Northwest and Delta Ok merger, creating the world's largest air carrier
Nathan Hurst / The Detroit News
Delta Air Lines and Northwest Airlines Corp. late Monday announced a $17.7 billion merger of the two airlines, creating the world's largest air carrier and making Detroit Metropolitan Airport a linchpin in the combined carrier's global network.
The airline will be called Delta, have its headquarters in Atlanta and will be lead by Delta CEO Richard Anderson, a former Northwest chief executive. It will employ 75,000 people and operate 800 aircraft.
The merger comes as the industry, battered by $100 a barrel-plus oil, declining consumer confidence and a weak economy, is poised to enter a period of consolidation. Already, three airlines -- ATA, Aloha and Champion -- have shut down, and Frontier Airlines filed for federal bankruptcy protection. The tie-up of Eagan, Minn.-based Northwest with Atlanta-based Delta follows months of on-again, off-again negotiations peppered by labor strife and intense pressure from investors.
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A Northwest-Delta deal likely will transform the airline industry, sparking a wave of consolidation. United Airlines and Continental are rumored to be next in line for a deal. American Airlines, the world's largest airline, also is expected to feel pressure to find a partner.
Other details of the deal:
• The airline will have executive offices in Atlanta, Minneapolis/St. Paul, New York, Amsterdam, Paris and Tokyo.
• The board of directors will be made up of 13 members, seven of whom will come from Delta's board (including Chairman Daniel Carp, who will continue to lead the board, and Anderson) and five of whom will come from Northwest's board, including Chairman Roy Bostock, who will become vice chairman, and Northwest CEO Doug Steenland. One director will come from the Air Line Pilots Association.
• Delta pilots will receive a 3.5% equity stake
The deal still faces some major hurdles.
The two companies are moving forward, carrying a new tentative labor agreement with nearly 7,000 Delta pilots that will make it easier for the new combined carrier to realize some operational efficiencies, according to sources. Leaders of Delta's chapter of the Air Line Pilots Association, the only union representing workers at both carriers, reached agreement with Delta management on Monday and will encourage its rank-and-file membership to approve the changes.
Delta's pilots would receive pay raises in exchange for the contractual changes.
Northwest's pilot union chapter held its own meeting near Minneapolis on Sunday to discuss the potential merger. In a statement, the chapter's leadership said it would evaluate any deal against Northwest's stand-alone business plan.
Leadership "unanimously decided that any merger involving Northwest Airlines, in order to avoid our vigorous opposition, must clearly be in the best interest of NWA pilots, its customers and employees," said Dave Stevens, chairman of the union chapter's master executive council.
Monty Montgomery, the group's vice chairman, said Northwest has "a stand-alone business plan based on a strong international and domestic route structure."
Sources said that without a combined labor contract in place, the Northwest pilots would be expected to negotiate a deal of their own with the new airline's management.
Experts have said Detroit Metropolitan Airport is expected to be a winner in the merger, given its strong presence as a premier gateway to Asia and modern, easy-to-navigate facilities. Northwest employs more than 9,000 people in Michigan, the majority of them stationed at Metro Airport, where the company operates its largest hub.
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