Tuesday, April 15, 2008

New Global Airline: The Delta-Northwest Merger

Delta-NorthwestLate yesterday, officials at Delta Air Lines and Northwest Airlines formally announced plans to merge the two carriers into one mega-airline. The combined airline will be called Delta, and will be headquartered in Atlanta. Once the merger is complete, the new Delta will be the world's largest carrier, with about 75,000 employees.

A special website has been created (http://www.newglobalairline.com/) to explain to the public the benefits of what the combined management now refers to as America's Premier Global Airline. The website asks the public to "help bring greater opportunity to our employees, enhanced service to our customers, and expanded global access and economic growth to the communities we serve by letting your voice be heard." Among other things, customers are asked to contact their elected officials to "let them know that you are in favor of this airline merger and that we need their support."

Another page on the website explains how the merger is a win for employees. In support of this position, the web page explains:
As a result of this transaction, the seniority of our people is protected; the existing pension plans of our employees and retirees are maintained; the network is expanded; our plans for international growth are strengthened and accelerated; and, most importantly, there is even greater job security with more career opportunities for the people of Delta and Northwest.
The statement goes on to offer the following commitments to the employees of Delta and Northwest:
  • Non-pilot employees of Delta and Northwest will participate in the benefits of the combined airline by receiving a 4 percent equity stake in the new company upon closing. The stock will be allocated based upon relative payrolls of the companies and your individual earnings. International employees will receive a cash payment, in lieu of stock.
  • There will be no involuntary furloughs of U.S.-based frontline employees or hub closures as a result of this transaction.
  • Delta and Northwest employees will enjoy reciprocal pass privileges on both airlines’ worldwide networks, beginning as soon as possible during the regulatory review process.
  • Delta pilots will participate in the benefits of the combined airline through a new four-year agreement that facilitates the integration of the carriers and realization of the combined revenue synergies. With respect to Northwest pilots, Delta has committed to use its best efforts to reach a combined Delta-Northwest pilot agreement, including resolution of pilot seniority integration, prior to the closing of the merger.
That last item reflects the Northwest pilots' opposition to the merger plans. In a letter to the membership of the Northwest pilots' union, the chairman of the Northwest Master Executive Council of the Air Line Pilots Association (ALPA) said yesterday that "a merger with Delta may no longer be in the best interests of all Northwest stakeholders, including the Northwest pilot group." At issue is pilot seniority integration. Since the pilot seniority issue was not resolved prior to the merger announcement, the Northwest pilots' union intends to try and stop the merger from going forward.