Delta, Northwest boards approve merger deal
WASHINGTON (AFP) — US carriers Delta Air Lines and Northwest Airlines are combining to form what will be the world's largest airline if regulators and stockholders approve the deal, the two companies said.
The third and fifth largest US airlines will marry under the name Delta with a combined value of 17.7 billion dollars, the two announced after their boards approved the merger late Monday.
The merger boasts the creation of the world's largest airline in terms of fleet, destinations and total passengers.
"Combining Delta and Northwest will create a global US flag carrier strongly positioned to compete with foreign airlines that are continuing to increase service to the United States," a joint statement said.
The terms of the all-stock transaction call for Northwest shareholders to receive 1.25 Delta shares for each Northwest share they own.
The deal was announced as skyrocketing fuel costs, a suffering economy and increasing dissatisfaction among travelers have put a chokehold on the airline industry.
Both Delta and Northwest emerged from Chapter 11 bankruptcy last year.
The transaction was forecast to generate more than one billion dollars in annual revenue, with one-time cash costs for integrating the two airlines also set at one billion dollars.
A Delta-Northwest merger, tipped for weeks, was complicated by opposition from pilots who could not reach agreement on a combined system for establishing seniority.
"Delta will use its best efforts to reach a combined Delta-Northwest pilot agreement, including resolution of pilot seniority integration, prior to the closing of the merger," the statement said.
It cited staggering job losses and fuel prices that have doubled since 2007 as primary reasons for the merger.
"In an industry where the US network carriers have shed more than 150,000 jobs and lost more than 29 billion dollars since 2001, the combination of Delta and Northwest creates a company with a more resilient business model that is better able to withstand volatile fuel prices than either can on a standalone basis," it said.
"Merging Delta and Northwest is the most effective way to offset higher fuel prices and improve efficiencies, increase international presence and fund long-term investment in the business."
Delta CEO Richard Anderson will continue as chief executive officer of the combined airline, to be headquartered in Atlanta, Georgia.
The merger must be approved by shareholders of both companies and is subject to antitrust review, a process that is expected to be completed later this year, Delta said.
The merger would increase international and domestic reach without reducing the number of hubs, serving "140 small communities in the United States -- more than any other airline," the company said.
In addition, the new company and its partners, operating a fleet of close to 800 planes and employing 75,000 people globally, will service more than 390 destinations in 67 countries, it said.
"The new carrier will offer superior route diversity across the US, Latin America, Europe and Asia and will be better able to overcome the industry's boom-and-bust cycles," said Northwest Chief Executive Officer Doug Steenland.
Last week, US authorities gave tentative approval for Delta, Northwest, and four of their international partners to combine their transatlantic routes in the SkyTeam alliance.
The two US carriers, along with Air France, Alitalia, Czech Airlines and KLM Royal Dutch Airlines, plan "to coordinate their services and act as a single carrier for US-Europe services," according to the US Department of Transportation.
