Status Report: Delta - Northwest

This week's development are reports of Delta Air Lines (DAL) negotiating directly with its pilots to resolve the seniority issue which has prevented a formal merger agreement with Northwest Airlines (NWA) to this point. Apparently, the company is attempting to create a situation where current DAL pilots will be allowed to maintain their current union contract, and therefore seniority positions, separate from the NWA pilots, post-merger.

This would be a unique resolution to the pilot seniority issue if indeed it can be worked out. However, the obvious drawback here is that it necessarily puts NWA pilots in the position of essentially submitting to the seniority of pilots from the company it would be acquiring. Although there has been no indication at this point of the reaction, or possible reaction of NWA pilots, there is obviously a very good chance they will not be highly enthusiastic of this scenario.

While it is being speculated that DAL's current efforts may result in a formal merger agreement as early as next week, the complexity and entrenchment of this unusual situation suggests this is probably not very likely. Even if the DAL pilots agree to move forward with a "separate but equal" agreement, there is certainly no guarantee NWA pilots will do the same.

Nevertheless, it will yet again be stated that this publication continues to foresee a resolution to the pilots issues at some point in the near future. It will also be repeated that failure to appease the pilots on both sides will very likely result in the failure of the companies to reach a formal merger agreement.

Disclosure: We have no positions of any kind, in any security. We are a completely neutral source of research and analysis.

Comments

[Seymor Butts:]

How do you figure NWA is the "acquiring" airline? The combined airline will be called DELTA, not NWA. The CEO will be Anderson, not Steenland. The headquarters will be in Atlanta, not Eagan.

2008 Apr 13 06:18 AM

[Simple Logic:]

You don't really know anything about this sort of thing, do you? The negotiations were for a Pilot Contract - nothing to do with a combined seniority list. The integration, contrary to your "article", will take months or even years.

2008 Apr 13 08:29 AM

[User 177496:]

How do people like this get published? Doesn't anyone who knows ANYTHING about this subject even proofread it first? Other than the names of the two companies, none of the facts are straight.

2008 Apr 13 10:58 AM

[DR:]

DAL = DELTA AIR LINES, and not DELTA AIRLINES. They are not the came company. Please proof the name of your featured organization. Also, I do not believe that NWA will be aquiring DAL from what I know of the discussions.

2008 Apr 13 11:20 AM

[Robert Cassidy:]

Lest there be any doubt ...This merger will be completed ....with or without the concurrence of the pilots .....The NWA pilots will find themselves effectively on a quasi " B scale " status until the seniority is integrated either by mutual negotiation or imposed arbitration ....a temporary but signifigant irritant
Everyone ...investors as well as employees ...have a great deal at stake ..The whole airline industry , along with rest of the economy is on very thin ice....
If pilot conflict were to lead towards another bankruptcy, the pilots would have more to worry over than their precise seniority .
I remain confident that common sense will prevail ...The seniority issue will be resolved .....to the dissatisfaction of nearly every pilot-
but with a future of greater prosperity and security for nearly all
I say nearly ... because some cutbacks may be inevitable .
Even the intrepid CEO Richard Anderson has no control over the global economy
I have worked for three airlines (Eastern ,Panam and Delta)..
All of them went bankrupt ..but DELTA bounced back like the phoenix from the ashes....
The NWA - DAL team will be a dynamic global giant !
[e-mail]

2008 Apr 13 11:22 AM

[4thegood:]

We all have some fears. There are no guarantees. I come from the NWA side--'85 hire. The best solutions happen when all can take a step in faith and be willing to give a little. I want all parties to have a greater good, and I can see the possibility of the best airline organization in the world, setting a much better example for others.

I support the closing tone of bocacassidy.

I'm personally willing to take some change in my old expectations to achieve a much better company. What my expectations were, are no
longer relevant, anyway. Delta Air Lines has always had a reputation for caring about people. I think Richard Anderson fits well into that legacy. I also want to be part of a great organization that cares about people at all levels, and runs an excellent airline.

I for one am willing to give a little (not everything, though!) to achieve a solid, practical seniority list, that will serve for the greater good. I want no one group, investors, stockholders, leaders, employees, or customers to suffer lasting hardship. There is enough good for all. It takes faith that together we can all enjoy a greater future. I stand for that possibility wholeheartedly!

2008 Apr 13 02:08 PM

[firenbrimstone:]

The CEO of Delta fully understands the value of discord in the pilot group. He came from NWA where they have had 2 cultures for 20 years. No surprise he would start out by creating a second class group for DAL. Lower pay scale, cheaper cost, all the new flying.

2008 Apr 13 03:41 PM

[Flyer1:]

NWA managment and BOD (sic, Wellington Hedge Fund) may desire and announce a merger. But there is a far difference between an announcement and the actual merger.

I do not believe NWA employees are in any hurry to give away their BILLIONS in pay cuts to appease Hedge Funds and allow Steenland to take his millions and get out.

This has all the makings of a long drawn out battle the likes we have never seen in US aviation. Hedge Funds really ought to be banned from US airlines. This industry is too vital for the US economy for the outlaw-ish activity that has taken hold of it since the mid-1980s. Enough is enough.

Re=regulate.

2008 Apr 13 06:10 PM

[Flyer1:]

bocacassidy, et al (delta activists)

Clearly, you are confused, or do not understand the process of a merger. These airlines managements can "announce" anything they like. It does NOT mean it will happen..the hurdles against this combo attempt is insurmountable in my estimation.

They do NOT have the blessing of NWA employees (Unions) which means it places them firmly behind powerful Aviation/Transportatio... Chairman, Congressman James Oberstar/ the Dem. Congress/ The incoming Dem. President.

Moreover, this is about MONEY and the pay off of Hedge Funds, this has NOTHING to do with creating a "better" company. Anyone who believes that simply doesn't have a clue about the economics of what's involved.

NWA's balance sheet dictates that it is the acquirer. The Delta name and HQ location is a reflections of the Delta carry over from bankruptcy of a NOL valued at $9.1 BILLION dollars, which CAN NOT be transferred to a new owner under IRS bankruptcy laws.

I predict it will not come to fruition. NWA as a corporation has too much to lose. As a shareholder, I am immensely disappointed in the NWA BOD and will call for the removal of Bostock and others.

2008 Apr 13 06:24 PM

[Seymor Butts:]

Hey Flyer1,
Tell us again how NWA is the acquiring airline?

2008 Apr 14 10:47 PM

[Flyer1:]

Hey butts...better yet. Tell us why it's NEW name is Delta? (when Delta's balance sheet is nowhere near NW's)

Delta is barely ALIVE, has a terrible balance sheet with HUGE debt due over the next few years, and couldn't buy a greyhound bus let alone Northwest Airlines.

2008 Apr 15 09:13 AM