NWA, Delta feel pressure to seal a merger before opportunity ends
Glen Stubbe, Star Tribune
Analysts question whether either airline could thrive on its own and say a consolidated carrier could operate more efficiently.
Northwest Airlines and Delta Air Lines executives recognize time is growing short to propose a merger that could win regulatory approval before President Bush leaves office, and they now are seriously discussing multiple merger options.
By LIZ FEDOR, Star Tribune
Last update: April 8, 2008 - 7:42 AM
Northwest Airlines and Delta Air Lines executives recognize time is growing short to propose a merger that could win regulatory approval before President Bush leaves office, and they now are seriously discussing multiple merger options.
Some analysts view the airlines as likely to move quickly, because of that narrowing political window and the threat of growing unrest among many shareholders who are demanding consolidation.
A person familiar with the talks said Monday that the airlines could elect to follow a traditional path, announcing a merger and leaving the integration of their union pilot ranks until after the combination receives federal approval.
Delta CEO Richard Anderson, who would lead the merged carrier, and other executives wanted to secure a pilot agreement in advance of a deal, partly because the new airline could avoid a protracted and bitter dispute among the two pilot groups.
If the pilot groups fail to negotiate a seniority deal after a merger takes effect, the Air Line Pilots Association policy allows arbitration to be triggered to resolve the dispute.
Another possible merger strategy involves moving ahead with what some have called a "lite merger" in which there would be only one set of top executives, but Delta and Northwest would continue to operate separately.
However, that approach would be strictly an interim step because it would achieve limited efficiencies. In addition, current pilot labor contracts at both airlines "require that the operations of the airlines be integrated shortly after the negotiation of a combined collective bargaining agreement and seniority integration," said a second source familiar with the talks.
Third option floated
A third option involves the executives informing the two pilot groups that they intend to proceed with a merger, but they want the pilots to make one last attempt at reaching a deal on seniority.
The two airlines have had a merger agreement ready since February, with the combined company to be based in Atlanta.
In February, the airlines executives also negotiated a four-year labor deal with the two pilot groups that called for double-digit wage increases. That new contract was designed to be an inducement for pilots to negotiate the integrated seniority list that would allow the merged airline to combine fleets from the outset. So far, the two pilot groups have failed to reach an agreement.
Now, a news source said, "The one wild card is whether or not you can still achieve enough synergies without having a pilot deal up front."
Talks between the two pilot groups might begin again this week.
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