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Pilots Could Prove Obstacle to Airline Mega-Merger

BY Admin  April 15, 2008 at 10:45 AM EST

Delta and Northwest Airlines planes; AP photo

Late Monday, the boards of the third and fifth largest U.S. airlines approved the deal, which values Eagan, Minn.-based Northwest at almost $3.63 billion.The combined airline, which will be called Delta and be headquartered in Atlanta, will be worth $17.7 billion and have annual revenue of $31.7 billion.

It would create of the world’s largest airline in terms of fleet, destinations and total passengers — ahead of American Airlines. Delta CEO Richard Anderson will head the combined company.

The deal, which needs antitrust and shareholder approval, will face the tricky task of integrating the work forces of fully unionized Northwest with Delta, where pilots are currently the only major unionized work group.

Northwest’s pilots and the union that represents most of the ground workers immediately announced they would fight the merger.

Northwest also didn’t consult with the union that represents its baggage handlers, ramp workers and ticket agents, Joseph Tiberi, a spokesman for the International Association of Machinists and Aerospace Workers, told the AP.

Lee Moak, head of Delta’s pilots union, said Delta hopes cooler heads will prevail.

“It takes two to fight,” Moak said. “We don’t see a fight here. We see a cooperative relationship with the Northwest pilots to bring everybody to parity as soon as possible.”

Beyond enlisting members of Congress and the Justice Department to oppose the deal, Northwest pilots have little opportunity to prevent a merger, The New York Times reported. But they can help keep a completed merger from being successful.

At US Airways, the product of a 2005 merger with America West Airlines, pilots are still litigating over a combined seniority list. Pilots can also engage in legal work slowdowns, which can lead to late and canceled flights.

The Delta and Northwest pilots unions were unable to agree on integrating seniority lists before the merger was announced. A joint contract they had reached was never consummated.

Delta said it will 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.

Delta and Northwest are betting that cost savings and a larger route network will outweigh the potential operating chaos and labor unrest that can result from airline mergers, the Times reported.

The merger announcement comes a year after the two carriers emerged from Chapter 11 bankruptcy protection. Both carriers are losing money again but are in much better shape than the four much-smaller airlines that have filed for bankruptcy or gone out of business in recent weeks.

The deal may open the door for other airlines to merge. The most likely scenario that has been mentioned is a potential deal between United and Continental airlines, The AP reported. The airlines want the Bush administration’s Justice Department to approve the deals rather than risk seeing them stall until a new president takes office.

Northwest and Delta overlap relatively little in the U.S. — which could actually help them gain antitrust regulatory approval. Delta’s routes are strongest in the eastern U.S. and to Latin America and Europe. Northwest would complement that with its near-lock in the Midwest along with flights to its Tokyo hub and other points in Asia.

The new company and its partners will operate a fleet of nearly 800 planes, employ 75,000 people globally and service more than 390 destinations in 67 countries, according to a joint statement. There will be an unspecified number of job cuts or transfers through the consolidation of overlapping corporate and administrative functions, Delta said.

Delta doesn’t plan to close any of the two airlines’ hubs.