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Delta, Northwest Boards May Vote on Combination

AP
Tuesday, 19 Feb 2008 | 5:03 PM ET

The boards of directors of Delta Air Lines and NorthwestAirlines were expected to vote Wednesday on a combination provided their pilot unions can reach their own integration deal by then, people briefed on the discussions said Tuesday.

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

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

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

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

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

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

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

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

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

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

The head of Delta's pilots union said in a letter to members last week that in a typical situation once a corporate merger is publicly announced by the participating companies, each pilot group's elected leadership would analyze the deal, seek input from advisers and eventually decide whether to oppose the combination or enter into the combination process.

He noted that US Airways and America West followed the typical approach following their 2005 announcement that the two carriers would combine, but nearly three years later a joint pilot contract has yet to be reached.

That, he said, has resulted in the pilots of those two carriers not being able to capture any meaningful value from the merger transaction.

The possibility of a Delta-Northwest combination has led Minnesota Gov. Tim Pawlenty to cancel an out-of-state trip.

Pawlenty was due to fly Tuesday to Las Vegas to address a renewable energy conference.

But his spokesman said the trip was called off because of "ongoing activities involving Northwest and Delta."

Spokesman Brian McClung said the administration hasn't gotten any word that a deal is about to happen, but Pawlenty wants to "be able to stay in direct contact with staff and commissioners in case his involvement is needed."

The Republican governor said it's too soon to say if he'll fight the merger because he doesn't know what a combined Northwest-Delta company would mean for Minnesota. Northwest employs 11,500 people in Minnesota.

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