Delta exec: Oil price spike won't derail NWA merger
Delta also intends to grant voluntary buyouts to more than 3,000 workers.
By LIZ FEDOR, Star Tribune
Last update: May 30, 2008 - 12:27 AM
Jim Mone, Associated Press
The rapid rise in oil prices may have discouraged other airlines from proposing mergers, but Delta Air Lines President Ed Bastian said his carrier's merger deal with Northwest Airlines has been successfully "pressure tested" with oil prices at more than $135 a barrel.
Long before oil hit that price last week, Bastian said Delta's executives and board members looked at merger models that assumed oil at $135 a barrel and higher.
"We affirmed to ourselves back then, before oil did reach these levels, that [a merger] still made sense," Bastian told the Star Tribune.
But Bastian acknowledged that the heavier fuel-cost burdens that Delta and Northwest are facing has prompted their executive teams to try to speed up the financial benefits of the merger.
When the deal was unveiled in mid-April, oil was around $110 a barrel.
The two airlines' executives had estimated that it would take three years to fully capture about $1 billion in merger synergies -- cost savings and revenue growth.
Now, Bastian said, merger teams have been asked "to come in with a shorter time frame towards achievement of the synergies and a higher number." Ultimately, he expects the merger benefits to be "substantially north of $1 billion."
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Delta also intends to grant voluntary buyouts to more than 3,000 workers.
By LIZ FEDOR, Star Tribune
Last update: May 30, 2008 - 12:27 AM
Jim Mone, Associated Press
The rapid rise in oil prices may have discouraged other airlines from proposing mergers, but Delta Air Lines President Ed Bastian said his carrier's merger deal with Northwest Airlines has been successfully "pressure tested" with oil prices at more than $135 a barrel.
Long before oil hit that price last week, Bastian said Delta's executives and board members looked at merger models that assumed oil at $135 a barrel and higher.
"We affirmed to ourselves back then, before oil did reach these levels, that [a merger] still made sense," Bastian told the Star Tribune.
But Bastian acknowledged that the heavier fuel-cost burdens that Delta and Northwest are facing has prompted their executive teams to try to speed up the financial benefits of the merger.
When the deal was unveiled in mid-April, oil was around $110 a barrel.
The two airlines' executives had estimated that it would take three years to fully capture about $1 billion in merger synergies -- cost savings and revenue growth.
Now, Bastian said, merger teams have been asked "to come in with a shorter time frame towards achievement of the synergies and a higher number." Ultimately, he expects the merger benefits to be "substantially north of $1 billion."
Link
