Opus

NWA, Delta trying to beat ticking clock
By LIZ FEDOR, Star Tribune

April 7, 2008

Northwest Airlines and Delta Air Lines executives recognize
time is growing short to propose a merger that could win
regulatory approval before President Bush leaves office, and
they now are seriously discussing multiple merger options.

Some analysts view the airlines as likely to move quickly,
because of that narrowing political window and the threat of
growing unrest among many shareholders who are demanding
consolidation.

A person familiar with the talks said Monday that the
airlines could elect to follow a traditional path,
announcing a merger and leaving the integration of their
union pilot ranks until after the combination receives
federal approval.

Delta CEO Richard Anderson, who would lead the merged
carrier, and other executives wanted to secure a pilot
agreement in advance of a deal, partly because the new
airline could avoid a protracted and bitter dispute among
the two pilot groups.

If the pilot groups fail to negotiate a seniority deal after
a merger takes effect, the Air Line Pilots Association
policy allows arbitration to be triggered to resolve the
dispute.

Another possible merger strategy involves moving ahead with
what some have called a "lite merger" in which there would
be only one set of top executives, but Delta and Northwest
would continue to operate separately.

However, that approach would be strictly an interim step
because it would achieve limited efficiencies. In addition,
current pilot labor contracts at both airlines "require that
the operations of the airlines be integrated shortly after
the negotiation of a combined collective bargaining
agreement and seniority integration," said a second source
familiar with the talks.

Third option floated

A third option involves the executives informing the two
pilot groups that they intend to proceed with a merger, but
they want the pilots to make one last attempt at reaching a
deal on seniority.

The two airlines have had a merger agreement ready since
February, with the combined company to be based in Atlanta.

In February, the airlines executives also negotiated a
four-year labor deal with the two pilot groups that called
for double-digit wage increases. That new contract was
designed to be an inducement for pilots to negotiate the
integrated seniority list that would allow the merged
airline to combine fleets from the outset. So far, the two
pilot groups have failed to reach an agreement.

Now, a news source said, "The one wild card is whether or
not you can still achieve enough synergies without having a
pilot deal up front."

Talks between the two pilot groups might begin again this
week.

Dave Stevens, Northwest pilots union chairman, and Monty
Montgomery, the union's vice chairman, met with U.S. Rep.
Jim Oberstar, D-Minn., on Monday in Minneapolis. Oberstar
opposes a merger because of competition issues. The pilots
shared some merger concerns with Oberstar that they have
heard from multiple Northwest employees, said a source
familiar with the meeting. The Northwest pilots' leadership
previously said it could support a merger under the right
circumstances.

This spring, the Northwest and Delta boards and executives
have reached a stage in which prospects for the airline
industry have grown tougher as the U.S. economy stagnates
and fuel prices remain at record highs.

In recent weeks, merger discussions between the two airlines
have occurred in "fits and starts," one source said, because
executives had to focus their attention on capacity cutbacks
intended to help Delta and Northwest remain viable on their
own in the face of rising fuel prices.

J. Steven Hart, an antitrust attorney who worked in the
Reagan administration, said in an interview that the
airlines should allow the Department of Justice enough time
to complete a merger review by the end of November. He
argues that regulators will need at least six months to
assess the combination, which he believes would be approved
because the airlines' domestic networks are complementary.

Hart views presidential candidates Hillary Clinton, John
McCain and Barack Obama as "less likely to be favorable
towards airline mergers" than the Bush administration.

'Up against a deadline'

Dan McKenzie, an analyst for Credit Suisse, said that if
Delta's board dallies much longer, some shareholders are
prepared to mount an effort to replace board members with
those who would more aggressively move ahead on a merger.

He said that the window for proposing a merger should be
measured in days rather than weeks.

"We are coming up against a deadline," McKenzie said.

sailingfun

This is one of the few article that appears well written and factual. I also don't like the sound of it. Since I know that most Delta pilots oppose this merger and it appears from this forum that most NWA pilots feel the same way make sure you MEC reps understand your feelings. Email and call them today. Its time for the MEC's to let management know that we will oppose this jointly with all means available. It can and will make a difference!

IHateMgmt

Liz Fedor is a great reporter.

NWA320pilot

From what I am hearing the majority of the NWA pilots are in favor of a merger. Personally I feel that a merger would be a benefit for everyone.... I know the SLI issue still remains but in this case from what I am hearing it is a $1B cost savings as a whole vs. the two entities. If this is the case then it would be in a much better position to weather any storms thus protecting pilot jobs.

reddog25

I'm a NWA pilot and I support the merrger for this reason: STRONG AIRLINE.

From the April 2008 ATW: JAN 2007- NOV 2007 traffic. INT'L traffic: Pacific; NWA-4,945,000 pax, DAL-183,000 pax. Atlantic; DAL-5,618,000 pax, NWA 2,597,000 pax. We as pilots need to look at the big picture. Will your seniority be the same as it was before a merger? Of course not. Will we dominate the Pacific and Atlantic? You Betcha, ya'll

acl65pilot

And you MIGHT have the same job when you retire. It is a better chance that we all have currently.
It just needs to be done correctly or all bets are off. I believe that Anderson recognizes this and that is why there has not been announcement to date.
Now we will see who wags the dogs tail.
Will he get his way or is the DAL board going to tell him to get it done or pound sand.
Our window of opportunity is closing.

reddog25

My 2 cents bet is that the folks who steered both NWA and DAL out of bankruptcy are still in the drivers seat, and it wasn't Steenland or Anderson. It was and is the hedge funds who need to see a payoff on their investments. So yes, it will get done, and we need to start planning to work together. I've already begun eating grits for breakfast!

tsquare

Except that she incorrectly used the word "too" in her headline.... professionalism and all that...

tsquare

oops that was the poster that did that ugh....

Deez340

Amen!!! Bring on the lutefisk!

acl65pilot

Now that is funny.
Being from up that way, I already am used to the Friday Fish Fry.

I agree, but there are a few people on the board that are wild cards. Most of them are looking for long term viability, and there are still some serious questions that need to be answered for this marriage to work. If certain issues cannot be ironed out, there is no real benefit to having this merger happen. Most of it has to deal with us.
Do you really think that DAL/NWA want to deal with the issues of a merger lite, or a forced deal. No, they and the board are watching an airline go in the tubes because of it. They will not allow the same issue to kill this deal.
From what I am hearing there are a lot of things coming out that are designed to "test the waters"
This whole merger lite will not fly, but most of the rank and file pilots do not know that and do not know their contracts. No way no how will this pass muster. It is designed to freak the majority out and say.... Get the deal done now before they do that to us....
Might work, might not.