Delta Acquires Northwest … Now What?

Locations in this article:  Amsterdam, Netherlands Atlanta, GA Detroit, MI Minneapolis, MN Tokyo, Japan

Delta Northwest MergerAfter months of speculation, Delta Air Lines announced Monday that it acquire Northwest Airlines for about $3.1 billion, a move that will create the world’s largest airline and may lead to a series of other deals. The new carrier will operate as Delta and be based in Atlanta, with Delta CEO Richard Anderson serving as CEO.

The new carrier will have more than 800 jets. Delta said the carrier will maintain the nine hubs of both airlines, including Atlanta, Detroit, Minneapolis/St. Paul, New York, Amsterdam and Tokyo, with 6,400 daily flights serving more than 390 destinations in 67 countries.

“Delta and Northwest are a perfect fit,” Anderson said Monday. Delta is currently the leading U.S. airline in the trans-Atlantic market with a strong domestic presence in the Northeast, South and West. Northwest is a strong player in the upper Midwest.

The merger needs the approval of the Department of Justice, which will examine routes flown by bother Delta and Northwest to determine whether it violates antitrust laws. This process could take several months. Executives at Delta and Northwest said they are aiming to close their deal by the end of this year, before the “merger-friendly” Bush administration leaves the office.

Pilot Radio TalkingThe merger has been opposed by members of Congress, and two of Northwest’s largest employee unions—including its pilots. Delta made a deal with its pilots over the weekend, but Northwest pilots have yet to work out a deal.

“No pilot group is going to put up with this. No amount of money can sustain a carrier which creates this level of discord,” Northwest pilot chairman Dave Stevens wrote in a memo late Monday.

As for the effect on passengers, it’s hard to say. Fewer airlines mean less competition, which may translate into higher fares where the two carriers have competing routes. In general, though, there is relatively little overlap between Delta and Northwest’s current routes.

However, the announcement may spur other airlines to consolidate, particularly Continental and United. Some experts say that if other major carriers negotiate their own deals, we could end up with three mega-carriers controlling about 80 percent of the nation’s air traffic.

Related links: Associated Press, USA Today, CNN

Previous Coverage:

Impending Drama: Merger Mania

Frequent-Flier Follies: Why Airlines Don’t Make Good Banks

Airline Mergers and Crash-Landing Investigations

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