Delta, Northwest Approve Merger Deal

World's Biggest Airline Will Be Created Pending Antitrust Approval

(CBS/AP)  Delta Air Lines has reached an agreement with Northwest Airlines to take over Northwest and create the world's biggest carrier, a person familiar with the negotiations confirmed to CBS News.

The boards of both companies gave the deal the go-ahead Monday.

Delta said the combined airline will have an enterprise value of $17.7 billion. It will be based in Atlanta, and Delta CEO Richard Anderson will head the combined company.

The new airline would keep the Delta name, own more than 1,100 planes and service more than 1,100 destinations worldwide, reports CBS News correspondent Nancy Cordes.

Under the terms of the transaction, Northwest shareholders will receive 1.25 Delta shares for each Northwest share they own. The exchange ratio represents a premium to Northwest shareholders of 16.8 percent based on Monday's closing stock prices.

The announcement comes a year after the two carriers emerged from Chapter 11 bankruptcy protection. Both carriers are losing money again but are in much better shape than the four much-smaller airlines that have filed for bankruptcy or gone out of business in recent weeks.

The deal will need antitrust approval, and integrating the work forces of fully unionized Northwest and Delta, where pilots are currently the only major unionized work group, will be tricky.

The joining of Atlanta-based Delta and Eagan, Minn.-based Northwest, if approved by regulators, will result in combined annual revenue of $31.7 billion, vaulting it ahead of Fort Worth, Texas-based AMR Corp.'s American Airlines for the top spot in the U.S.

It would be the biggest carrier in the world in terms of traffic, before any further domestic capacity cuts and any divestitures that might be required by antitrust regulators.

The agreement comes after several months of merger discussions between Delta and Northwest and at one time between Delta and Chicago-based UAL Corp.'s United Airlines. Analysts believe a Delta-Northwest combination will stand up better to regulatory scrutiny because the two carriers have less overlap, even though a Delta-United combination could create more scale and have greater synergies.

Years of mounting losses forced Delta and Northwest to file for bankruptcy protection in New York on Sept. 14, 2005. Both emerged from bankruptcy as leaner carriers last spring, after shedding billions in costs during their reorganizations.

While in bankruptcy, Delta fended off a hostile takeover bid by Tempe, Ariz.-based US Airways Group Inc.

Delta said its plan to remain on its own would create more value than US Airways' $9.8 billion bid, which Delta argued would not pass regulatory hurdles. The value argument never materialized, as Delta's post-emergence market capitalization started out $1 billion less than US Airways' bid and less than the $9.4 billion to $12 billion Delta projected. Its market value has fallen precipitously in the months since amid airline industry woes, including high fuel prices and a general inability to gain traction raising ticket prices.

Many analysts predicted an eventual Delta-Northwest merger after Anderson, a former Northwest CEO, was named last August to be the chief executive officer of Delta.

Anderson, who was Northwest's CEO from 2001 to 2004, immediately sought to quiet those suggestions, telling Delta's pilots union chairman the morning his appointment was announced that he believed in Delta's standalone plan and that "he was not coming in as CEO to facilitate a merger with Northwest."

But eight months later, that's what Anderson is doing, and many analysts believe he didn't have a choice amid plummeting airline market values and soaring fuel prices.

Wall Street and some airline executives have pushed for consolidation for years, arguing that too many seats are chasing too few passengers. The resulting discounting has made it hard for airlines to cover their expenses.

However, Northwest and Delta overlap relatively little in the U.S. - which could actually help them gain antitrust approval. Delta's routes are strongest in the eastern U.S. and to Latin America and Europe. Northwest would complement that with its near-lock in the Midwest along with flights to its Tokyo hub and other points in Asia.

Northwest's Asian routes have been one of its main appeals to other carriers. It and United are the only two U.S. carriers with the rights to pick up new passengers in Japan and fly them farther into Asia. Delta and Northwest also complement each other internationally because they are both part of a marketing alliance that includes Air France-KLM.

U.S. airlines get the majority of their revenue from domestic service, though that trend has shifted in recent years as more carriers, particularly Delta and Northwest, have sought to increase international service.

[forthepeopl1]

if it aint MR. POTATOHEAD, LOOKS PRITTY SCARED DOENT HE. ITS FUNNY TO HAVE THIS INSIDER OF WALLSTREET HAVE SO MUCH POWER..


LISTEN IF THEY ( CONGRESS) WOULD DO THERE JOBS WE WOULDN''''''''T BE IN THIS MESS.

ANYONE THAT TOOK OUT LOANS FROM 2000 TO 2007
REGARDLESS OF WHAT THERE CREDIT LOOKS LIKE RIGHT NOW, BECAUSE OF THIS MESS MOST HAVE LOST THEIR GOOD RATING.


THEY NEED TO COME OUT AND TELL ALL MORTGAGE COMPANYS

TO RE-FI EVERYONE NOW. NO EXCEPTION IF THEY HAVE A
MORTGAGE THAN TAKE 60% OFF THE BALLANCE AND RE-FI THEM AT 1 PERCENT OVER PRIME AND STOP ALL THE BLEEDING FOR ONCE..THAT IS ALL THAT HAS TO BE DONE, SIMPLE,FAST,AND IT WOULD STOP ALL FORCLOSEINGS,BURNINGS OF HOMES,AND STOP 10''''''''''''''''''''''''''''''''S OF MILLIONS FROM BEING ON THE STREET..

THIS IS MORE INPORTANT, THAN THIS ***.

OR HOW ABOUT REPORTING THAT WE THE PEOPLE WANT TO KNOW THIS FROM CLINTON AND MCCAIN. WHAT DO YOU WANT TO SAY TO THE 374,298 AMERICANS DEAD,HURT,MAIMED IN THIS WAR YOU SUPPOTED FROM THE START..HOW ABOUT ASKING THEM THIS


TIME TO MARCH DOWN AND TAKE THEM OUT..

[luxurytax-2009]

THEY CANT EVEN OPERATE RIGHT SEPERATELY AND NOW THEY WANT TO MERGE.I WORK IN THE PHILADELPHIA INTERNATIONAL AIRPORT AND I GET CURSED OUT FOR THEIR FLIGHTS NOT GOING OUT ON TIME OR EVEN BEING CANCELLED.

[luxurytax-2009]

THEY CANT EVEN OPERATE RIGHT SEPERATELY AND NOW THEY WANT TO MERGE.I WORK IN THE PHILADELPHIA INTERNATIONAL AIRPORT AND I GET CURSED OUT FOR THEIR FLIGHTS NOT GOING OUT ON TIME OR EVEN BEING CANCELLED.

[usbrit-2009]

Couple of points: At least Delta have gotten rid of the management team that got them into bankruptcy - has NorthWest?
NorthWest has a written agreement with Minneapolis and/or Minnesota not to leave - how is that going to be dealt with?
NorthWest has not consulted their employees on this, and I doubt that their Pilots are going to agree to play second fiddle to Delta pilots any time soon.
Big problems with this deal without even invoking the anti-trust law (and since there are still five majors in the country even after this merger, I doubt that that applies).

[hungry1968]

"Okay the merger is completed.

First order of business - raise fares!!!

Second order of business - ask the government for a massive multi-billion dollar bailout because the merger was so expensive!!

Buwaa haa haa haa!!"

[fedupredneck]

RE:Posted by SistaTee at 02:08 AM : Apr 15, 2008
I couldn''t have said it better myself.I give it 3 yrs and they will be ready to file for chapter 11 protection again.

[truthspeake2]

What''s next...Coke buying Pepsi???

[sistatee-2009]

Two bankrupt companies merge. Now you have a larger, but still inept company. Eventually it will go bankrupt, holding more debt than the previous two companies. The CEO will walk away with millions and the taxpayers will get to clean up the whole mess. I see a trend here.

[cyberus-2009]

The mega-merger of the oil companies sure increased competition and lowered prices didn''t it?

(sarcasm intended)

[shanev137]

Pretty soon there will only be one of everything....one bank, one airline, one car maker, one police force...etc.


Annuit Coeptis of the Novus Ordo Seclorum