Delta, Northwest plan merger

After months of twists and turns, Delta Air Lines and Northwest Airlines announced last night that they are joining forces in a stock-swap deal that will create the world's largest carrier when measured by traffic.

The boards of the companies, squeezed by record-high fuel prices and a slowing economy, signed off yesterday on the deal, which must pass regulatory muster and overcome potentially strong employee resistance.

 

Delta said the combined airline, which will be called Delta, will have an enterprise value of $17.7 billion. The headquarters will be in Atlanta, with executive offices in Northwest's home territory of Minneapolis/St. Paul. Delta Chief Executive Richard Anderson will head the combined company.

 

At Louisville International Airport, Delta and Northwest along with their regional carriers handled about one-quarter of the passengers in February, according to the most recent data available. Delta and its feeder airlines carried about twice as many passengers at Louisville International -- 48,703, compared with 24,705 for Northwest.

 

Delta has a hub at Cincinnati/Northern Kentucky International Airport in Hebron, Ky. Delta doesn't plan to close any of its or Northwest's existing hubs.

 

The deal is expected to unleash a wave of consolidation as fragmented U.S. carriers try to bulk up through mergers to weather deteriorating industry conditions from record fuel prices, the weak economy and the credit crunch.

 

There will be an unspecified number of job cuts or transfers through the consolidation of overlapping corporate and administrative functions, Delta said. The airlines employ more than 80,000 people. The company expects no involuntary furloughs of front-line employees and said existing employee pension plans will be protected.

 

Terms of the deal call for Northwest shareholders to receive 1.25 Delta shares for each Northwest share they own.

 

Delta also said it has agreed with its pilot leadership to extend its collective-bargaining agreement through the end of 2012. The agreement does not cover Northwest's pilots. Delta pilots will get a 3.5 percent equity stake in the new company.

 

U.S.-based nonpilot employees of both companies will get a 4 percent equity stake when the deal closes.

 

The announcement comes a year after the two carriers emerged from bankruptcy protection.

 

Both carriers are losing money again but are in much better shape than the four smaller airlines that have filed for bankruptcy or gone out of business in recent weeks.