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Delta CEO: Good Merger, Tough Business

By CNBC.com
Friday, 16 May 2008 | 7:37 AM ET

The chief executive officer of Delta Air Lines said Friday that his airline's pending merger with Northwest Airlines is on track and should be in force by next year.

"We're very confident with regulators that we're going to get approval by the end of the year," Delta CEO Richard Anderson said on CNBC's "Squawk Box."

Delta Air Lines and Northwest Airlines Corp said in April they planned to merge. The move would make the world's largest airline.

Proponents of the merger believe it would counter rising fuel prices and growing competition from European carriers as trade barriers fall on trans-Atlantic travel.

Delta CEO
Insight on the merger, with Richard Anderson, Delta CEO and CNBC's Joe Kernen

"The airlines that are in existence today are all a product of consolidation," said Anderson. (See his full interview in the accompanying video).

But skeptics have argued that getting larger may not be the answer.

"It is a very tough business," Anderson admitted. "There's no question about it, and if you look at the history of the business since deregulation, I think Warren Buffett had once said that it's a business he wouldn't invest in, because of the cyclicality, but, that's really what our challenge is. Our challenge is to change the business model in a way that creates a lot more durable franchise, and that's what we're about."

Standard & Poor's Ratings Services said, in a report on how United States airlines are coping with rising jet fuel prices, that the proposed merger of Delta and Northwest Airlines offers potential financial gains, but also material risks.

"We believe overall, it probably isn't as beneficial as its supporters promise or as dire as its critics suggest," said Philip Baggaley, Standard & Poor's senior airline credit analyst.

The Delta-Northwest combination may lead off a whole round of consolidation. United Airlines has begun talks with Continental Airlines Inc for a possible alliance even as its merger talks with US Airways continue to advance, sources briefed on the matter said. American Airlines is also believed to be talking to possible partners.

Click here for more about possible airline mergers.

-- Wire services contributed to this report.

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