Feds Approve Delta-Northwest Merger

Delta and Northwest Airlines planes taxi before takeoff at Logan International Airport in Boston, Tuesday, April 15, 2008. Delta Air Lines Inc. and Northwest Airlines Corp., squeezed by record high fuel prices and a slowing economy, are combining in a stock-swap deal that would create the world's biggest carrier. (AP Photo/Michael Dwyer) AP Photo/Michael Dwyer

Delta and Northwest airlines won antitrust approval on Wednesday, with the Justice Department saying the creation of what will be the world's largest airline will help consumers without hurting competition.

The approval means the only thing standing between the two airlines and the deal closing is a trial in San Francisco next week in a lawsuit brought by 28 travelers. Northwest CEO Doug Steenland has said he does not believe the lawsuit will stop the deal, which the carriers have said they hope to close by the end of this year.

"This is a very big day for Northwest and Delta Airlines," said Tammy Lee, Northwest's Vice President for Corporate Communications. "We've gotten the green light from the Department of Justice to complete our merger. So for employees of a combined carrier this is great news and for customers as well."

Federal regulators wrote in a statement that "the proposed merger between Delta and Northwest is likely to produce substantial and credible efficiencies that will benefit U.S. consumers and is not likely to substantially lessen competition."

It noted that they already compete with other carriers on most of the routes where they currently compete with each other. The Justice Department also said consumers should benefit from savings on expenses for airport operations, technology and suppliers. The companies have said they can cut $2 billion a year in expenses once they combine.

When Delta Air Lines Inc. and Northwest Airlines Corp. announced their deal in April, it was widely thought that they were looking to get approval before a new president took office.

The new airline would retain the Delta brand and be headquartered in Atlanta, where Delta is based now. Delta chief executive Richard Anderson would head the new company.

Shareholders of both companies in September approved the plan for Delta to acquire its smaller rival.

The all-stock deal gives Northwest shareholders 1.25 Delta shares for each Northwest share, valuing the deal at about $2.6 billion based on Delta's Tuesday close at $8.16 a share.

But Kevin Mitchell, chairman of the Business Travel Coalition, said approval of the merger will mean higher fares and fewer connections between mid-size cities and business centers. He said he was concerned about an enlarged Delta and other possible airline combinations and joint ventures.

"A first priority of the new administration should be to reconsider the rationale behind antitrust-immunized alliances and the market power they can exercise to the detriment of consumers," he said.

Mitchell testified before Congress in April in opposition to airline mergers.
  • CBSNews

Comments