Merger Between Delta & Northwest in Jeopardy

Filed in archive Aviation Travel on February 23, 2008

It looks like the merger between Delta Air Lines and Northwest Airlines has hit a snag. A few days ago, it was reported that talks were moving along. However, talks over seniority with the pilot union has put the entire deal in jeopardy. But, experts are not ruling out the merger yet, saying both airlines could wait until next year to resume talks.

"I can conceive of the pilots not coming to an agreement and destroying a potential merger," said Ray Neidl, an airline analyst with Calyon Securities in New York.

While in bankruptcy, Atlanta-based Delta defeated a hostile takeover offer from Tempe, Ariz.-based US Airways Group Inc., arguing that Delta was better off as a standalone carrier. It emerged from Chapter 11 last April with that feeling intact, but soaring fuel prices soon prompted a wave of consolidation chatter.

Delta has considered a combination with Northwest or Chicago-based UAL Corp.'s United Airlines, but in recent weeks has apparently focused on trying to hammer out a deal with Eagan, Minn.-based Northwest, which was once headed by Delta Chief Executive Richard Anderson.

People close to the Delta-Northwest talks said the pilots unions have agreed on a comprehensive joint contract, a significant equity stake for pilots and big pay raises for some, but cannot agree to how seniority for the 12,000 pilots would work under a combined carrier. The people asked not to be named because of the sensitive stage of the talks.

Seniority is important for pilots because those at the top of the list get first choice on vacations, the best routes and the bigger planes that they get paid more for flying. It's also the reason pilots don't often leave to go work for another airline.

A person close to the talks said Tuesday night that a small group of Northwest pilot negotiators want thousands of young Delta pilots to go to the bottom of the combined seniority list as part of agreeing to a deal. The person said that was a major hang-up.