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Another interesting article about DL/NWA.....

General Lee

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Justice Department approves Delta-Northwest merger


Atlanta Business Chronicle - by J. Scott Trubey Staff Writer


The U.S. Department of Justice approved the merger of Delta Air Lines Inc. and Northwest Airlines Corp. Wednesday, the final regulatory hurdle for the deal to create the world’s biggest airline.
“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,” said Delta CEO Richard Anderson in a news release. “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.”
Atlanta-based Delta (NYSE: DAL) and Eagan, Minn.-based Northwest (NYSE: NWA) announced the plan to merge in April. The combined carrier will be called Delta and will be based in Atlanta.
Metro Atlanta Chamber of Commerce President Sam A. Williams noted that for every one job Delta has in Atlanta, it creates 100 through its route structure and connections to the world’s fastest-growing economies.
“The Delta Air Lines and Northwest merger represents a new plateau for metro Atlanta, just as significant as the 1996 Centennial Olympic Games in Atlanta. While the Olympics gave us worldwide recognition, Delta's route structure makes Atlanta the most connected city on earth,” Williams said. “The presence of the world’s largest airline in Atlanta strengthens our city’s position as a center of gravity for economic prosperity not just in Georgia, but across the Southeast. Especially in these difficult times for the national economy, Delta’s role as an economic multiplier for our region is critical.”
Analysts have called the carriers a natural match for one another. There is little overlap between Delta’s network and that of Northwest.
"After a thorough, six-month investigation, during which the Division obtained extensive information from a wide range of market participants –including the companies, other airlines, corporate customers and travel agents –the Division has determined that the proposed merger between Delta and Northwest is likely to produce substantial and credible efficiencies that will benefit U.S. consumers and is not likely to substantially lessen competition,” the Justice Department’s Antitrust Division said in a written statement.
Delta, the nation’s third largest airline, is strongest east of the Mississippi River and in Europe, Africa and Latin and South America. Northwest, the fifth largest carrier in the U.S., is strong along the West Coast, Midwest and in Asia.
Anderson told the Atlanta Commerce Club Wednesday that the combined airline will not only be the world’s largest, but the largest American player in New York, Los Angeles, Atlanta, the upper Midwest and in Europe, Asia, Africa and Latin and South America.
The combined airline will see $2 billion in annual synergies, Anderson said.
“Even in tougher times, the acquisition makes even more sense,” Anderson said.
The Justice Department noted cost efficiencies and said the merger will not be detrimental to competition.
“In addition, 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,” regulators said in a statement. “Consumers are also likely to benefit from improved service made possible by combining under single ownership the complementary aspects of the airlines’ networks.”
A lawsuit to stop the merger filed in federal court in San Francisco is the only remaining legal hurdle.
Despite a decline in oil prices from record highs in the $140 range per barrel to today’s current price around $65, Anderson said the airline industry is still operating in difficult times. Fuel costs are “still too high,” he said, and airline demand is falling.
“We believe there will be lowering demand over the next 12 to 24 months,” he said, though he expects Atlanta capacity to be flat to slightly up for the time being. Additional cuts may come as economic conditions warrant.
To cope with high fuel prices, Delta has made significant cuts to its domestic capacity while boosting lucrative international routes. The new Delta will continue its strategy of expanding internationally, focusing on second-tier European markets, Anderson said.
Ben DeCosta, the general manager of Hartsfield-Jackson Atlanta International Airport, said having the largest hub for the world’s largest airline will be a boon for the world’s busiest airport.
“We think it means we are going to be more resilient and have more traffic despite the negative forces of a worldwide recession,” DeCosta said. It also enhances Atlanta’s “global reputation.”
In July, Delta announced its leadership team for the combined carrier. Anderson, a former Northwest CEO, will remain as CEO of the new Delta, with his eight most senior officers evenly split among Delta and Northwest executives.

In August, Delta and Northwest pilots agreed to a joint contract, though seniority issues remain unresolved. In September, the carrier also obtained clearance on its plan for a single operating certificate; a step Anderson said often is not achieved until after anti-trust approval, Final clearance for the certificate could take about 18 months.
On Sept. 25, shareholders of both companies approved a plan to issue 1.25 shares of Delta stock for every share of Northwest stock.
Logistically it will take time for the merger to take effect, airline analyst Mike Boyd said last week.
“It’s going to take them years,” said Boyd, the president of Evergreen, Colo.-based The Boyd Group International Inc. “They’re not going to rush to put things together.”
It will take at least six to nine months to integrate what the customer sees and experiences, Boyd said, and at least two years to integrate flight and logistics technology, reservations, frequent flier programs and other divisions.
Anderson said Delta will keep the best of each airline and plans to have the integration complete by the end of 2010. It will base its technology on Delta’s mainframe, though Northwest’s technology guru, Theresa Wise, will take the role as chief information officer.
The new carrier also will have to deal with merging two fleets of aircraft. Delta is heavily Boeing, with a fleet full of 737s, 757s, 767s, 777s, as well as McDonnell Douglas MD-88 aircraft. Northwest will counter by adding dozens of Boeing 747 jumbo jets, a size plane Delta lacks, as well as Airbus A330s.
Anderson said executives will have to “right size” the fleet to optimize the carrier’s options.
Senior executives of the new Delta Air Lines Inc.:

-Richard Anderson, Delta's current CEO, who will retain that position. He is a former CEO of Northwest Air Lines Corp.
- Ed Bastian, Delta’s current president and chief financial officer, who will become CEO and president of Northwest. Northwest will initially be a subsidiary of Delta.
- Mike Campbell, Delta executive vice president of human resources, labor and communications, who will continue in that role for the merged carrier.
- Mike Becker, the current senior vice president of human resources at Northwest, who will be the executive vice president and COO of Northwest as it is folded into Delta.
- Steve Gorman, Delta executive vice president of operations, who will continue in that role.
- Glen W. Hauenstein, Delta’s executive vice president and chief of network and management, will be Delta executive vice president of revenue and network for the combined carrier.
- Ben Hirst, Northwest senior vice president of corporate affairs, who will be senior vice president and general counsel.
-Laura Liu, Northwest senior vice president of international, who will continue in the same role at Delta.
-Theresa Wise, Northwest chief information officer, who will fill that role with Delta.
-Doug Steenland, the current Northwest CEO, will become a board member of the new Delta.



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