Joshua Freed
April 15, 2008 - 01:09 a.m.
(AP) - If Delta and Northwest are going to create the world's largest airline, they'll first have unions to cajole, politicians to placate, and antitrust regulators to convince.
Two of Northwest's largest unions immediately declared their opposition.
Most importantly, the airlines will need antitrust approval from federal regulators. In 2001, an attempted merger of United Airlines and US Airways fell apart amid antitrust concerns. Executives at Delta and Northwest said they are aiming to close their deal by the end of this year, which would be before the end of the merger-friendly Bush administration.
The takeover announced Monday calls by reason of the combined airline to be named Delta, wait based in Atlanta, and be run by Delta CEO Richard Anderson. If the share-swap becomes final, Delta shareholders will get a bigger company, while Northwest shareholders would get a 16.8 percent premium over Monday's closing stock prices. Based on those prices, the deal values Northwest at more than $3.6 billion.
"We are confident the transaction will go forward and be approved," Northwest CEO Doug Steenland declared.
As for the unions, the airlines tried something novel: They tried to get their pilots to agree on a joint contract and seniority beforehand. They failed to get any accord on seniority, though.
Delta made a deal with its pilots over the weekend, leaving the Northwest pilots to work out something later. On Monday, Northwest pilots declared their obstruction to the combination "as it stands," perhaps leaving room for a deal later.
The Delta pilot agreement, which still needs rank-and-file ratification, extends its existing collective bargaining agreement through 2012 and gives Delta pilots 3.5 percent of the new company.
That was good for Delta. But Northwest pilots concluded it was an arrangement to "try to disadvantage the Northwest pilots economically and with respect to our seniority," Northwest pilot chairman Dave Stevens wrote in a memo late Monday.
"No pilot group is going to put up with this. No amount of money can sustain a carrier which creates this level of discord," he wrote.
Delta said it will use its best efforts to reach a combined Delta-Northwest pilot agreement, including resolution of pilot seniority integration, before the merger closes.
Northwest didn't consult with the union that represents its baggage handlers, ramp workers and ticket agents, said Joseph Tiberi, a spokesman for the International Association of Machinists and Aerospace Workers.