lies beneath the big merger
17. Comment - wait and see
18. Delta pilots open to arbitration with Northwest pilots
19. Delta Pilots Open To Arbitration - Fulton County Headlines News Story - WGCL Atlanta
20. Union chief Lee Moak had key merger role | ajc.com
21. Deals: Delta Flies Away with the Honors - - CFO.com
22. Delta, Northwest Testify About Merger Plans - WSJ.com
23. Consolidations, bankruptcies have airline industry on edge
24. Free Preview - WSJ.com
25. SLC hub sure to survive, thrive - Salt Lake Tribune
26. In Twin Cities, a loss of jobs and status | ajc.com
27. NWA merger may hurt shares | Freep.com | Detroit Free Press
28. Delta-Northwest pairing likely sets stage for more mega-mergers
29. Community Press - Delta says it committed to CVG
30. ATW: Delta/Northwest merger may lead to reduction of 50-seat RJs
31. Northwest Airlines CEO offered bigger payout at merger's end -- chicagotribune.com
32. WZZM13 - NWA boosts payout for Steenland if he stays for Delta deal
33. MPR: Pawlenty meets with NWA, Delta leaders
34. Stay home: Analyst warns of airport long lines, high prices - Quincy, MA - The Patriot Ledger
35. Piloting toward 'right' merger | ajc.com
36. Mergers hold checkered track record - Salt Lake Tribune
37. Merger Won't Affect Comair Service - Business - redOrbit
38. NWAnews.com :: Northwest Arkansas' News Source
39. The Albert Lea Tribune
40. Delta hires lobbyist team to help push big merger - Salt Lake Tribune
41. Merger, they're writing - The Denver Post
42. WREG-TV Memphis - Will Delta, Northwest shareholders have their day?
43. Northwest-Delta Deal Breakup Fee is $165 Mln; CEO Gets Retention Package - International Business Times -
44. Mergers Turn Into Crackers For Consumers
45. Northwest CEO to get up to $8.25M to stay through Delta merger - Charlotte Business Journal:
46. WTOL.com, Toledo's News Leader, News 11 | Delta pilots open to arbitration with Northwest pilots
47. BANKOH, Korean Visas and Crude Oil | KGMB9.com | Airlines, Says, Oil, Korean, Debt
48. Q&A; with Delta executives
49. One-time bonus to keep CEO at Northwest - Sacramento Business Journal:
50. Oberstar wants to run out the clock on merger

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