By RUSSELL GRANTHAM
The Atlanta Journal-Constitution
Published on: 02/16/08
A major obstacle to a possible merger between Delta and Northwest airlines has been cleared, after airline and union negotiators agreed to rely on a "conceptual" plan to blend the airlines' pilot ranks, said people briefed on the talks.
While the contemplated merger agreement could still fall apart in coming days, the decision regarding the airlines' pilot unions should allow Delta's board of directors to consider approval of the deal at a meeting scheduled Wednesday in New York, these people said.
If approved, Delta and Northwest, the nation's third- and fifth-largest airlines, respectively, could announce a merger pact later next week, these people said.
Delta and Northwest have been in talks for weeks, trying to put together a pact that would create the world's largest airline, with 79,000 employees in their mainline operations and major hubs in Atlanta, Detroit and Minneapolis, as well as substantial routes to Asia and Europe.
The talks idled over the past week as the carriers waited for their units of the Air Line Pilots Association to work out a plan to merge members' seniority lists.
The airlines hoped the unions would hammer out as many details as possible, people briefed on the talks said, to avoid lengthy delays and litigation that typically accompany transitions to a merged union.
The unions did not work out every detail, as airline management had hoped, but they did reach a "conceptual plan of integration," said one person describing the talks. The airlines are now moving ahead with final details of their tie-up, the people familiar with the talks said.
Delta spokesman Kent Landers declined to comment Friday beyond the company's announcement late last year that its board of directors created a committee to explore strategic options, including mergers.
However, in a weekly message to employees Friday, Delta Chief Executive Richard Anderson said any decision regarding a merger will be aimed at creating a stronger company and serving the "long-term interests of all Delta stakeholders, including employees, customers, shareholders and the communities we serve."
Anderson, who did not comment on any specific merger scenario, added that the company's "thoughtful look at consolidation is focused on whether it could allow us to do things for employees that couldn't be accomplished otherwise or as quickly — things like accelerating our long-term commitment to improve compensation to industry standard wages, and other growth opportunities.
He said any deal would offer "seniority protection" for frontline employees.
The chairman of ALPA's Delta unit, Capt. Lee Moak, told pilots in a letter Thursday that any negotiation to integrate seniority lists "often turns out to be a protracted and very contentious process that almost always ends in binding arbitration." He did not comment directly on the merger discussions, but said the union maintains its position to support a merger that improves Delta's viability and rewards pilots.
Both Delta's and Northwest's pilot unions hope a merger will provide stock in the combined airline and allow them to reverse earlier pay and benefit cuts.
"I think of it [Moak's letter] as a reassurance letter to tell us they are working on the deal and have all the bases covered," said one top Delta pilot. "They are trying to address the seniority issue in the middle of the negotiations instead of waiting until the end."
A pilot's seniority standing determines pay level, the type of plane the pilot can fly and the routes open to that pilot.
"I think there's a good chance for a blueprint for a realistic plan by the time it's announced," said the senior pilot.
ALPA leaders could agree to the merger and then take specifics back to their membership for a vote after the announcement. If the membership rejects it, it would be thrown into arbitration.
Under the expected deal, the two carriers' pilot unions would be rewarded with a voting seat on the combined carriers' board of directors, the people familiar with the talks said. Pilots also would share in equity, expected to total roughly 7 percent, to be divvied among management and employees.
According to the people who were briefed on the negotiations, these are the broad outlines of the planned deal, if approved by Delta's and Northwest's boards: The airlines will combine in a stock-swap deal in which the merged company would be called Delta. Its headquarters would remain in Atlanta, while Northwest's current Minneapolis headquarters would become a secondary operational center.
As previously reported, Delta CEO Anderson — who formerly headed Northwest in recent years and then later joined Delta's board — would head the merged carrier. Northwest's current CEO, Doug Steenland, would be on the company's board of directors but wouldn't have a direct management role.
One detail that apparently hasn't been nailed down, according to these people, is a potential investment by Air France/KLM. The French and Dutch carriers, which merged under a holding company, have offered to invest almost $1 billion in a Delta-Northwest merger, but the companies have not worked out what, if any, stake the foreign carriers may eventually hold, according to these people.
The Atlanta Journal-Constitution
Published on: 02/16/08
A major obstacle to a possible merger between Delta and Northwest airlines has been cleared, after airline and union negotiators agreed to rely on a "conceptual" plan to blend the airlines' pilot ranks, said people briefed on the talks.
While the contemplated merger agreement could still fall apart in coming days, the decision regarding the airlines' pilot unions should allow Delta's board of directors to consider approval of the deal at a meeting scheduled Wednesday in New York, these people said.
If approved, Delta and Northwest, the nation's third- and fifth-largest airlines, respectively, could announce a merger pact later next week, these people said.
Delta and Northwest have been in talks for weeks, trying to put together a pact that would create the world's largest airline, with 79,000 employees in their mainline operations and major hubs in Atlanta, Detroit and Minneapolis, as well as substantial routes to Asia and Europe.
The talks idled over the past week as the carriers waited for their units of the Air Line Pilots Association to work out a plan to merge members' seniority lists.
The airlines hoped the unions would hammer out as many details as possible, people briefed on the talks said, to avoid lengthy delays and litigation that typically accompany transitions to a merged union.
The unions did not work out every detail, as airline management had hoped, but they did reach a "conceptual plan of integration," said one person describing the talks. The airlines are now moving ahead with final details of their tie-up, the people familiar with the talks said.
Delta spokesman Kent Landers declined to comment Friday beyond the company's announcement late last year that its board of directors created a committee to explore strategic options, including mergers.
However, in a weekly message to employees Friday, Delta Chief Executive Richard Anderson said any decision regarding a merger will be aimed at creating a stronger company and serving the "long-term interests of all Delta stakeholders, including employees, customers, shareholders and the communities we serve."
Anderson, who did not comment on any specific merger scenario, added that the company's "thoughtful look at consolidation is focused on whether it could allow us to do things for employees that couldn't be accomplished otherwise or as quickly — things like accelerating our long-term commitment to improve compensation to industry standard wages, and other growth opportunities.
He said any deal would offer "seniority protection" for frontline employees.
The chairman of ALPA's Delta unit, Capt. Lee Moak, told pilots in a letter Thursday that any negotiation to integrate seniority lists "often turns out to be a protracted and very contentious process that almost always ends in binding arbitration." He did not comment directly on the merger discussions, but said the union maintains its position to support a merger that improves Delta's viability and rewards pilots.
Both Delta's and Northwest's pilot unions hope a merger will provide stock in the combined airline and allow them to reverse earlier pay and benefit cuts.
"I think of it [Moak's letter] as a reassurance letter to tell us they are working on the deal and have all the bases covered," said one top Delta pilot. "They are trying to address the seniority issue in the middle of the negotiations instead of waiting until the end."
A pilot's seniority standing determines pay level, the type of plane the pilot can fly and the routes open to that pilot.
"I think there's a good chance for a blueprint for a realistic plan by the time it's announced," said the senior pilot.
ALPA leaders could agree to the merger and then take specifics back to their membership for a vote after the announcement. If the membership rejects it, it would be thrown into arbitration.
Under the expected deal, the two carriers' pilot unions would be rewarded with a voting seat on the combined carriers' board of directors, the people familiar with the talks said. Pilots also would share in equity, expected to total roughly 7 percent, to be divvied among management and employees.
According to the people who were briefed on the negotiations, these are the broad outlines of the planned deal, if approved by Delta's and Northwest's boards: The airlines will combine in a stock-swap deal in which the merged company would be called Delta. Its headquarters would remain in Atlanta, while Northwest's current Minneapolis headquarters would become a secondary operational center.
As previously reported, Delta CEO Anderson — who formerly headed Northwest in recent years and then later joined Delta's board — would head the merged carrier. Northwest's current CEO, Doug Steenland, would be on the company's board of directors but wouldn't have a direct management role.
One detail that apparently hasn't been nailed down, according to these people, is a potential investment by Air France/KLM. The French and Dutch carriers, which merged under a holding company, have offered to invest almost $1 billion in a Delta-Northwest merger, but the companies have not worked out what, if any, stake the foreign carriers may eventually hold, according to these people.
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