Delta, Northwest agree on merger
Delta Air Lines announced Monday night it has agreed to merge with Northwest Airlines to create what would be the world’s largest airline.
The combined stock value of the companies is $17.7 billion. The new airline will be called Delta and be based in Atlanta, Delta’s current headquarters.
The two airlines broke off talks in February after their pilot unions could not agree on seniority and how to divvy up flying time on larger aircraft, which draw greater compensation. Speculation resumed during the weekend that the two airlines were talking again and nearing an agreement as the economic position of the airline industry had continued to deteriorate.
Under the deal, Northwest shareholders will receive 1.25 shares of Delta stock for each Northwest share.
Airlines are under enormous pressure from rapidly rising jet fuel prices and a weaker economy that is dampening travel demand. The merger will allow the airlines to consolidate many domestic routes and create an international network that combines Northwest’s strong Pacific network and Delta’s strong Europe and South America operations.
The merger still faces large hurdles before it can be finalized. The pilot unions would have to reach some compromise and the deal is expected to get tough scrutiny from Congress and federal regulators because of concerns that consumer choices may be squeezed and prices increased.
The deal is expected to set off a wave of potential mergers in the U.S. airline industry. United and Continental Airlines have reportedly been in talks for several months as well about forming a combined carrier to compete with a larger and more efficient Delta.