E1Out

Delta's Bastian: Merger Benefits Increasing - TheStreet.com

The planned merger between Delta and Northwest looks even better now than it did in April.

That's because Delta now believes the merger will produce $2 billion in savings and benefits, up from an original estimate of $1.2 billion, and will cost about $600 million, down from the $1 billion projected earlier.

"When we announced in April with oil at $110, we wanted to make certain we did not over-commit to Wall Street what the real value was," said Delta President Ed Bastian, in an interview with TheStreet.com. "We would rather under-commit and then deliver good news.

"Now that we've had an opportunity to do more detailed work, we've been able to validate the synergies we thought were there, but had a difficult time quantifying," he says. "With oil at $130 a barrel, we have to make sure we are getting every last nickel of synergies and also make sure we have good transparency."

Having two dozen employee teams fully scrutinize Northwest's operations -- which could not happen during negotiations -- has been a big factor.

The evaluation suggests the combined company could gain back $500 million in 2009 and another $500 million to $600 million annually until 2012.

Under the tentative contract agreement reached last month with the pilot groups from the two airlines, Delta can attach either carrier's code to the flights it chooses, as soon as the deal closes. Delta expects to complete the transaction in the fourth quarter.

"The greatest value [from the new contract] was the ability to move aircraft around and use the right code mix," Bastian says. Additionally, once the carriers get a single operating certificate, which is expected 12 to 24 months after the merger is completed, pilots could fly any airplane in the fleet.

By contrast, in the 2005 merger between US Airways(LCC - Cramer's Take - Stockpickr) and America West, pilot contracts did not prevent code shares, but the continued failure to merge the contracts means pilots still fly only the planes from their pre-merger airline.

The deal gives Delta the world's largest loyalty program, with 60 million frequent fliers. In the next two years, the carrier expects to benefit from the expiration of agreements to issue credit cards linked to the two carriers' programs with American Express and US Bancorp.

"We will be America's premier global airline, and there is a price to pay for that," Bastian says. Last month, Continental received $413 million when it extended a joint marketing agreement with JPMorgan Chase.

Additionally, the merger will make Delta the operator of 700 to 800 regional jets, about 40% of the country's regional jet fleet. "That is a big opportunity," Bastian says. Also, Delta will get more than $100 million in improved efficiencies in airport operations, leasing less space at costly facilities like Los Angeles International Airport.

As for regulators, Bastian says everything appears to be going well with the Justice Department, which must approve the deal.

"We're meeting all the information requests, [for] over 10 million pages of information, and we're working in a very collaborative manner," he says.




Please tell me that I am either reading this wrong, or that this is just another example of the press having no clue what's going on in the airline industry...

I am reading this as:

1) In our TA, we are agreeing that the company can move around aircraft as soon as the merger is approved by the DOJ. (i.e. Come October, DC-9's and B747's could be moved to ATL and MD-88's to DTW.)

2) We are also agreeing that in 1 - 2 years, there will be no fences.

I just got back from vacation and haven't had a chance to read the TA yet... Somebody please tell me it ain't so........

Bluto

Well, what would be the point of merging if they're going to be treated as separate companies? It seems to me, the more different this merger is from US/AW the better. DAL management has been opposed to fences from the beginning. Why is that a problem?

Superpilot92

Read the MEC info and go to the roadshows. The NWA mec put up a video of the roadshow on our MEC page for people to watch it if unable to attend. Maybe DAL has done the same. There is a massive amount of information in regards to each question you have. The MEC's seemed to have looked at everything so by all means dont get to worked up over a news clipping.

sailingfun

I am not sure what you are saying. The company can do anything it wants with the flying after the DCC. They will own both airlines and can put equipment where they desire. Its not a union function to fleet plan. If they move nines or 747's to ATL flights there will not be a base for the equipment there. It will simply be flown by NWA pilots on rotations. Much as a MD-90 pilot might fly Atlanta legs based out of SLC. There was nothing for us to grant for the company to be able to do this.

As far as pilot integration the contract has nothing to do with fences. The SLI will determine fences and that has not be agreed upon. Even with fences the pilot groups will be unified in 1 to 2 years. (Rumored first joint bid fall 09). Fences never cover everything so some cross bidding will occur. As a example the arbitrators might rule that 777's arriving after xxx date can be bid by either side as well as 787's after the same date.

SomedayRJ

Concur heartily. This is just the way I see it, but:

In the short run, everyone gets screwed—not necessarily equally but almost everyone will wind up somewhat worse off than they were pre-merger. In the long run (e.g. when cost savings are realized, which if DL/NW management is to be believed will be Real Soon), the integrated carrier survives and is able to crush the competition, making those who were short-term screwed better off than they were at separate companies.

Having it turn into another achingly slow, painfully divisive integration and having the pilot groups close to fisticuffs and in shouting matches with one another benefits exactly one group: management—at the expense of all pilots involved. Sure, one group may 'win' in such a situation, but it will be at tremendous cost in the long run to all involved.

(Short summary: You can be screwed now, with chances of improvement, or totally screwed later.)

E1Out

This answers my question regarding aircraft movement... Thank you. My fear is losing my base (which is one of the reasons I applied to DAL and not NWA).

My question in regards to fences, is whether or not I may be prevented from moving to another DAL aircraft before more senior NWA pilots get a crack at it - potentially boxing me out of it for the next ~10 years. (Again, another reason I applied to DAL and not NWA.)

newKnow

By this time next year there will be 330's in JFK, 767's in DTW and we will all be one big happy family. Right?

acl65pilot

What DAL will do is have the aircraft where they need them. What that does to us under the TJPWA is create some very long trips. When they move the 777's,330's, 767's,and 744's around you are going to see some 9-12 day trips until they can create bases in the other cities. This will not occur until SOC+ a few months.
Talked to a few of the people over in crew planning and to make the synergies work off the bat the best answer is long long trips internationally. Domestically they can do it quite easily.

acl65pilot

You will see this by DCC+4 or four months. It will take that long to get the schedule out.

atpcliff

Hi.

It sounds like a lot of you DAL/NWA pilots think this merger will be terrible, especially from the DAL side.

I encourage all the DAL (and NWA) pilots who thinks this merger and/or DAL/NWA of the future is/will be crap to immediately leave and get a flying job elsewhere-Asia is hiring a lot.

I will be applying to NWA/DAL as soon as they begin hiring (unless I get a good job before then). I will appreciate the extra slots that are freed up.

Good luck, and God Bless!

cliff
MCI

PS-My airline just furloughed, like so many others in recent months.