ATW Daily News

Delta merger talk heats up, reportedly seeks talks with United, NWA

Friday January 11, 2008

Delta Air Lines CEO Richard Anderson is expected to ask the carrier's board of directors today for permission to enter into merger talks with both Northwest Airlines and United Airlines.

The Wall Street Journal reported yesterday that Anderson, a former CEO of Northwest, plans to negotiate with both rivals with the intention of determining which one would be a better merger match for DL, which revealed two months ago that its board had established a "special committee. . .to review and analyze strategic options. . .including potential consolidation transactions" (ATWOnline, Nov. 15, 2007).

DL did not comment yesterday beyond reiterating its commitment to examining options, but Air Line Pilots Assn. Delta MEC Chairman Lee Moak wrote in a letter to members that it is "increasingly difficult to discount" merger talk "as simply more rhetoric." Citing rising fuel costs, low capacity growth and airline stocks' continuing poor performance, Moak said: "Consolidation may indeed be at our door."

Another factor that may be driving consolidation discussions is the belief among merger-inclined airline executives that the US Dept. of Justice under President George W. Bush would look more favorably upon a merger than a potential Democratic administration that could take office next January.

Led by then-CEO Gerald Grinstein, DL last year successfully fought off a "hostile takeover" bid by US Airways, which wanted to merge with the Atlanta-based airline (ATWOnline, Oct. 26, 2007). But new CEO Anderson and a declining US economy appear to be pushing DL to take another look a consolidation.

Moak said pilots will not necessarily move to block a merger. "We do not oppose consolidation, and may even determine that consolidation is desirable," he said. "The kind of consolidation that the Delta pilots might support is one that will produce an even stronger and growing airline that will vigorously and successfully compete in the international marketplace for years to come. . .Any attempt at consolidation will fail without the active involvement and support of the pilots from the earliest formative stages of the effort."

UA parent UAL Corp. Chairman, President and CEO Glenn Tilton repeatedly has called consolidation a "strategic imperative" for the US industry (ATW, July 2007).

by Aaron Karp

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