Deals and IPOs

Pilots Dispute Could Hit Northwest, Delta Deal

AP and Reuters

Leaders of the union representing pilots at Delta Air Lines and Northwest Airlines have yet to reach a deal on the integration of seniority lists if the two airlines were to merge, a spokesman for Northwest's pilots union said Wednesday.

Matt Coons, spokesman for Northwest's chapter of the Air Line Pilots Association (ALPA), said the pilots cannot sign off on a merger without a deal that is fair to all pilots.

Seniority integration is the only key issue that has yet to be resolved, Coons said. ALPA represents pilots at both airlines.

The impasse among pilot negotiators over blending seniority lists put a $20 billion deal to combine Delta Air Lines and Northwest Airlines in "serious jeopardy", two people close to talks told The Associated Press.

Deal on the Runway?

They said late Tuesday that the pilot talks were expected to continue Wednesday, but if no agreement is reached, a deal on a combination of the two airlines  would be in real trouble.

The boards of both companies were expected to vote on a combination agreement Wednesday if a pilot deal is in place by then. Otherwise, they were expected to just get an update on the merger talks, three people close to the talks said.

One of the officials close to the talks said Northwest's board might only meet by teleconference or, if things fall apart, not meet at all.

A Delta spokeswoman declined to comment on consolidation issues involving Delta.

Delta has previously said it was considering a possible consolidation transaction, but it has not commented beyond that.

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 , 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.

There also is interest coming from outside the U.S. as trade restrictions on trans-Atlantic travel loosen this year and major European airlines are enjoying the benefit of a strong euro.

There was also a separate report in the Chicago Tribune that said Lufthansa is talking about taking an equity stake in UAL and investing in a merger between United and Continental Airlines.

Air France KLM has already indicated that it would invest in a merger between Delta and Northwest airlines, according to the the Tribune.

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.

One of the people close to the talks said Tuesday night that a small group of Northwest seniority list pilot negotiators want thousands of young Delta pilots to go to the bottom of the combined seniority list as part of agreeing to a dealon seniority. The person said that was a major hang-up.

A spokesman for the Northwest pilots union, Greg Rizzuto, did not immediately return a call and a page to his cell phone seeking comment.

The pilots from both companies have agreed to a significant equity stake for the pilots, including raises for some, one of the people close to the talks said.

However, a second person close to the talks said it was not clear that the equity issue had been resolved.

Much of the terms of how the combined carriers would operate had been resolved as of Tuesday, two people close to the talks said. The combined carrier would be based in Atlanta, would be called Delta and Delta's chief executive, Richard Anderson, would be head of the new company, the people said.

It remained unclear what role Northwest's CEO, Doug Steenland, would play in the combined carrier, the people said. A combined Delta-Northwest would maintain a  substantial presence in Minneapolis and there would be no furloughs for  front-line U.S. employees, the people said. The two airlines have roughly 85,000 total employees.