Delta mulling Northwest offer
Delta Air Lines is trying to determine whether to push ahead with a Northwest Airlines merger, without a prearranged deal between their pilots, a move that could change certain details of the deal, two people familiar with the discussions said Monday.
Delta (DAL, Fortune 500) and Northwest (NWA, Fortune 500) are looking at their route structures and how a combination now would affect them given $100-a-barrel oil and a decision by both carriers to cut domestic capacity.
"When that happens, the merger details could change," the person said. "That will also affect the pilots."
Overarching issues such as retaining the company’s Atlanta headquarters, Delta Chief Executive Richard Anderson taking charge of the combined entity and using the Delta name for the new company, are not likely to change, the person said.
The other person said there is no particular timeline or deadline for the airlines to decide whether to proceed with a deal, and things could still fall apart.
The people requested anonymity because of the sensitivity of the talks.
No meetings are scheduled this week between officials from both companies, though Delta’s board met last week, one of the people familiar with the talks said.
The usual approach in airline combinations has been to have pilots work out a joint union contract after a deal announcement. Atlanta-based Delta and Eagan, Minn.-based Northwest for months took a different approach in their talks, figuring that if they could obtain full pilot agreements in advance they would reap the benefit of a combined airline much sooner.
With that in mind, pilots were in line to get raises and equity in the combined company payday loans. But the two groups couldn’t agree on seniority, which determines who flies more desirable aircraft and routes.
Now, the rising cost of oil has put all airlines under intense financial pressure. Since the talks began, Delta and Northwest have announced plans to reduce capacity this year, and Delta has announced plans to eliminate 2,000 jobs.
The pilot negotiating committees at Delta and Northwest have not had any recent meetings, but there has been informal contact between members of the two unions, one of the people familiar with the discussions said.
Delta has said it would be interested in a combination under the right circumstances, including the ability to protect its employees’ seniority. It has said it has a strong standalone plan and is not obligated to find another partner if a deal with Northwest falls through.
Another option that remains on the table is a "light" deal between Delta Air Lines Inc. and Northwest Airlines Corp. in which they would combine some corporate functions but keep separate pilot ranks and operations, the people familiar with the talks said.