Delta and Northwest Agree to Merge

[Matt Molnar]

Delta and Northwest Agree to Combine (http://biz.yahoo.com/ap/080414/delta_northwest.html?.v=14)
Monday April 14, 8:39 pm ET
By Harry R. Weber, AP Business Writer
Delta, Northwest Agree to Combine in Stock-Swap Deal That Would Create World's Biggest Carrier

ATLANTA (AP) -- Delta Air Lines Inc. and Northwest Airlines Corp., squeezed by record high fuel prices and a slowing economy, are combining in a stock-swap deal that would create the world's biggest carrier. The boards of both companies gave the deal the go-ahead Monday.

Delta said the combined airline, which will be called Delta, will have an enterprise value of $17.7 billion. It will be based in Atlanta, and Delta CEO Richard Anderson will head the combined company.

Under the terms of the transaction, Northwest shareholders will receive 1.25 Delta shares for each Northwest share they own. The exchange ratio represents a premium to Northwest shareholders of 16.8 percent based on Monday's closing stock prices. [Full Article (http://biz.yahoo.com/ap/080414/delta_northwest.html?.v=14)]

[stuart schechter]

WOW... Consolidation at its best. It was bound to happen and I think that there will be much more of this in the future.

[nwafan20]

God hates me.....

[Iberia A340-600]

http://www.newglobalairline.com/pics/delta_01.jpg

[MarkLawrence]

Say bye bye to the DC9's...they will go quicky...probably quite a few of the DL MD-80's as well....gas guzzlers...

[JZ1]

Many things come into mind --
* what about the 787 orders
* so long, DC9
* another DL livery, or they will just keep the most current one
* will we see A-330s mixing with 763 at JFK?
* what will happen to all the NW miles?
* In certain areas, Sky Team will be bigger than Star Alliance.
* other than Australia, the new airline will server every continent in the world
Any one care to continue...?

[Iberia A340-600]

If the A330 was integrated into the JFK international market I'd definitely fly on Delta.

[cancidas]

wow. kind of expected this actually, but now that this is official i want to know what's going to happen with AAL, COA, UAL, USA and the rest of the industry. no doubt that someone else will be merging.

[T-Bird76]

Simply because they agree doesn't mean it will happen. As I said the only ppl to benefit from this will be the shareholders, lawyers, consultants, and the top brass. Sadly this well mean loss of service and lots of jobs being cut.

[adam613]

This isn't terribly surprising...questions:

1) How are they going to get the pilots to go along with it?
2) Are they going to keep all of their hubs?
3) What's the 747-400 going to look like in Delta colors? :D

[stuart schechter]

And it's very official


Dear Stuart Schechter,

As a valued Northwest Airlines customer and WorldPerks&reg member, I wanted you to be among the first to hear that we have announced a merger with Delta Air Lines. Subject to regulatory review, our two airlines are joining forces to create America's premier global airline which, upon closing of the merger, will be called Delta Air Lines.

By combining Northwest and Delta, we are building a stronger, more resilient airline that will be a leader in providing customer service and value. Our combined airline will offer unprecedented access to the world, enabling you to fly to more destinations, have more flight choices and more ways than ever to earn and redeem your WorldPerks miles.

You can be assured that your WorldPerks miles and Elite program status will be unaffected by this merger. In addition, you can continue to earn miles through use of partners like WorldPerks Visa&reg. And once the new Delta Air Lines emerges you can look forward to being a part of the world's largest frequent flyer program with expanded benefits.

The combined Delta Air Lines will serve more U.S. communities and connect to more worldwide destinations than any global airline. Our hubs, both Delta's and Northwest's, will be retained and enhanced. We will be the only U.S. airline to offer direct service from the United States to all of the world's major business centers in Asia, Latin America, Europe, Africa and around North America.

Both airlines bring tremendous strengths to this new partnership. Our complementary service networks form an end-to-end system that is truly greater than the sum of its parts. This is a merger by addition, not subtraction, which means all of our hubs, both Northwest's and Delta's, will be retained. In addition, building on both airlines' proud, decades-long history of serving small communities, we plan to enhance global connections to small towns and cities across the U.S.

All of these positive benefits of our combination mean that we can:

* Offer a true global network where our customers will be able to fly to more destinations, have more schedule options and more opportunities to earn and redeem frequent flyer miles in what will become the world's best and most comprehensive frequent flyer program.
* Continue to serve our current roster of destinations and to maintain our hubs in Atlanta, Cincinnati, Detroit, Memphis, Minneapolis/St. Paul, New York, Salt Lake City, Amsterdam and Tokyo.
* Improve our customers' travel experience, through new products and services including enhanced self-service tools, better bag-tracking technology, more onboard services, including more meal options, new seats and refurbished cabins.

While we work to secure approval of our merger, which may take up to 6 to 8 months, it will be business-as-usual at both airlines. We will continue to operate as independent airlines and the people of Northwest will remain focused on providing you with the very best in safe, reliable and convenient air travel. At the same time, both airlines will be planning for a seamless integration of our two airlines, one that delivers to you the enhanced benefits that will earn, and retain, your preference.

As we work through this process, we will keep you informed at every step along the way. Thank you for your business and we look forward to serving you on your next Northwest flight.

Sincerely,

Bob Soukup
Managing Director, WorldPerks

[Midnight Mike]

There will be an unspecified number of job cuts or transfers through the consolidation of overlapping corporate and administrative functions, Delta said. The two airlines employ more than 80,000 people combined. The company expects no involuntary furloughs of front-line employees and said the existing pension plans for both companies’ employees will be protected.

Delta doesn’t plan to close any of the two airlines’ hubs.

Delta also said that it has agreed with its pilot leadership to extend its existing collective bargaining agreement through the end of 2012. The agreement, which is subject to pilot ratification, will allow the combined company to realize the revenue synergies of the transaction, Delta said. It also provides the Delta pilots a 3.5 percent equity stake in the new company and other enhancements to their current contract.

The agreement does not cover Northwest pilots.

Delta said it will use its best efforts to reach a combined Delta-Northwest pilot agreement, including resolution of pilot seniority integration, prior to the closing of the merger.

U.S.-based non-pilot employees of both companies will get a 4 percent equity stake in the new airline when the deal closes, Delta said.

Northwest pilots and the union representing most of Northwest’s ground workers immediately announced they would fight the combination.

Dave Stevens, chairman of the Northwest branch of the Air Line Pilots Association, said in a prepared statement, “The risk to Northwest Airlines and to the Northwest pilot group from letting this merger proceed, as it is now structured, is simply too great.”


http://www.msnbc.msn.com/id/24116154/

[G-BOAD]

Tt sure will be sad to see NWA airlines go. However, could this merger ironically be protecting NWA from bankruptcy? I think Delta will integrate the NWA fleet into its own, but it will take some time. As many know, there are still Delta "medium" colors still flying around.
Also, how does this effect the KLM-NWA partnership?

[Delta777LR]

I hate to see NWA go, I mean I flew on NWA back in the early ninetys on an A320 and DC-9... Long live NWA... But I would really love to see the Delta colors on the A330 and 747-400s......

[Delta777LR]

Check out my drawing I did on the hybird Delta and NWA colors I did back in Feb.. Maybe well see these for a while...

http://i116.photobucket.com/albums/o37/sergair/NorthwestDeltaMerger.jpg

[SengaB]

God help us if this"NWA/DAL Airline ever emplodes.

United-American Airways

Delta Northwestern

US-Continental Airways

Then it will be DeltaNorthwestUnitedamericanContinentalUSAirways Airlines.
Sole aircraft in the fleet 787-200 through 787-900

Eventually to be renamed to a "Trendy" name to "ALL USA Airlines"
Empire Motto.... "BECAUSE WE CAN"
Senga

[727C47]

as a former champion guy, and a current detroiter,i'm going to miss the red tail,but delta is a great airline,with everything from pan am,to northeast in its dna. Godspeed to all.

[Midnight Mike]

A letter from the NWA MEC Chairman to the pilots of ALPA Councils 1, 20, 54, 55 & 74






TO: All Northwest Pilots

FROM: Dave Stevens

DATE: April 14, 2008


In the wake of the Delta-Northwest merger announcement today, I am writing to update the Northwest pilots. I will start by giving you the conclusion. Since January 2008, we have been working hard to put together a cooperative merger between the Northwest pilots, Delta management and the Delta pilot leadership. Agreement on the terms for a cooperative merger was in all stakeholders’ best interest in better times, with oil below $90 per barrel. With oil over $110 and an economy facing recession, and given the recent activities of the two managements and the Delta MEC, a merger with Delta may no longer be in the best interests of all Northwest stakeholders, including the Northwest pilot group. Northwest Airlines has strong standalone prospects given its cash position (best of the legacy carriers) and the flexibility of the NWA fleet, among other things. We are in a good position to weather the potential economic storm.



As a quick review, we started exploration of a cooperative merger with four key requirements from NWA MEC Resolution 08-01:



1. Creation of a profitable merged company with sufficient market presence and network scope to provide a stable platform for growth and sustainable profits;



2. Fair and equitable seniority list integration;



3. Collective bargaining agreement for the merged company with substantial improvements; and



4. Share in the equity of the merged company.



A cooperative merger provides a win-win formula for labor and management. By achieving a joint contract and seniority list prior to the effective date of the merger, revenue synergies and cost efficiencies are generated immediately (worth many hundreds of millions of dollars per year), and a portion of this economic upside could go to the pilot groups in the form of contract improvements and equity.



Since January, we have met with the Delta pilot leadership and Delta management in three extended efforts to accomplish the above requirements. By the end of the second session, we had accomplished requirements #3 and #4. However, we were unable to reach agreement on #2, an equitable seniority list, which is essential to accomplish #1. There was a great deal of collaborative effort expended by the Delta pilot leadership and Delta management to convince us to accept inequities in a seniority list in return for improved economics in a joint contract. As you know all too well, seniority is forever while economic provisions can be short lived.



The first two negotiations took place in New York City with oil below $90 per barrel. While we achieved agreement on a joint contract and equity and made progress on a seniority list, we did not achieve an equitable seniority list. The third negotiation took place in Washington, D.C., and while more progress was made on seniority, a seniority list agreement was not reached.

The seniority negotiations broke down over the Delta pilot leadership’s desire to include aircraft options, not just orders, in the seniority integration ratio. We were not willing to adjust the seniority integration ratio in favor of Delta pilots based on options, particularly when such options were unlikely to be exercised, other than as replacement aircraft, in the worsening economic environment. There were additional problems concerning calculation of the number of active pilots at each carrier and staffing assumptions for the future. The resulting difference in our respective positions on a ratio was substantial. The actual breakdown occurred when, in response to my suggestion that we both compromise and bring that to our respective MECs for their consideration, we were advised that the Delta pilot group could not move off their last ratio proposal.



As we had several times before, we then suggested to the Delta pilot leadership that we agree on expedited arbitration of the outstanding issues by a date certain. The result of an expedited arbitration would have been functionally the same as an immediate negotiated agreement since there would have been one seniority list and a joint contract in place on the transaction effective date.



By use of this process, much of the transaction risk would have been taken out of the merger and additional funds would have been generated to pay for one-time transition costs. In the uncertain world of airline economics, this was a key consideration. When two airlines merge, they attempt to realize the benefits of the created synergies before they run out of cash on hand to pay for the transition costs. In our current environment, there is no more money to borrow and airlines have few assets left to encumber.



Unfortunately, the Delta pilot leadership rejected arbitration, whether expedited or not, as a means to resolve the seniority list dispute. From that point, Delta management, the Delta pilot leadership and Northwest management chose a different path. NWA management proposed a traditional merger to Delta management. Then Delta management entered into bilateral negotiations with the representatives of the Delta MEC. The representatives of the Northwest pilots were excluded from the negotiations. Inexplicably, the Delta pilot leadership reversed its position. They are now willing to arbitrate the seniority list issues under ALPA merger policy. At the same time, they abandoned the joint pilot contract approach and have, instead, agreed to a Delta pilot contract amendment which will increase the pay and benefits for only Delta pilots. The Northwest pilots are excluded from the economic benefits. Both managements have cooperated in this change in course.



Yesterday we met with Delta CEO Anderson, President Bastian and EVP Campbell. At that meeting, we suggested that they delay the merger announcement and spend a short period negotiating a joint contract with a focus on their harmonization issues. This suggestion was rejected in favor of the plan they are currently pursuing. In explanation, they said we were out of time to negotiate prior to a merger announcement date (despite the fact they found two weeks to negotiate a deal with the Delta pilot leadership).



As a result, there will be seniority arbitration in a traditional merger process and it may take a long time. The Delta pilot leadership may choose not to cooperate on a joint contract for the benefit of the Northwest pilots while they seek an agreement on seniority that favors the Delta pilots.



Now we reach the question your MEC considered at its meeting yesterday – Should the pilots, employees and customers of Northwest support this merger as it is currently contemplated? The managements are betting on the merger models of old: Pay the employees of one group less and focus on lowering costs (instead of many of the revenue synergies that are far more likely to improve the bottom line); hope for cost savings going forward from employee division with no concern for the dis-synergies caused by labor dissatisfaction. The point has already been made to us by Delta management that they already have a “B scale” at Northwest, and that they will need to maintain it by phasing in harmonized wages. Mergers based on this model have never worked well, but trying to make this work at $110/bbl fuel, with a looming recession and no access to credit markets, is putting everything at risk.



One can only conclude that the Delta pilot leadership and Delta management have made an arrangement to try to disadvantage the Northwest pilots economically and with respect to our seniority. No pilot group is going to put up with this. No amount of money can sustain a carrier which creates this level of discord. This is a recipe for failure. Under these conditions, Northwest Airlines and all the stakeholders, including the pilots, other employees and customers, are better served by a standalone airline. Under these circumstances, it is Northwest’s best option, with its strong international and domestic route structure, a flexible fleet, an order book with fuel-efficient aircraft and the best cash position of any legacy carrier, to remain an independent carrier.



Your MEC reached this conclusion with reluctance. We were very close to concluding a truly cooperative merger which would have served the interests of everyone. We regret that an agreement was not obtained. However, the past is past. The Northwest pilot group now has to face a difficult future. As hard as a standalone course may be in these economic times, it is our judgment that it carries less risk than the merger path which now lies before us. For that reason, we will be turning our efforts to stopping this merger. Over the course of the next few weeks, we will be sending you more information on the MEC’s plans. Look for a road show schedule to be posted soon.



Fraternally and in Unity,


Dave Stevens

MEC Chairman

[Matt Molnar]

Wall Street doesn't seem very excited by this deal. Most of the time, a company being bought sees a nice bump, and the company doing the buying drops slightly. Today both the buyer and the buyee are down significantly, DAL is down almost 11% and NWA down almost 5%. With oil hitting $113 a barrel this morning, even this new super airline will have a hard time turning a profit.

[cancidas]

found this on flightblogger just now, leads me to wonder about the DAL/NWA long-ter imtegration plans. i'm posting the link because the picture is pretty big. also, where and when did DAL get 737-700s??

http://www.flightglobal.com/blogs/flightblogger/deltanorthwest_lg.jpg

[Midnight Mike]

Wall Street doesn't seem very excited by this deal. Most of the time, a company being bought sees a nice bump, and the company doing the buying drops slightly. Today both the buyer and the buyee are down significantly, DAL is down almost 11% and NWA down almost 5%. With oil hitting $113 a barrel this morning, even this new super airline will have a hard time turning a profit.

Would imagine the fact that the Northwest Employees are going to fight the merger is playing a role as well, & this one could be rather interesting:


Minn. lawmakers grapple with Delta-Northwest merger, consider offering tax breaks to keep jobs

House Republicans said it's too soon to kiss Northwest goodbye. They proposed a package of tax breaks designed to persuade Delta to move its main offices to Minnesota and will attempt to suspend normal rules on Wednesday to force a vote on the House floor.

"Why are we all just assuming or taking for granted that if Northwest and Delta reach an agreement that all the jobs that are in the state of Minnesota, or that the headquarters at least, will end up being down in Atlanta, Georgia? Why are we doing that?" said Rep. Tom Emmer, R-Delano.

Emmer added: "The deal is not closed. There's still time."

This may spook the market that Congress may not approve the merger?????

[G-BOAD]

found this on flightblogger just now, leads me to wonder about the DAL/NWA long-ter imtegration plans. i'm posting the link because the picture is pretty big. also, where and when did DAL get 737-700s??

http://www.flightglobal.com/blogs/flightblogger/deltanorthwest_lg.jpg

Interesting link.

RE:737-700: I think they have them on order, but they were not delivered yet.

[JetBlueAirwaysFan]

I guess the DL/NW terminal at LaGuardia will just be the Delta terminal now.

I am interested to see the type of route network this integrated carrier will have. Delta will now have access to many new cities. I am wondering if some NWA cities served by the mainline will be reduced to regional jets. For example: VPS (Fort Walton Beach) is served only by the NWA mainline (Delta and Delta Connection too) with the DC-9 three times daily from Memphis. I bet this will be reduced to RJ service.

And what will happen to NWA's new Compass Airlines feeder carrier?

I have a feeling that even though DL is saying that they will have access to all these new medium cities and rural communities, but they will eventually drop some destinations. Fuel is too expensive to have such a route network.

[nwafan20]

Tt sure will be sad to see NWA airlines go. However, could this merger ironically be protecting NWA from bankruptcy? I think Delta will integrate the NWA fleet into its own, but it will take some time. As many know, there are still Delta "medium" colors still flying around.
Also, how does this effect the KLM-NWA partnership?

Are you joking me? NW was in better financial condition than DL! More cash, better cashflow, etc. etc.

The KLM-NWA partnership will stay until merge, then it will be the DL-AF/KL partnership.

This is a really sad time for myself and many other Detroiters. I grew up on NW, and I couldn't imagine flying anyone else, especially DL (my least favorite airline)

[G-BOAD]

T...However, could this merger ironically be protecting NWA from bankruptcy? ...

Are you joking me? NW was in better financial condition than DL! More cash, better cashflow, etc. etc....


Today, Delta closed at 8.62 with a 20,470,000 volume. NWA closed at 9.55, however with a volume of 11,800,000. Both companies have come down a rocky road. When Delta emerged from Bankruptcy, they sold for around $20 a share. This year, on January 28, NWA broke $20 a share. Also, NWA was well above in July 2007, selling around $25 a share or higher. But now, look how the airlines plummeted. Frankly, I believe, that in order to stay out of bankruptcy, or to not have to stop their operation (like we saw so many other airlines do in the past few weeks), a merger is a good option, that can save the airlines. A Merger can bring the two troubled airlines a better outlook; and now, instead of competing with each other, they work together.

Like I said, I hate to see NWA go, but, look on the bright side of the merger.

[nwafan20]

Stocks does not indicate an airlines profitability or cash on hand, just how investors feel about it.

For me there is NO bright side to this merger...