NEW YORK (Reuters) - Executives of Delta Air Lines Inc hope to win over Northwest Airlines Corp pilots, who oppose Delta's bid to buy Northwest for more than $3 billion to create the world's biggest airline by traffic.
By Mark McSherry
NEW YORK (Reuters) - Executives of Delta Air Lines Inc hope to win over Northwest Airlines Corp pilots, who oppose Delta's bid to buy Northwest for more than $3 billion to create the world's biggest airline by traffic.
While Delta pilots would get a 3.5 percent equity stake in the new airline, and support the all-stock deal, the leaders of Northwest's pilots said Monday night the union will use "all resources available to aggressively oppose" it after the two unions could not agree on how to work under one seniority umbrella.
Seniority determines when pilots work, what they fly and how much they get paid. Some analysts said the opposition of the Northwest pilots could pose a serious threat to the deal.
!ADVERTISEMENT!The proposed deal comes as major U.S. carriers try to counter skyrocketing fuel prices and a weak domestic economy.
Delta Chief Executive Richard Anderson said on Tuesday the carrier aims to fully integrate its two pilots' groups as soon as possible.
At a press conference in New York, Delta executive vice president Mike Campbell said the airlines had eight or nine months to get the Northwest pilots on board.
"If we succeed in that, it will be revolutionary, and it will be a game changer," said Campbell.
In an interview on NBC television, Anderson said that before the deal closes, he wants to have an agreement with pilots from both airlines.
"We're halfway there. It's part of the process, and we think we'll be successful in getting the Northwest pilots under the Delta collective bargaining agreement with a resolution on the seniority between the two groups prior to closing," Anderson told NBC.
"We're going to work hard, and we tried very hard to have an agreement with both the Northwest and Delta pilots," Anderson said on NBC.
AIR FRANCE
The airlines hope that mergers lead to higher fares and reduced competition as combined carriers reduce flights and allow airlines to use increased market power to raise fares.
According to reports, the airlines most likely to follow Delta and Northwest could be UAL Corp's United Airlines and Continental Airlines Inc, which have been in merger talks for months.
French-Dutch airlines operator Air France-KLM said in a statement it would be pleased with a Delta-Northwest tie-up, which would strengthen its partnerships on the transatlantic market.
Air France has a transatlantic joint venture with Delta, and Dutch-based KLM has a similar arrangement with Northwest.
"Thanks to antitrust immunity proposed last week by the U.S. Department of Transportation (DOT), we are confident we can quickly build a global partnership between Delta, Northwest, KLM and Air France," Air France-KLM said.
Air France-KLM's deputy chief executive, Pierre-Henri Gourgeon, said in February it could make an investment in a merged Delta-Northwest in exchange for shares.
But on Tuesday, the French-Dutch operator said that due to the "strong liquidity position" of the Delta-Northwest combination, there would be no need for a capital increase from Air France-KLM.
Delta CEO Anderson said a combined Delta-Northwest would have about $7 billion in liquidity and access to the capital markets.
REGULATORS
Delta's CEO also said he does not foresee any regulatory hurdles to the deal. Still, it is expected to get a thorough regulatory review to ensure it does not impede competition.
"The regulatory issue is going to be confined to the United States," Anderson said in an interview on CNBC Tuesday, referring to last week's Department of Transportation decision to grant Northwest antitrust immunity in coordinating schedules with its SkyTeam alliance partners, including Delta.
"In the United States we have not quite 20 percent market share," he said. "You still have many other carriers, including many discount carriers, that have free access to every market in the United States."
The Bush administration, seen as broadly friendly to airline mergers, gave no indication of an immediate objection to the Delta/Northwest deal.
"The Justice Department has the lead role in reviewing proposed airline mergers due to its primary jurisdiction over antitrust laws," White House spokesman Scott Stanzel said in a written statement, when asked for White House reaction to the proposed deal.
Delta shares fell about 14.2 percent to $8.99, while Northwest dropped 10 percent to $10.11, both on the New York Stock Exchange.
(Reporting by Mark McSherry and Bill Rigby; Additional reporting by Deborah Charles and Julie Vorman in Washington; editing by John Wallace/Jeffrey Benkoe)
