Delta and Northwest say merger may be needed

The chiefs of Delta Air Lines Inc. and Northwest Airlines Corp. told employees that their carriers may need a partner to stay competitive, and a U.S. congressman confirmed that the airlines are holding merger talks.

"Delta would be open to consolidation if it is in the best interests of our shareholders and our employees," Delta's chief executive officer Richard Anderson said in a recorded message Tuesday, reiterating previous remarks. Northwest chief executive officer Doug Steenland said his company must "proactively consider all options."

Delta, the third-largest U.S. carrier, is in the "early stages" of talks with Northwest and United Airlines parent UAL Corp., U.S. Rep. James Oberstar, D-Minn., said Wednesday on a conference call, citing a meeting with Northwest executives. Northwest is based in Minnesota.

The chief executive officers' messages give further momentum to the prospect of mergers as a 61 percent rise in jet-fuel prices in the past year threatens carriers' profits. Oberstar, who has not met with Delta or United, said he opposes consolidation and favors "an appropriate balance of competition in the aviation market."

American Airlines parent AMR Corp. on Wednesday blamed rising fuel costs for a quarterly loss of $69 million, ending six straight profitable quarters. The eight largest U.S. carriers will post a combined deficit of $450 million for the fourth quarter, according to an estimate by Michael Linenberg, a Merrill Lynch & Co. analyst in New York.

Atlanta-based Delta, which has a hub in Salt Lake City, has "taken a number of steps" that will make the airline "a stronger and more viable enterprise," Anderson said in his message, without giving details. "It's important that we always be certain that Delta is always in a safe harbor and a leader in the global airline industry."

Northwest spokeswoman Tammy Lee, Delta spokeswoman Betsy Talton, and United spokeswoman Jean Medina declined to comment on Oberstar's remarks.

Delta created a board committee in November to consider possible mergers, six months after emerging from Chapter 11 bankruptcy protection.

Steenland, whose airline filed for bankruptcy on the same day as Delta in September 2005, promised workers in a memo that management would "not move forward with any transaction that did not benefit our employees, our shareholders and the communities we serve."

Northwest, the No. 5 carrier in the U.S., cut operating costs during its 20 months under court protection, and had the highest third-quarter pretax profit margin among major U.S. airlines. Steenland said that Northwest has achieved a "competitive position."

"To maintain this position of leadership and strength, we need to pro-actively consider all options available to us and not just wait for our future to be dictated to us," Steenland said in the memo.