Delta Air Lines Inc., the third-largest U.S. carrier, is still reviewing options for the company that may include a merger, chief executive officer Richard Anderson told employees Friday.
"The board and our management team are fully committed to ensuring that this is a thorough process, so any decision made will be in the very best interest of all Delta stakeholders," Anderson said in a recorded message.
A board committee that formed in November to consider possibilities including mergers "continues to review all the options," he said. Delta is in talks with Northwest Airlines Corp. and UAL Corp.'s United Airlines, the Northwest pilots union said last week, citing confirmation from their company.
Analysts say a merger between Atlanta-based Delta and Minnesota-based Northwest would mean more international flights from Atlanta, a smaller role for the Memphis airport and a bigger one for airports in Detroit, Salt Lake City and possibly Minneapolis.
A Delta-Northwest merger would create the nation's largest airline possibly the biggest in the world and could have long-range consequences for many existing hubs, as well as routes controlled by the two carriers.
"It would truly, truly be 'the' U.S. global carrier," said Minnesota-based airline consultant Terry Trippler. "It would be No. 1 to Europe. It would be very close to No. 1 to Asia. And it would be very big in Latin America, Mexico and the Caribbean."
The merger would combine Delta's extensive domestic and Latin American route system with Northwest's vast presence in Asia. Northwest operates 200 nonstop flights a week between the United States and Asia, and those routes would be complemented by both carriers' operations in Europe.
Delta has hubs in Atlanta, Cincinnati, Salt Lake and New York's John F. Kennedy Airport. Northwest has hubs in Minneapolis, Detroit, Memphis, Tokyo and Amsterdam, Netherlands.
Delta Air Lines' executives said the airline has a strong stand-alone plan and will not go ahead with a merger unless it meets their goals to strengthen the carrier and create job security for both companies' employees.
Delta President Ed Bastian said in an interview Friday that the Atlanta airline has been working "several months" to prepare for a potential wave of mergers among the industry's biggest players. "The seeds of what we're doing here really were laid over the restructuring over the last couple of years," said Bastian.
He and other Delta executives painted a picture of an airline that can afford to be picky about potential partners.
They said the carrier is in good financial shape after shedding billions in debt and operating expenses in a 19-month bankruptcy restructuring.
"A strong stand-alone plan is part of the hand that we're carrying," said Michael Campbell, Delta's executive vice president of human resources and labor relations.
The executives' comments come as people familiar with the matter have said they expect Delta to soon announce a merger agreement with Northwest Airlines or to reach a decision not to do a deal. However, some of these people have said the talks also ran into a snag last week over decisions about how top executives will share power, and potentially other issues as well.
Delta has not publicly commented on the merger rumors, and executives on Friday avoided commenting on specific merger scenarios or negotiation-related issues.
However, Bastian, the No. 2 executive at Delta, said any merger must meet three major goals. He said Delta won't agree to a deal unless it creates a global network that "fills holes" in Delta's operations; avoids burdening the combined airlines with excessive debt; and treats employees fairly and assures them of job and seniority protections.
"If we do any transaction, we have to do the right thing for the people," said Bastian, referring to employees.
Industry experts believe the current time window to forge a deal is short, because the months-long review by the federal Department of Justice's antitrust regulators may not be complete before a new administration enters the White House, possibly bringing more delay and uncertainty.
The head of Delta's pilots union said Thursday in a letter to members that a combination with another carrier might be "desirable" under the right circumstances.
"We are aware of the economic impact of expensive oil, the consequences associated with a potential looming recession and a host of other factors that place our company and the industry at increased risk," wrote Lee Moak, chairman of the Delta chapter of the Air Line Pilots Association. "We remain open to the 'right' consolidation, and we may even find it desirable over a standalone Delta."
Any proposed merger must make Delta a more competitive international airline with long-term growth prospects, while giving pilots "meaningful returns for our participation" in the combined company, the union leader said.
Delta's goal is still to provide job security for employees and to position the Atlanta-based carrier as "the global airline of choice," Anderson said in the recorded message. Anderson was Northwest's CEO before he took the helm at Delta this past August.
Many analysts believe it would be easier for a Delta-Northwest merger to pass regulatory scrutiny.
Airline mergers are fraught with pitfalls, as carriers try to combine fleets, routes and computer systems. An attempted hostile takeover of Delta by US Airways fell apart last year amid widespread opposition by employees, political leaders and Delta executives.
However, a Delta-Northwest merger would be a different animal than the proposed combination of US Airways and Delta. That failed union would have produced what airline officials call an "overlap" merger. The two carriers had numerous overlapping routes and hubs that would have been trimmed to reduce capacity and create a leaner airline.
Airline officials refer to a possible Delta-Northwest combination as an "end-to-end" merger, or one that would use the synergies of the two carriers to grow the resulting airline, especially its international footprint. It's also doubtful that a proposed merger would envision closing too many hubs because of the regulatory and political fires that could be ignited.
When it emerged from bankruptcy last spring, Delta mapped out a path to increase its profits by expanding lucrative international routes, especially those to high-growth areas in Asia. Combining with Northwest could fast-forward that plan by decades.
Some airline officials estimate it would take Delta 20 to 25 years to build the same Asian route system the new carrier would get in a Delta-Northwest combination. Delta will begin its first nonstop flight to China this year from its Atlanta hub.
A merger could vastly increase the number of Asia-bound flights from Atlanta's Hartsfield-Jackson International Airport in just a few years. It also could expand international flights out of Detroit, which Northwest uses as its main U.S. point of departure. The new airline would not only have a major hub in Tokyo, it would have a major gateway to Europe, Africa and the Mideast through an Amsterdam hub.
Atlanta, Detroit, Salt Lake, JFK and Minneapolis would likely remain hubs. And Cincinnati, a profitable Delta gateway, would likely remain a large operation, even though some regional flights could be redirected to either Detroit or Atlanta.
One big unknown is what would happen to Memphis International Airport, which, in airline realities, is very close to Atlanta.
"We're concerned, but we're cautiously optimistic we'll be OK," said Larry Cox, president and CEO of the Memphis-Shelby County Airport Authority. "But if the hub goes away, our world will not come to an end."
Trippler agreed with Cox that smaller could be better when a combined mega-airline begins trying to decide what to do with Memphis."Atlanta is so big. It is so busy," Trippler said. "It may be a situation were they want to keep the Memphis hub going because it siphons off some of the Hartsfield traffic."
Contributing: Bloomberg News