DAL & NWA merger announcement soon?
04-13-2008, 01:47 PM
#1
Gets Weekends Off
Thread Starter
Joined APC: Aug 2005
Position: Retired 121 pilot
Posts: 1,033
DAL & NWA merger announcement soon?
Delta, Northwest Could Unveil Merger as Early as Tuesday
By SUSAN CAREY and PAULO PRADA
April 13, 2008 3:38 p.m.
Delta Air Lines Inc. and Northwest Airlines Corp. have spent the last week readying their long-delayed merger announcement, with the aim of unveiling it as early as Tuesday, said people familiar with the matter.
They could go ahead without the support of Delta's 6,000 pilots. Delta and its pilots remained in talks over the weekend on a new post-merger contract that would cover that group only, leaving negotiations with Northwest's 5,000 pilots for a later day, these people said.
That approach, not the one Delta and Northwest executives originally had hoped to take, risks acrimony between the pilot groups and management distractions just when the two carriers would embark on a lengthy antitrust review of the merger by the Justice Department.
The deal still could run aground or be delayed because of disagreements between the two carriers or between them and their labor groups. Other issues to be resolved over the weekend were a couple of key deal terms that earlier had been decided were being reappraised in light of the deteriorating financial conditions plaguing the industry, said one person with knowledge of the situation.
It wasn't clear Sunday if the two airlines would proceed without an accord between Delta and its pilots. Talks between the two sides broke down last week over financial terms, but negotiations picked up again over the weekend with the hope of reaching agreement as soon as Monday, these people said. Legally and contractually, the carriers don't need their pilots' support to go ahead with the merger.
A spokeswoman for Delta's pilot union declined to comment. A spokesman for the Northwest pilots couldn't be reached.
One way or the other, if Delta and Northwest proceed and the transaction receives regulatory approval, the combined carrier would be the largest in the world by traffic. Such a merger -- or even the prospect of one -- is expected to set off a wave of consolidation, with UAL Corp.'s United Airlines and Continental Airlines Inc. seen as the next possible pairing.
Mergers have become all the more compelling as the industry copes with a weakening economy and skyrocketing fuel prices, troubles that forced four smaller carriers to file for bankruptcy-court protection in the past few weeks, three of them abruptly shutting down their operations.
In February, Delta and Northwest were days away from moving ahead with a merger agreement until their plans were derailed by their pilots' failure to reach accord on how to integrate their seniority systems. At the time, the deal terms included a share swap at near market rates, with Northwest holders getting a significant premium to Delta holders; a $750 million investment by European marketing partner Air France-KLM SA; and retention of the Delta name, headquarters and chief executive officer, Richard Anderson.
In recent days, the two carriers have wrangled over the size of the Northwest premium, said two people with knowledge of the matter, with Delta trying to reduce it and Northwest balking. The size of the Air France stake also is being revisited because the depressed prices of Delta and Northwest stock mean the previously foreseen investment would buy Air France a much larger stake in the combined entity than the U.S. airlines are prepared to cede. The two, which have $5.8 billion in combined cash, don't feel they need as much money from Air France to cement their existing marketing links, said one person, adding that it was expected that those issues would be resolved by the end of the weekend.
Originally, the two airlines wanted to move ahead with their merger only after they had accord with their pilots on a common contract covering all 11,000 aviators, and the pilots themselves had agreed on a way of integrating the two groups' seniority systems. The terms of the common contract were reached, but the pilots, represented by separate branches of the Air Line Pilot Association union, couldn't reach a deal on seniority.
Seniority is important because it dictates which kinds of planes they fly and whether they are captains or first officers, both determinants of pay and lifestyle. Northwest pilots tend to be more senior because hundreds of veteran Delta aviators quit before Delta filed for Chapter 11 in 2005.
Without an accord on seniority, Delta and Northwest realized they wouldn't be able to reap the scheduling, fleet and operating efficiencies they had hoped for immediately on deal consummation. Therefore, they decided they couldn't afford the significant costs of the joint pilot contract, which would have given raises to all the aviators, with large ones for the lesser-paid Northwest pilots.
After a lull, Northwest late last month proposed to Delta that the two revive the plan but without a pilot agreement, leaving it to the employees to work out seniority issues later and then bargain for a new contract with the combined company. That is the way most merging airlines approach labor integration, but it is a difficult process that can take years.
Instead, Delta in recent days tried to forge a deal with its pilots alone, hoping that an agreement with them would undo some current contract language that would hinder the combined airline's flexibility in the first phase of the merger. Delta also wanted to insure harmonious relations with its only large unionized group.
A deal with the Delta pilots also was intended to give the Northwest group an incentive to quickly work out the seniority issue either through negotiation with the Delta pilots or via arbitration. In return, the Northwest pilots could look forward to a new contract of their own later that would raise their pay to Delta levels.
But talks between Delta and its pilots foundered last week over pay issues, said one person familiar with the situation. Because of the worrisome industry outlook, Delta suggested cutting back on the terms it had agreed to in February, which led to a breakdown in talks. Leaders of Delta's pilot union have met in Atlanta over the weekend with Delta management in hopes of breaking the stalemate, said this person. As of Sunday, it appeared that the two sides were getting closer, this person said.
Meanwhile, the Northwest pilots, who have signaled their unhappiness at being left out of the process, scheduled their own ALPA leadership meeting Sunday near Minneapolis. "Any negotiations that do not involve all parties are rarely successful," a Northwest pilot spokesman said last week.
The Northwest pilots fear that in the initial phase of a merger, the combined airline would expand the Delta side of the operation and shrink the Northwest side. If the Northwest pilots believe a merger announcement is imminent, they could try to press Delta management to agree to expedited bargaining in return for the Northwest pilots not opposing the deal.
http://online.wsj.com/article/SB120811358101510993.html
-----------
In the for what it's worth dept, Susan Carey is IMO, a class news reporter who knows the business. I met her when I was on my MEC Communications Committee.
By SUSAN CAREY and PAULO PRADA
April 13, 2008 3:38 p.m.
Delta Air Lines Inc. and Northwest Airlines Corp. have spent the last week readying their long-delayed merger announcement, with the aim of unveiling it as early as Tuesday, said people familiar with the matter.
They could go ahead without the support of Delta's 6,000 pilots. Delta and its pilots remained in talks over the weekend on a new post-merger contract that would cover that group only, leaving negotiations with Northwest's 5,000 pilots for a later day, these people said.
That approach, not the one Delta and Northwest executives originally had hoped to take, risks acrimony between the pilot groups and management distractions just when the two carriers would embark on a lengthy antitrust review of the merger by the Justice Department.
The deal still could run aground or be delayed because of disagreements between the two carriers or between them and their labor groups. Other issues to be resolved over the weekend were a couple of key deal terms that earlier had been decided were being reappraised in light of the deteriorating financial conditions plaguing the industry, said one person with knowledge of the situation.
It wasn't clear Sunday if the two airlines would proceed without an accord between Delta and its pilots. Talks between the two sides broke down last week over financial terms, but negotiations picked up again over the weekend with the hope of reaching agreement as soon as Monday, these people said. Legally and contractually, the carriers don't need their pilots' support to go ahead with the merger.
A spokeswoman for Delta's pilot union declined to comment. A spokesman for the Northwest pilots couldn't be reached.
One way or the other, if Delta and Northwest proceed and the transaction receives regulatory approval, the combined carrier would be the largest in the world by traffic. Such a merger -- or even the prospect of one -- is expected to set off a wave of consolidation, with UAL Corp.'s United Airlines and Continental Airlines Inc. seen as the next possible pairing.
Mergers have become all the more compelling as the industry copes with a weakening economy and skyrocketing fuel prices, troubles that forced four smaller carriers to file for bankruptcy-court protection in the past few weeks, three of them abruptly shutting down their operations.
In February, Delta and Northwest were days away from moving ahead with a merger agreement until their plans were derailed by their pilots' failure to reach accord on how to integrate their seniority systems. At the time, the deal terms included a share swap at near market rates, with Northwest holders getting a significant premium to Delta holders; a $750 million investment by European marketing partner Air France-KLM SA; and retention of the Delta name, headquarters and chief executive officer, Richard Anderson.
In recent days, the two carriers have wrangled over the size of the Northwest premium, said two people with knowledge of the matter, with Delta trying to reduce it and Northwest balking. The size of the Air France stake also is being revisited because the depressed prices of Delta and Northwest stock mean the previously foreseen investment would buy Air France a much larger stake in the combined entity than the U.S. airlines are prepared to cede. The two, which have $5.8 billion in combined cash, don't feel they need as much money from Air France to cement their existing marketing links, said one person, adding that it was expected that those issues would be resolved by the end of the weekend.
Originally, the two airlines wanted to move ahead with their merger only after they had accord with their pilots on a common contract covering all 11,000 aviators, and the pilots themselves had agreed on a way of integrating the two groups' seniority systems. The terms of the common contract were reached, but the pilots, represented by separate branches of the Air Line Pilot Association union, couldn't reach a deal on seniority.
Seniority is important because it dictates which kinds of planes they fly and whether they are captains or first officers, both determinants of pay and lifestyle. Northwest pilots tend to be more senior because hundreds of veteran Delta aviators quit before Delta filed for Chapter 11 in 2005.
Without an accord on seniority, Delta and Northwest realized they wouldn't be able to reap the scheduling, fleet and operating efficiencies they had hoped for immediately on deal consummation. Therefore, they decided they couldn't afford the significant costs of the joint pilot contract, which would have given raises to all the aviators, with large ones for the lesser-paid Northwest pilots.
After a lull, Northwest late last month proposed to Delta that the two revive the plan but without a pilot agreement, leaving it to the employees to work out seniority issues later and then bargain for a new contract with the combined company. That is the way most merging airlines approach labor integration, but it is a difficult process that can take years.
Instead, Delta in recent days tried to forge a deal with its pilots alone, hoping that an agreement with them would undo some current contract language that would hinder the combined airline's flexibility in the first phase of the merger. Delta also wanted to insure harmonious relations with its only large unionized group.
A deal with the Delta pilots also was intended to give the Northwest group an incentive to quickly work out the seniority issue either through negotiation with the Delta pilots or via arbitration. In return, the Northwest pilots could look forward to a new contract of their own later that would raise their pay to Delta levels.
But talks between Delta and its pilots foundered last week over pay issues, said one person familiar with the situation. Because of the worrisome industry outlook, Delta suggested cutting back on the terms it had agreed to in February, which led to a breakdown in talks. Leaders of Delta's pilot union have met in Atlanta over the weekend with Delta management in hopes of breaking the stalemate, said this person. As of Sunday, it appeared that the two sides were getting closer, this person said.
Meanwhile, the Northwest pilots, who have signaled their unhappiness at being left out of the process, scheduled their own ALPA leadership meeting Sunday near Minneapolis. "Any negotiations that do not involve all parties are rarely successful," a Northwest pilot spokesman said last week.
The Northwest pilots fear that in the initial phase of a merger, the combined airline would expand the Delta side of the operation and shrink the Northwest side. If the Northwest pilots believe a merger announcement is imminent, they could try to press Delta management to agree to expedited bargaining in return for the Northwest pilots not opposing the deal.
http://online.wsj.com/article/SB120811358101510993.html
-----------
In the for what it's worth dept, Susan Carey is IMO, a class news reporter who knows the business. I met her when I was on my MEC Communications Committee.
04-13-2008, 06:19 PM
#6
Retired
Joined APC: Feb 2008
Position: whale wrangler
Posts: 3,527
wisecrack alert!
And why is it that the Northwest name may go but not Deltas? just curious about who decided who was going to take the bullet on this one and hopefully they wont have the same problems that AWA and USAir had and still have to this day but time will tell i reckon .
04-13-2008, 07:45 PM
#7
Gets Weekends Off
Joined APC: Feb 2008
Posts: 19,704
Managements decide those issues. They reached an agreement several weeks ago on the surviving name, management team and where the HQ location would be.
Thread
Thread Starter
Forum
Replies
Last Post
