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Fights Loom For DAL Plan To Absorb NWA
Apr 15, 2008
By Benet Wilson and Jim Mathews/Aviation Daily
Pilots and ground workers at Northwest Airlines have come out strongly against a deal, made public Monday night, to combine with Delta Air Lines and the pilots’ union promises to use all their resources to shoot down the merger.
Both airlines’ boards okayed the merger late Monday afternoon, a stock-swap deal that will create a $31.7 billion giant, assuming the agreement passes regulatory muster and gets by both carriers’ shareholders. Delta CEO and Northwest alum Richard Anderson will head the new Delta, and Delta Chairman Daniel Carp will become chairman of a new 13-member board with seven Delta members and five from what will be the former Northwest. Northwest Chairman Roy Bostock is set to be vice chairman, while CEO Doug Steenland will have a seat on the board.
Delta’s move to absorb Northwest will also stitch together two largely separate networks into a traffic behemoth, combining the U.S. northeast, Europe and Latin American system of Delta with Northwest’s strong Asian presence and nearly unchallenged dominance in the U.S. Midwest.
Executives say there are no plans to close hubs, at least for the moment, but overlapping corporate and administrative jobs will likely be lost. Delta pledged, however, that no front-line staff would be furloughed and pension plans aren’t in jeopardy.
Representatives of Delta’s pilots union, which as part of the deal won an extension of its existing collective bargaining deal through 2012, plus other sweeteners, urged other unions caught up in the proposed merger to work cooperatively to see things through. Northwest and Delta pilots groups, however, were never able to see eye-to-eye on seniority lists before the merger, and mounting financial pressures forced Delta to press on without getting both groups on board.
The merger puts NWA pilots at a disadvantage on economic issues and seniority list integration, said Northwest MEC chairman Dave Stevens in a prepared statement. “A merger built on this unstable foundation is likely to put the combined airline in a position similar to that of US Airways,” he said. “A US Airways-style labor relations scenario at the merged carrier, combined with the current and projected price of fuel and the looming economic downturn, is likely to place the Northwest pilots and all other Northwest employees at greater risk than as a stand-alone carrier.”
Three years after the merger of US Airways and America West, pilot groups there are still bickering over a merged seniority list (Aviation DAILY, Feb. 29). Delta and Northwest were hoping to avoid a similar fate. The Delta pilots initially balked at a potential deal in February after being unable to reach a consensus with Northwest’s pilots on merging seniority lists in the new company. Delta’s pilots were concerned that their membership would have less seniority under the original proposal. The NWA MEC offered to resolve the issue using expedited arbitration, but the Delta MEC rejected it.
Delta’s pilots were sold on the deal after management offered a 3.5% stake in the newly merged carrier, pay raises every year between 2009 and 2012, furlough protection for 24 months after the merger is closed and a boost in 737-700 pay rates to make them equal to 737-800 rates.
“Inexplicably, the Delta MEC has reversed its position and is now willing to arbitrate the seniority list issues under ALPA merger policy, but, at the same time, has abandoned the joint pilot contract approach and has, instead, agreed to a new Delta pilot contract amendment which will increase the pay and benefits for only Delta pilots,” said Northwest MEC vice chair Monty Montgomery, also in a prepared statement.
Restive unions aren’t the only hurdle the combination faces. Antitrust regulators need to approve the deal, and could force a handful of divestitures or other cuts to tailor the combination for approval. Shareholders at both Delta and Northwest also need to agree that the combination will make them better off. Northwest shareholders are slated to get 1.25 Delta shares for each Northwest share they own, roughly a 17% premium to where the market valued Northwest as of Monday’s close. The new airline will carry considerable debt, and with relatively little overlap between the two carriers’ networks, the scope for drastically removing yield-draining capacity from the systems -- a major incentive for a deal -- could be limited.
(Jim Mathews contributed reporting to this article from Washington.)
Apr 15, 2008
By Benet Wilson and Jim Mathews/Aviation Daily
Pilots and ground workers at Northwest Airlines have come out strongly against a deal, made public Monday night, to combine with Delta Air Lines and the pilots’ union promises to use all their resources to shoot down the merger.
Both airlines’ boards okayed the merger late Monday afternoon, a stock-swap deal that will create a $31.7 billion giant, assuming the agreement passes regulatory muster and gets by both carriers’ shareholders. Delta CEO and Northwest alum Richard Anderson will head the new Delta, and Delta Chairman Daniel Carp will become chairman of a new 13-member board with seven Delta members and five from what will be the former Northwest. Northwest Chairman Roy Bostock is set to be vice chairman, while CEO Doug Steenland will have a seat on the board.
Delta’s move to absorb Northwest will also stitch together two largely separate networks into a traffic behemoth, combining the U.S. northeast, Europe and Latin American system of Delta with Northwest’s strong Asian presence and nearly unchallenged dominance in the U.S. Midwest.
Executives say there are no plans to close hubs, at least for the moment, but overlapping corporate and administrative jobs will likely be lost. Delta pledged, however, that no front-line staff would be furloughed and pension plans aren’t in jeopardy.
Representatives of Delta’s pilots union, which as part of the deal won an extension of its existing collective bargaining deal through 2012, plus other sweeteners, urged other unions caught up in the proposed merger to work cooperatively to see things through. Northwest and Delta pilots groups, however, were never able to see eye-to-eye on seniority lists before the merger, and mounting financial pressures forced Delta to press on without getting both groups on board.
The merger puts NWA pilots at a disadvantage on economic issues and seniority list integration, said Northwest MEC chairman Dave Stevens in a prepared statement. “A merger built on this unstable foundation is likely to put the combined airline in a position similar to that of US Airways,” he said. “A US Airways-style labor relations scenario at the merged carrier, combined with the current and projected price of fuel and the looming economic downturn, is likely to place the Northwest pilots and all other Northwest employees at greater risk than as a stand-alone carrier.”
Three years after the merger of US Airways and America West, pilot groups there are still bickering over a merged seniority list (Aviation DAILY, Feb. 29). Delta and Northwest were hoping to avoid a similar fate. The Delta pilots initially balked at a potential deal in February after being unable to reach a consensus with Northwest’s pilots on merging seniority lists in the new company. Delta’s pilots were concerned that their membership would have less seniority under the original proposal. The NWA MEC offered to resolve the issue using expedited arbitration, but the Delta MEC rejected it.
Delta’s pilots were sold on the deal after management offered a 3.5% stake in the newly merged carrier, pay raises every year between 2009 and 2012, furlough protection for 24 months after the merger is closed and a boost in 737-700 pay rates to make them equal to 737-800 rates.
“Inexplicably, the Delta MEC has reversed its position and is now willing to arbitrate the seniority list issues under ALPA merger policy, but, at the same time, has abandoned the joint pilot contract approach and has, instead, agreed to a new Delta pilot contract amendment which will increase the pay and benefits for only Delta pilots,” said Northwest MEC vice chair Monty Montgomery, also in a prepared statement.
Restive unions aren’t the only hurdle the combination faces. Antitrust regulators need to approve the deal, and could force a handful of divestitures or other cuts to tailor the combination for approval. Shareholders at both Delta and Northwest also need to agree that the combination will make them better off. Northwest shareholders are slated to get 1.25 Delta shares for each Northwest share they own, roughly a 17% premium to where the market valued Northwest as of Monday’s close. The new airline will carry considerable debt, and with relatively little overlap between the two carriers’ networks, the scope for drastically removing yield-draining capacity from the systems -- a major incentive for a deal -- could be limited.
(Jim Mathews contributed reporting to this article from Washington.)
