NWA - Delta merger on hold?

[patrickdc9]

Delta, Northwest merger talks on hold

By RUSSELL GRANTHAM
Cox News Service
Tuesday, February 12, 2008
ATLANTA — A merger deal between Delta Air Lines and
Northwest Airlines is on hold while their pilot unions try
to hammer out how to combine workers and how much to demand
from the companies, according to industry experts and people
who have been briefed on the discussions.

The move is aimed at smoothing the integration of Delta and
Northwest, but some experts said pilots may drag out
negotiations or demand too much, potentially scuttling the
deal.

"It ain't going to be easy, and it could be a deal-buster"
if the unions can't agree or seek too large a pay-off from
going along with the merger plans, said Vaughn Cordle, chief
analyst at consulting firm at Airline Forecasts.

The airlines asked the two units of the Air Line Pilots
Association to hold negotiations parallel to merger talks by
airline management.

The pilots may push for more than $1 billion in incentives,
including stock in the combined airlines, pay raises, and
other contract improvements, Cordle said. "That may kill the
deal."

The pilot groups' other aim: To determine how they will
merge their seniority lists and compromise on other work
rules, the people briefed on the discussions said.

Such a pilot agreement could allow the carriers to announce
a merger pact either late this week or sometime next week,
these people said. Company management gave the unions until
mid-week to reach a deal, but it's a deadline that could
easily slip into next week, according to one person.

The people briefed on the discussions said they believe
union leaders are motivated to clear a path for the planned
merger. The airlines have offered pilots an equity stake in
the contemplated merger. The unions also hope a merger will
reverse some of the pay cuts and other concessions they made
to Delta and Northwest as they headed into twin bankruptcy
restructurings.

FTN Midwest Securities analyst Michael Derchin said the
unions are trying to reach a consensus on what demands they
want to make.

"We've got an odd situation where the pilots are for this
deal," said Derchin. They want to use the leverage the deal-
making gives them, but "they don't want to kill the deal."

Northwest Airlines pilots told the Minneapolis Star-Tribune
over the weekend that they "will not be stampeded" into a
deal that would enable a smooth merger with Delta.

"We will not make a deal with any entity unless it is the
right deal for Northwest pilots," Dave Stevens, a Northwest
captain and chairman of its pilots union, told the newspaper
in Northwest's headquarters city.

Meanwhile, Delta and Northwest have largely resolved other
issues related to a planned stock-swap merger, including
decisions on who will run the combined companies, according
to the people briefed on the discussions.

Delta Chief Executive Richard Anderson is expected to remain
at the controls, while Northwest CEO Doug Steenland will
give up a direct management role and remain of the board of
directors, according to one person.

Officials at Delta and Northwest have not publicly confirmed
that they are in merger discussions.

A side agreement between the two pilot unions could help
increase investors' confidence in projected cost-savings and
revenues from the merger. It also may diffuse political
opposition to a merger that would create the world's largest
airline.

Delta's pilots union, with about 6,300 active members, is
the only large union group at the Atlanta-based carrier.
Minneapolis-based Northwest has roughly 4,500 active pilots
in its ALPA unit. More than 80 percent of Northwest's
workers are in unions.

Neither union returned calls seeking comment.

Experts say the airlines appear to be pushing the unions to
navigate a briar patch of issues in a few weeks that has
often kept unions and airline executives in a tangle for
months or years. Pilots at US Airways are still working
under separate seniority lists and contracts more than two
years after America West acquired the wounded carrier and
assumed its name in 2005.

As with most airline employees, a pilots' seniority
determines pay rates and which routes they get to fly.

Pilots at Delta have lower seniority on average than
Northwest's pilots because more than 2,000 retired early to
save part of their pension benefits as the carrier headed
toward bankruptcy. Meanwhile, pilots at Northwest, the
smaller carrier, are paid slightly less on average.

Russell Grantham writes for The Atlanta Journal-
Constitution.

 

[General Lee]

Was it G4G5 or AA717driver that stated "You will have NO SAY in any merger....this is driven by Hedge Funds and Wall St only, and you will wake up one day and it will be over....." Well, I think whomever said it was wrong.

Bye Bye--General Lee

 

[On Your Six]

Sounds like Lee Moak of DALPA is doing his job. It is better to hammer out a "workable" agreement before jumping into it (like USAirways/AWA).

Get it right (as much as possible) before agreeing to anything...

 

[Going2Baja]

Where will any merger leave furloughed guys that have a bypass?

Baja.

 

[DrewBlows]

Ask for the moon. Why would the pilots want to approve a merger if it doesn't pay? If the executives really want a deal they will give concessions.

 

[Bavarian Chef]

Was it G4G5 or AA717driver that stated "You will have NO SAY in any merger....this is driven by Hedge Funds and Wall St only, and you will wake up one day and it will be over....." Well, I think whomever said it was wrong.

Bye Bye--General Lee

But this isn't a hostile takeover, General. The airlines want it, the investors want it, the industry wants it -- far different rules this time (from the US debacle).

Everytime you post all I think is:

The band is setting up on deck, are you gonna hum along or pick up an instrument and start playing?


I know Lee Moak from aways back, he's a very solid guy. I hope he makes it work out for y'all. I have some good friends that got on with the D in the last year.

 

[Sedona16]

Delta-Northwest ties-up plan advances
By Justin Baer in New York
Monday Feb 11 2008 19:05
Delta Air Lines (NYSEAL) and Northwest Airlines
(NASDAQ:NWAC) have shared details of their merger proposal
with labour leaders, bringing the two US carriers a step
closer to a definitive agreement, people familiar with the
matter said.

Securing support of pilots and other workers would be a
crucial victory for thecarriers' executives, who are mindful
that any deal would face stiffer oppositionin Washington
without endorsements from key employee groups.

The two airlines are closing in on an accord that would
exchange Northwest shares for those of Delta at little or no
premium, the people said.

Delta has a market value of about $7bn, including shares the
company will issue to creditors as part of its agreement to
exit bankruptcy. Northwest is worth about $5bn. Both
carriers filed for protection from creditors in 2005 and
emerged last year.

Delta and Northwest also still need to determine whether Air
France-KLM, their mutual European ally, will invest in the
combined company, the people said.

The Air Line Pilots Association represents pilots at Delta
and Northwest. While each group has said it was open to
consolidation, they are pushing for wage increases to unwind
concessions they made to their airlines during their
bankruptcies. They also want to resolve how their members
will rank in the combined company's seniority list, which
helps determines how much pilots are paid and what aircraft
they fly.

While pilots cannot technically block two airlines from
merging, they can help galvanise opposition. Delta was able
to fend off a hostile bid from US Airways last year in part
because of the pilots' co-operation with management.

"Although we as a group received little public credit for
the victory, those close to the fight know for a fact that
the Delta pilots played a key role in the defeat of the
hostile takeover," Lee Moak, chairman of the pilots group,
wrote in a letter to members last month.

"In any merger scenario that may take place, whether we
choose to support or oppose the effort, our active
engagement will be every bit as important as it was one year
ago."

Delta's pilots are the carrier's only major employee group
with union representation, though the Atlanta-based
company's flight attendants plan to vote this week to
organise.

Northwest declined to comment, as did the airline's pilots.

 

[Sedona16]

Merger plan upsetting to NWA pilots, expert says
Seniority seen as concern; airlines decline to comment
February 12, 2008

BY MARGARITA BAUZA

FREE PRESS BUSINESS WRITER

Northwest Airlines pilots are unhappy with a proposed merger plan from Delta Air Lines and Northwest because they are concerned their seniority wouldn't be protected, said an expert familiar with the talks.

Doug Marshall, an aviation professor at the University of North Dakota, said Monday that pilots from both carriers recently saw the plan for how they would work for the combined airline and that there are many issues to sort out.

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"There is no legal requirement that they are fully integrated," Marshall said of Northwest pilots. "You could get a senior 747 captain flying a Delta regional jet.

"That's what happened with TWA and American," said Marshall, referring to the 2001 merger of those two carriers. Pilot lawsuits are still pending in connection with that merger, he added.

If Delta is the acquiring company, it would have the incumbent union and have the power to impose its own terms, Marshall said.

Pilots from Northwest declined to comment. Officials from Northwest and Delta also declined to comment.

Delta and Northwest are said to be in formal talks about a merger and are expected to announce a proposed agreement within days.

Pilots from both carriers share the same union -- the Air Line Pilots Association -- and there are specific guidelines on how a merger would be handled.

For instance, it calls for use of a mediator if certain issues can't be resolved.

There would be 11,000 pilots at the combined company.

Marshall said merging the two workforces -- one union and one largely nonunion -- has so far been a major sticking point in marrying the companies. Integrating workforces presents major logistical and legal barriers, he said.

About 17% of Delta's 51,300 employees were represented by unions in 2006. Roughly 85% of Northwest's 30,000 employees were organized in that year.

Marshall said he has heard details of the proposed plan and would be surprised if the Justice Department approves it.

"It sounds anticompetitive," he said. "The intent in a combination is to rationalize the respective system and reduce service in some markets. Fewer flights and lower capacity would raise prices."

But labor issues are, by far, the larger obstacle, he said.

The Association of Flight Attendants, which represents 8,300 Northwest attendants, said Saturday that Delta attendants will file cards on Thursday to seek union representation. Voting is to begin within 60 to 90 days of the membership cards being filed.

Efforts to unionize the 14,000 Delta flight attendants have been building since late 2006, said Kevin Griffin, president of the attendants union.

Delta flight attendants could organize before the Department of Transportation and the Department of Justice approve a merger, a process that could take months.

If that happens, there will be guidelines for the integration of flight attendants at both airlines, Griffin said.

Delta flight attendants could also choose not to organize.

Employee groups would need at least 35% of the merged work group to be unionized in order to hold a vote to organize.

In the case of flight attendants, more than 50% of them would then have to vote to retain the union. Otherwise, the union would cease to exist and so would the contract, Griffin said.

If the contract dissolves, all employees would be covered by Delta's policies and procedures manual, he added.

Griffin said he had "a good feeling" that the attendants would organize prior to a deal being finalized.

Labor-management relations at Northwest have been "rough for decades," Griffin said, adding that employees at Northwest would welcome a change in culture.

The chief executives at Delta and Northwest addressed the merger issue with employees last week.

Northwest CEO Doug Steenland told employees in a letter that a merger was highly likely. Delta CEO Richard Anderson told employees that the company would only go ahead with a merger if it met its goals, helped strengthen the company and create job security.

Moody's airline analyst George Godlin said he doubts the airlines will be able to raise ticket prices -- the desired result of merging operations and decreasing capacity.

"There is a resistance to fare increases on the part of customers," Godlin said. "Taking capacity out or reducing service does not offer assurance that they're going to be able to raise fares."

 

[737 Pylt]

"There is no legal requirement that they are fully integrated," Marshall said of Northwest pilots. "You could get a senior 747 captain flying a Delta regional jet.

'"

This is why I don't like reading anything in the press until it comes from our reps personally.
The newspapers can mess up a 1 car funeral!

737

 

[On Your Six]

Merger plan upsetting to NWA pilots, expert says
Seniority seen as concern; airlines decline to comment
February 12, 2008

BY MARGARITA BAUZA

FREE PRESS BUSINESS WRITER

Northwest Airlines pilots are unhappy with a proposed merger plan from Delta Air Lines and Northwest because they are concerned their seniority wouldn't be protected, said an expert familiar with the talks.

Doug Marshall, an aviation professor at the University of North Dakota, said Monday that pilots from both carriers recently saw the plan for how they would work for the combined airline and that there are many issues to sort out.

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"There is no legal requirement that they are fully integrated," Marshall said of Northwest pilots. "You could get a senior 747 captain flying a Delta regional jet.

"That's what happened with TWA and American," said Marshall, referring to the 2001 merger of those two carriers. Pilot lawsuits are still pending in connection with that merger, he added.

If Delta is the acquiring company, it would have the incumbent union and have the power to impose its own terms, Marshall said.

Pilots from Northwest declined to comment. Officials from Northwest and Delta also declined to comment.

Delta and Northwest are said to be in formal talks about a merger and are expected to announce a proposed agreement within days.

Pilots from both carriers share the same union -- the Air Line Pilots Association -- and there are specific guidelines on how a merger would be handled.

For instance, it calls for use of a mediator if certain issues can't be resolved.

There would be 11,000 pilots at the combined company.

Marshall said merging the two workforces -- one union and one largely nonunion -- has so far been a major sticking point in marrying the companies. Integrating workforces presents major logistical and legal barriers, he said.

About 17% of Delta's 51,300 employees were represented by unions in 2006. Roughly 85% of Northwest's 30,000 employees were organized in that year.

Marshall said he has heard details of the proposed plan and would be surprised if the Justice Department approves it.

"It sounds anticompetitive," he said. "The intent in a combination is to rationalize the respective system and reduce service in some markets. Fewer flights and lower capacity would raise prices."

But labor issues are, by far, the larger obstacle, he said.

The Association of Flight Attendants, which represents 8,300 Northwest attendants, said Saturday that Delta attendants will file cards on Thursday to seek union representation. Voting is to begin within 60 to 90 days of the membership cards being filed.

Efforts to unionize the 14,000 Delta flight attendants have been building since late 2006, said Kevin Griffin, president of the attendants union.

Delta flight attendants could organize before the Department of Transportation and the Department of Justice approve a merger, a process that could take months.

If that happens, there will be guidelines for the integration of flight attendants at both airlines, Griffin said.

Delta flight attendants could also choose not to organize.

Employee groups would need at least 35% of the merged work group to be unionized in order to hold a vote to organize.

In the case of flight attendants, more than 50% of them would then have to vote to retain the union. Otherwise, the union would cease to exist and so would the contract, Griffin said.

If the contract dissolves, all employees would be covered by Delta's policies and procedures manual, he added.

Griffin said he had "a good feeling" that the attendants would organize prior to a deal being finalized.

Labor-management relations at Northwest have been "rough for decades," Griffin said, adding that employees at Northwest would welcome a change in culture.

The chief executives at Delta and Northwest addressed the merger issue with employees last week.

Northwest CEO Doug Steenland told employees in a letter that a merger was highly likely. Delta CEO Richard Anderson told employees that the company would only go ahead with a merger if it met its goals, helped strengthen the company and create job security.

Moody's airline analyst George Godlin said he doubts the airlines will be able to raise ticket prices -- the desired result of merging operations and decreasing capacity.

"There is a resistance to fare increases on the part of customers," Godlin said. "Taking capacity out or reducing service does not offer assurance that they're going to be able to raise fares."

It sounds anticompetitive? And he is a Professor from UND? The route structures are almost completely complementary. NWA brings Asia and DAL brings Europe, Latin America and Africa. There is very little domestic overlap with only a few competing routes to/from hubs. How is that anticompetitive? Sure, there might be some hub rationalization (probably regional service) but not much. That guy sounds like a real dumba$$. I'd give him an "F" for that analysis. Welcome to the real world.