Northwest and Delta Join At Last

Nov. 6, 2008
At the conclusion of a six-month US Department of Justice (DoJ) investigation, approval of the merger of the two airlines was allowed

At the conclusion of a six-month US Department of Justice (DoJ) investigation, approval of the merger of the two airlines was allowed. It could be a year or two before consolidation is completed and the resulting entity operates as one.

A number of challenges had to be met before Delta Air Lines could complete its acquisition of Northwest Airlines, including the okay from the DoJ. Stockholders had to agree, which they did, and pilots for the two airlines had to settle differences regarding matters of seniority and more.

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Pilots for the two airlines did reach an agreement. As the merger for the airlines was announced, Captain John Prater, president of the Air Line Pilots Association, International, noted that as a result of efforts by both pilot groups they would be working with both carriers under a single bargaining agreement.

“This success story should also serve as a model for senior executives elsewhere that corporate success in the coming years, whether through transactions, joint ventures and alliances, or on a stand–alone basis, requires close cooperation and agreement with pilots and other employees,” claimed Captain Prater. “The benefits of engaging pilots at the earliest opportunity and at every point during the process cannot be overstated.”

In a statement explaining its decision to close the investigation into the merger, the DoJ claimed that it would, “produce substantial and credible efficiencies that will benefit US consumers and is not likely to substantially lessen competition.” It continued that in its view, “the merger likely will result in efficiencies such as cost savings in airport operations, information technology, supply chain economics, and fleet optimization that will benefit consumers. Consumers are also likely to benefit from improved service made possible by combining under single ownership the complementary aspects of the airlines' networks.”

Northwest is now a wholly owned subsidiary of Delta. Customer-facing technology will be integrated and Delta will continue to operate the airlines’ separate web sites as well as reservation systems and loyalty programs. The Northwest Cargo web site takes note of the merger and advises that customers can expect business as usual with no immediate changes in operations.

The company anticipates incurring one-time cash costs of $600 million to be used for integrating the two airlines. The new company says it expects to realize $2 billion or more in annual revenue and cost synergies to result from better use of aircraft, a more comprehensive and diverse route system and savings from reduced overhead and improved operations.

In commenting on the merger, Richard Anderson, Delta’s CEO, says, “The airline industry faces a very difficult economic environment around the world and this merger gives Delta increased flexibility to adapt to the economic challenges ahead. With much of the work to bring our airlines together well under way, the new Delta will be at the front of the pack in achieving the benefits of consolidation and is well positioned to navigate the tough waters ahead in a difficult economy.”

Delta is the country’s third largest airline. Northwest is the fifth largest carrier in the US. Together they claim service to 66 countries and 375 cities worldwide, with 75,000 employees around the globe.

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