Delta, Northwest Said To Be Close To Combination

AP

Delta and Northwest could announce a combination as early as Tuesday that would create the world's biggest airline, but pilot contract issues still loomed and there was no guarantee the deal would move ahead, three people familiar with the talks said Sunday.

The people, who spoke on condition of anonymity because of the sensitivity of the situation, said officials were mobilizing for an announcement provided the boards of the two companies give final approval to a deal.

The boards of both companies have been having ongoing merger-related conversations. They could meet Monday to discuss moving ahead with a deal, a person familiar with the talks said.

It was increasingly likely the two airlines would proceed without a prearranged seniority integration agreement between their pilots unions, so the main issue that remained was whether Delta pilots were willing to make changes to their contract to give Delta more flexibility after a combination, one of the people said.

Delta may be willing to give incentives to Delta pilots to make changes to their contract, another person familiar with the talks said.

The changes being sought are related to the scope section in the Delta pilot contract, which in part spells out what planes pilots fly and what routes they fly, people familiar with the talks said.

Any changes to the contract, including financial incentives, would apply to only Delta pilots since their contract only governs that airline's pilots. Northwest pilots have a separate contract.

A memo sent Friday from Delta's pilots union to its members said union leaders were meeting in special session in Atlanta. It didn't say what they were discussing. That meeting continued Sunday, people familiar with the talks said.

Northwest pilot union leaders were meeting separately Sunday in Minnesota. Their meeting was described mainly as informational.

The usual approach in airline combinations has been to have pilots work out a joint union contract after a deal is announced. Atlanta-based Delta Air Lines Inc. and Eagan, Minn.-based Northwest Airlines Corp. took a different approach in their talks for months, figuring that if they could obtain full pilot agreements in advance they would reap the benefit of a combined airline much sooner.

With that in mind, pilots were in line to get raises and equity in the combined company. But the two groups couldn't agree on seniority, which determines who flies more desirable aircraft and routes.

Now, the rising cost of oil has put all airlines under intense financial pressure. Since the talks began, Delta and Northwest have announced plans to reduce capacity this year, and Delta has announced plans to eliminate 2,000 jobs.

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

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