NWA-Delta merger talks confirmed

  • Article by: LIZ FEDOR , Star Tribune
  • Updated: January 16, 2008 - 7:35 AM

Northwest executives said Delta also is talking with United Airlines. Delta CEO Richard Anderson told employees that with the cost of fuel high, the airline needs to remain a leader in the industry.

Northwest Airlines has entered into formal merger discussions with Delta Air Lines, U.S. Rep. Jim Oberstar, D-Minn., confirmed in an interview Tuesday.

If Delta attempts to merge instead with United, "then Northwest clearly feels a pressure to protect itself in the marketplace and will look for a [new] partner," said Oberstar, chairman of the House Transportation and Infrastructure Committee.

In an interview with the Star Tribune, Oberstar said he met with two Northwest executives Tuesday in his office in Washington.

They were Ben Hirst, Northwest's senior vice president of corporate affairs and administration, and Andrea Fischer Newman, Northwest's senior vice president of government affairs.

"They confirmed that Delta is looking at a Northwest option and a United Airlines option for a merger," Oberstar said. "Northwest sees a benefit to them of a merger with Delta."

He added that the executives talked about how a merger would yield cost savings and that the two carriers' route networks are complementary, with Northwest strong in the Pacific and with Delta with a major presence in the Atlantic.

Hirst and Newman said "there is little route overlap and not a significant effect on competition, which I disagree with," Oberstar said.

Hirst and Newman did not reveal what deals Northwest might pursue if the Delta combination doesn't materialize, he said.

He added that the two executives painted a picture of an industrywide consolidation. Oberstar said he shared his concerns with Northwest that Delta's initiative could have a domino effect that creates three U.S. mega-carriers.

"I will view any merger not in isolation, but in the context of the national aviation picture," Oberstar said. He wants the Justice and Transportation departments to rigorously examine the effects that much larger carriers would have on U.S. consumers.

Tammy Lee, a Northwest spokeswoman, declined to comment Tuesday on whether merger talks are in progress with Delta. In Atlanta, Delta spokesman Anthony Black also would not confirm whether Northwest and Delta are in negotiations.

CEOs outline merger approach

In messages to their employees Tuesday, Northwest CEO Doug Steenland and Delta CEO Richard Anderson both outlined their principles for consolidation and described the business climate that is driving a serious look at mergers.

"It is our responsibility to consider the options available to us so that we can maintain and strengthen the competitive position we have achieved," Steenland said. "We need to proactively consider all options available to us and not just wait for our future to be dictated to us."

Anderson, who has been working with a Delta board committee to assess consolidation options, said that he would not comment on media reports that Delta is in talks with Northwest and United.

"We've said that Delta would be open to consolidation if it is in the best interest of our shareholders and employees," Anderson said. "With these fuel prices at the levels that we haven't seen before, it's important that we always be certain that Delta is in a safe harbor and that it is a leader in the global airline industry."

Anderson, who formerly was Northwest's CEO, told Delta employees that management will take steps to "make Delta a stronger and more viable enterprise."

Phil Baggaley, a credit analyst for Standard & Poor's, said there are some similarities between Northwest and United, so Delta is leaving its options open while analyzing which would make a better partner.

Both United and Northwest would give Delta access to the Midwest in the domestic market and the Pacific in the international market.

"United and Northwest both are heavily unionized with sometimes difficult labor relations," Baggaley added.

United is bigger than Northwest, so some industry observers argue that a Delta-Northwest pairing may fare better with federal regulators.

Liz Fedor • 612-673-7709

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