From Deseret News archives:

Delta, Northwest shares fall on deal, obstacles remain to create world's largest airline

Published: Tuesday, April 15, 2008 9:42 a.m. MDT
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As for union support, the airlines tried something novel: They attempted to get their pilots to agree on a joint contract and seniority beforehand. That failed over seniority disputes.

Delta made a deal with its pilots over the weekend, leaving the Northwest pilots to work something out later. On Monday, Northwest pilots declared their opposition to the combination "as it stands," perhaps leaving room for a deal later.

The Delta pilot agreement, which still needs rank-and-file ratification, extends the current contract through 2012 and gives Delta pilots 3.5 percent of the new company.

Northwest pilots concluded that was an attempt "to disadvantage the Northwest pilots economically and with respect to our seniority," Northwest pilot chairman Dave Stevens wrote in a memo late Monday.

"No pilot group is going to put up with this. No amount of money can sustain a carrier which creates this level of discord," he wrote.

Delta said it will try to reach a combined pilot agreement, including resolving the seniority question, before the merger closes.

"It takes two to fight," said Lee Moak, head of Delta's pilots union. "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."

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

"If the airline wanted the support of their employees they should have brought us in and discussed it with us earlier," he said.

The deal includes some details that should help build political support. The airlines said they would close none of their hubs, though Northwest's Memphis, Tenn., operation and Delta's Cincinnati hub were thought to be vulnerable. And they said they would try to limit job cuts. The two airlines employ more than 80,000 people.

"They're facing a bit of a delicate balancing act there, because in order to build labor and political support for the deal they would not want to have any layoffs or close or shrink hubs," said Standard & Poor's analyst Philip Baggaley. "On the other hand almost everyone agrees that one of the few ways that U.S. airlines can return to profitability would be to reduce the amount of capacity" in the U.S. market.

The transaction calls for Northwest shareholders to get 1.25 Delta shares for each Northwest share. U.S.-based non-pilot employees of both companies are in line for a 4 percent equity stake.

Shareholders at both carriers must approve the deal.

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