General Lee
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UPDATED: 9:16 p.m. January 17, 2008
Delta-Northwest alliance a divisive idea on the ground
Political rhetoric heats up as officials look to protect their own
By JIM THARPE, RUSSELL GRANTHAM
The Atlanta Journal-Constitution
Published on: 01/17/08
A potential merger between Delta Air Lines and Northwest Airlines turned into a political tug of war Thursday as elected officials from Georgia to Minnesota lined up behind their home-based companies, just as a deal to create a mega-carrier appeared to be gelling.
The governor of Minnesota said he wants to meet with the chief executives of both carriers to talk about the possibility they might merge, a union that would create the nation's largest airline. And a powerful Minnesota congressman has come out against any merger of any of the top airlines.
U.S. Sen. Johnny Isakson (R-Ga.), meanwhile, briefed the Metro Atlanta Chamber of Commerce, reminding top business leaders that Delta-based CEO Richard Anderson has promised him that any Delta merger would see Delta not only as the survivor, but still headquartered in Atlanta.
A Minneapolis-based airlines consultant said the rhetoric probably will increase as a merger nears, but he dismissed it as little more than political theater that will not have much impact on what eventually happens.
"They can holler. They can do whatever they want. It doesn't matter. The only people that matter are the antitrust people of the U.S. Justice Department," said Terry Trippler of Trippler & Associates.
Trippler, who knows both Anderson and Northwest CEO Doug Steenland, expects a deal to be announced within a few weeks.
"I think it will get announced by the middle of February, and then the rhetoric will fly," Trippler said.
Rumors of a possible merger between Delta and Northwest have swirled over the past few weeks, even though neither airline has confirmed that talks are under way. News reports, citing unnamed sources, have said Delta's board last week gave Anderson the green light to begin looking at a merger with either Northwest or United Airlines, which has headquarters in Chicago.
Many analysts believe a Delta-Northwest combination would more likely survive Justice Department scrutiny, and most of the rhetoric Thursday revolved around that possible corporate marriage. Industry experts are less certain a Delta-United combination would pass scrutiny without significant trimming of operations.
Fueling the speculation was news that Delta may bring Air France-KLM Group into its merger talks.
Anderson and other top Delta executives recently flew to Paris to meet with management of Air France-KLM Group, according to a person familiar with the negotiations. Delta's president and financial chief, Ed Bastian, and Glen Hauenstein, its head route planner, accompanied Anderson.
Minnesota Gov. Tim Pawlenty sent letters to Steenland and Anderson on Thursday. He said he met with Steenland recently but didn't say when.
Pawlenty wrote that he wants to "respectfully remind you" of Northwest's commitments to keep its headquarters and a hub in Minnesota.
His letter also asks the two airlines to say what additional steps Minnesota can take to ensure a high level of continued operations and presence in the state.
Pawlenty's letter followed a powerful Minnesota congressman's comments opposing any merger among top airlines. "I don't think mergers are in the best public interest, and that includes this one," U.S. Rep. Jim Oberstar (D-Minn.) said.
As chairman of the House Transportation Committee, Oberstar's opinion could be important in any merger debate.
But Georgia's Isakson said he doubts that would stop a deal.
Isakson said he understands Oberstar's opposition to the idea. Northwest probably would cease to exist under a merger, and the combined airline would likely be headquartered in Atlanta.
"In the end, it's all about routes and convenience," Isakson told The Atlanta Journal-Constitution. "If Minneapolis-St. Paul is provided the same basic level of service, the noise [opposition] would be minimal."
Isakson, who knows Oberstar well and who spent six years on the Transportation Committee, said the congressman's comments opposing a Delta-Northwest merger are not surprising.
"That's the natural reaction to anybody in public life," Isakson said. "I have the same parochial interests. I want to make sure Delta stays Delta and keeps its headquarters in Atlanta."
Anderson, a member of the chamber's board, did not attend Thursday's meeting. He has declined to comment on possible merger talks in light of news reports that he asked Delta's board last week for permission to begin formal merger conversations with Northwest and United.
Georgia's other U.S. senator, Republican Saxby Chambliss, issued a statement late Thursday backing the idea of Delta remaining in Atlanta.
"For more than 60 years, Delta has thrived as a leading employer of countless Georgians and has established itself as an economic engine for the Southeast," Chambliss said, "and I stand ready to do all I can to ensure that this remains the case for many years in the future."
Some airline analysts believe a Delta-Northwest merger makes sense in the financially stressed world of carriers. The airlines have to contend with too much capacity, which limits their ability to raise prices at the same time fuel costs have soared.
Trippler said he would hate to see Northwest cease to exist, but he said mergers in the airline industry are inevitable.
"As someone who lives in Minnesota, I don't want to lose a company," he said. "But the reality is that these six legacy carriers will be reduced to three. I feel badly about it, but it's just the nature of things."
The recent trip by Anderson and other Delta executives to talk to AirFrance-KLM has added another complex wrinkle to a potential merger, but it seems to point to a Delta-Northwest merger. The trip was taken just after Anderson was given board permission to pursue merger talks.
The purpose of the trip simply could have been to update nervous alliance partners on the merger discussions. Delta and AirFrance-KLM are partners in the nearly decade-old SkyTeam marketing alliance. But Delta also could be approaching Air France to buy a stake in a contemplated merger between Delta and Northwest.
Northwest also is in SkyTeam, which lets passengers accrue frequent-flier miles from the various carriers in the group.
KLM and Northwest also have antitrust immunity dating from an earlier linkup in the 1990s, which allows them to coordinate flight schedules and fares in ways that other competing airlines can't. Late last year, Delta and Air France announced similar plans for a joint venture that will give Delta its first access to London's Heathrow Airport, the busiest airport in Europe.
Air France is supplying four pairs of Heathrow slots to the joint venture.
By raising the possibility that it could defect to a rival alliance if it merges with United, Delta also could be hoping to pressure Air France to chip in valuable assets such as a cash investment or more Heathrow flying rights to encourage a merger with Northwest.
Bye Bye--General Lee
Delta-Northwest alliance a divisive idea on the ground
Political rhetoric heats up as officials look to protect their own
By JIM THARPE, RUSSELL GRANTHAM
The Atlanta Journal-Constitution
Published on: 01/17/08
A potential merger between Delta Air Lines and Northwest Airlines turned into a political tug of war Thursday as elected officials from Georgia to Minnesota lined up behind their home-based companies, just as a deal to create a mega-carrier appeared to be gelling.
The governor of Minnesota said he wants to meet with the chief executives of both carriers to talk about the possibility they might merge, a union that would create the nation's largest airline. And a powerful Minnesota congressman has come out against any merger of any of the top airlines.
U.S. Sen. Johnny Isakson (R-Ga.), meanwhile, briefed the Metro Atlanta Chamber of Commerce, reminding top business leaders that Delta-based CEO Richard Anderson has promised him that any Delta merger would see Delta not only as the survivor, but still headquartered in Atlanta.
A Minneapolis-based airlines consultant said the rhetoric probably will increase as a merger nears, but he dismissed it as little more than political theater that will not have much impact on what eventually happens.
"They can holler. They can do whatever they want. It doesn't matter. The only people that matter are the antitrust people of the U.S. Justice Department," said Terry Trippler of Trippler & Associates.
Trippler, who knows both Anderson and Northwest CEO Doug Steenland, expects a deal to be announced within a few weeks.
"I think it will get announced by the middle of February, and then the rhetoric will fly," Trippler said.
Rumors of a possible merger between Delta and Northwest have swirled over the past few weeks, even though neither airline has confirmed that talks are under way. News reports, citing unnamed sources, have said Delta's board last week gave Anderson the green light to begin looking at a merger with either Northwest or United Airlines, which has headquarters in Chicago.
Many analysts believe a Delta-Northwest combination would more likely survive Justice Department scrutiny, and most of the rhetoric Thursday revolved around that possible corporate marriage. Industry experts are less certain a Delta-United combination would pass scrutiny without significant trimming of operations.
Fueling the speculation was news that Delta may bring Air France-KLM Group into its merger talks.
Anderson and other top Delta executives recently flew to Paris to meet with management of Air France-KLM Group, according to a person familiar with the negotiations. Delta's president and financial chief, Ed Bastian, and Glen Hauenstein, its head route planner, accompanied Anderson.
Minnesota Gov. Tim Pawlenty sent letters to Steenland and Anderson on Thursday. He said he met with Steenland recently but didn't say when.
Pawlenty wrote that he wants to "respectfully remind you" of Northwest's commitments to keep its headquarters and a hub in Minnesota.
His letter also asks the two airlines to say what additional steps Minnesota can take to ensure a high level of continued operations and presence in the state.
Pawlenty's letter followed a powerful Minnesota congressman's comments opposing any merger among top airlines. "I don't think mergers are in the best public interest, and that includes this one," U.S. Rep. Jim Oberstar (D-Minn.) said.
As chairman of the House Transportation Committee, Oberstar's opinion could be important in any merger debate.
But Georgia's Isakson said he doubts that would stop a deal.
Isakson said he understands Oberstar's opposition to the idea. Northwest probably would cease to exist under a merger, and the combined airline would likely be headquartered in Atlanta.
"In the end, it's all about routes and convenience," Isakson told The Atlanta Journal-Constitution. "If Minneapolis-St. Paul is provided the same basic level of service, the noise [opposition] would be minimal."
Isakson, who knows Oberstar well and who spent six years on the Transportation Committee, said the congressman's comments opposing a Delta-Northwest merger are not surprising.
"That's the natural reaction to anybody in public life," Isakson said. "I have the same parochial interests. I want to make sure Delta stays Delta and keeps its headquarters in Atlanta."
Anderson, a member of the chamber's board, did not attend Thursday's meeting. He has declined to comment on possible merger talks in light of news reports that he asked Delta's board last week for permission to begin formal merger conversations with Northwest and United.
Georgia's other U.S. senator, Republican Saxby Chambliss, issued a statement late Thursday backing the idea of Delta remaining in Atlanta.
"For more than 60 years, Delta has thrived as a leading employer of countless Georgians and has established itself as an economic engine for the Southeast," Chambliss said, "and I stand ready to do all I can to ensure that this remains the case for many years in the future."
Some airline analysts believe a Delta-Northwest merger makes sense in the financially stressed world of carriers. The airlines have to contend with too much capacity, which limits their ability to raise prices at the same time fuel costs have soared.
Trippler said he would hate to see Northwest cease to exist, but he said mergers in the airline industry are inevitable.
"As someone who lives in Minnesota, I don't want to lose a company," he said. "But the reality is that these six legacy carriers will be reduced to three. I feel badly about it, but it's just the nature of things."
The recent trip by Anderson and other Delta executives to talk to AirFrance-KLM has added another complex wrinkle to a potential merger, but it seems to point to a Delta-Northwest merger. The trip was taken just after Anderson was given board permission to pursue merger talks.
The purpose of the trip simply could have been to update nervous alliance partners on the merger discussions. Delta and AirFrance-KLM are partners in the nearly decade-old SkyTeam marketing alliance. But Delta also could be approaching Air France to buy a stake in a contemplated merger between Delta and Northwest.
Northwest also is in SkyTeam, which lets passengers accrue frequent-flier miles from the various carriers in the group.
KLM and Northwest also have antitrust immunity dating from an earlier linkup in the 1990s, which allows them to coordinate flight schedules and fares in ways that other competing airlines can't. Late last year, Delta and Air France announced similar plans for a joint venture that will give Delta its first access to London's Heathrow Airport, the busiest airport in Europe.
Air France is supplying four pairs of Heathrow slots to the joint venture.
By raising the possibility that it could defect to a rival alliance if it merges with United, Delta also could be hoping to pressure Air France to chip in valuable assets such as a cash investment or more Heathrow flying rights to encourage a merger with Northwest.
Bye Bye--General Lee
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