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Ear to the Ground

Delta and Northwest Join in Airline Mega-Merger

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Posted on Apr 15, 2008
Delta
flightnetwork.com

Ready for liftoff: The merger would create a fleet of 800 planes and 75,000 employees.

As airlines around the globe struggle to navigate through tough times for the industry, Delta Air Lines Inc. and Northwest Airlines Corp. have come up with their own possible solution. By Tuesday, the two companies had reached an agreement to join forces and create Delta, the world’s biggest airline.


The Los Angeles Times:

The pact came amid one of the industry’s most tumultuous periods as three airlines collapsed in one week and American Airlines, currently the largest carrier in the world, canceled thousands of flights because of missed aircraft inspections.

Like its competitors, the new airline would have to tackle two challenges plaguing the industry: escalating prices for jet fuel and the cost of maintaining an aging fleet of jetliners.

Delta and Northwest said the merged airline could better utilize its hundreds of airplanes and generate $1 billion in new annual revenue and savings from slashing redundant operations. Delta said the value of the combined airline would be $17.7 billion.

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By cyrena, April 15, 2008 at 2:47 pm Link to this comment

Aegrus,

I think you’ve got a real good understanding, and protection racket sounds pretty much like what it is.

I’m not sure about the horrible profit percentages though. That depends on the airline, and one that has always maintained very high profit margines is American Airlines, because they hooked into the ‘advantages’ of de-regulation from day one.

In the first round of bail-outs after 9/11, (which were the most profitable) there were 37 airlines that ‘applied’ for the millions that were doled out. But, the ‘top’ 3 or so got the bulk of it, leaving the others to share pennies. (and of course it was the smaller ones that struggled the most - if at all) Quite honestly, I never understood why the industy needed that plus another ‘bail-out’ as a result of 9/11. So, that was DEFINITELY a protection racket, or plain fraud/corruption.

I know that American and probably Delta as well, were very much attached at the hip to the bush admin.

And then there was still another ‘bail-out’ several months after the first one, but it’s hard to call it a bail-out for American Air, because they were never in any financial difficulty to begin with, other than the purchase of TWA several months prior, which apparently had been a bad call. (like they bit off more than they could chew).

The cruel irony of these bailouts was that it was supposed to prevent them from having to ‘downsize’ their operations, even though that’s exactly what they did. With every huge influx of federal free money, came a huge purge of employees…most have never reentered the work force, and if they have, it’s been at less than half the pay they were earning before.

So, I don’t know what you call that, but fraud and corruption sounds good enough. The ‘biggies’ like AA and United, and Delta and Northwest all managed to sort of hang on, but if they experienced losses, it was because of mismanagement or other reasons. The event’s of 9/11 didn’t cause that, and I’m still trying to figure out how or why anybody fell for it. But then, I guess we ‘fell for’ a lot of things then.

Meantime, at least SOME folks got extra rich off the deals.

Now of course they’re using the old ‘expensive fuel trick’ again, and I can’t begin to tell you how many times I’ve heard THAT. All through the 80’s, and all through the 90’s, that was the constant refrain from all of them…tuff times, gotta do cuts, fuel costs are so high…

So, this is just more of the same.

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By DennisD, April 15, 2008 at 2:44 pm Link to this comment
(Unregistered commenter)

Aeroflot here we come. No competition, no problem.

We’ll eliminate choice, schedule, price, complaints and anything that used to pass for customer service in the airline industry all in the name of a another new “efficient” monopoly.

Once again, whats good for business is good for the American citizen - NOT.

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By cyrena, April 15, 2008 at 2:31 pm Link to this comment

“...Sorry to disappoint but Delta won’t be locating to any right-to-work state unless you include the Asian destinations where Northwest is busy moving a lot of their work to..”

jleman..

I think the term ‘right-to-work’ make have thrown you, since it doesn’t mean what it sounds like, but rather the opposite. It means nearly NONE of the standard protection from US labor laws for any workers. Now I THINK, (though I won’t swear to it until I’ve had time to verify it) that Georgia, (where Delta has been headquartered for decades) is a ‘right to work’ state. Businesses intentionally situate themselves in those states to avoid a whole bunch of labor laws, and the federal institutions/agencies that are supposed to make sure that they DO, are in their pockets, just like the FAA has been.

And yep..it’s been that way since de-regulation. So, if this ‘merged’ company is going to maintain Atlanta as the headquarters, they will continue to screw labor, and in a big way.

That said, I agree that it’s a scam, and a major one.

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By jleman, April 15, 2008 at 12:51 pm Link to this comment

cyrena,

Sorry to disappoint but Delta won’t be locating to any right-to-work state unless you include the Asian destinations where Northwest is busy moving a lot of their work to. Combined operations would mean circulating their planes over to Asia where they would establish their maintenance hubs like the one Northwest had the public build in Duluth(but never used). Imagine the costs of flying their planes to Asia to “save” on maintenance costs here just in “fuel”?
No, the whole thing is a scam. “Fuel” savings be damned.

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By jleman, April 15, 2008 at 12:30 pm Link to this comment

Northwest has it’s main hub in Minneapolis/St. Paul. They engage in tactics to keep a monopoly in place and charge people from this area three times the going rate for the “privilege” of having a hub in our area. On top of this, they got a Republican Gov. to “loan” them hundreds of Millions of dollars which they’ve not repaid. As I understand it, the bill is edging closer to One Billion Dollars and the darling of the “No new Taxes” Pawlenty(our bridges are falling down) goes on the air and proclaims they could be charged upwards of four hundred million dollars(?) if they move the hub.
Duh?
The sheriff of Nottingham(Northwest) has out-sourced jobs overseas in maintenance and so forth while cutting workers here. Rumors of substandard or used parts being supplied keep surfacing. They didn’t do what they promised and in return took everything they could get from the taxpayer while ripping them off at the gates. They rammed unnecessary runway construction through while renigging on noise abatement of their planes.
People living under their landing and takeoff patterns find their cars coated with petroleum products while reports out of Portland find people living in similar areas of their city having higher disease and death rates than surrounding areas.
Hint: the govenor doesn’t live under these routes nor do key politicians.
So, you see, for the management it is a marriage made in heaven.
For the public here? It makes one wonder as to the trade off of losing a hub(getting better airfares), and the possibility of getting through the legislation of removing the airport from the midst of a populated area(which Northwest blocked), especially if the health of the general population would offset any job loss.
Labor concessions equal huge pay bonuses for execs; so where are the profits? (And, maybe some of those “profits” they so badly needed ended up in the pockets of the politicians?)
Northwest corporate “restructured themselves”. They set up another corporation to be the “operator” while the stockholders owned the parent company. The parent company “leases” to the operating company planes and so forth. Gee, and the Northwest operating company can’t make any money?
Anybody see that turnip wagon just go past?

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By Aegrus, April 15, 2008 at 6:19 am Link to this comment

cyrena, as I understand the situation, pretty much every American-Owned air line is constantly being involved in government bail-outs, has horrible profit percentages and treats employees very poorly. In this free market economy, we aren’t allowed to let the Euro-Airlines to operate on our soil except to pick people up from “international airports.” So, I guess the whole air travel industry in this country adds up to a protection-racket?

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By Jim Yell, April 15, 2008 at 5:55 am Link to this comment
(Unregistered commenter)

The linch pin of business is supposed to be the virtues of competition. So why is every monopoly that comes out of the board room so good for the customer?

We have seen enough of how customer service plummets when business creates a monopoly. Re-regulate the airlines and we would all be better off. Creating conglomerates just gives business control of so much money that they can buy the kind of government they want, meaning no benifits to the average citizen and maxim profits to such arrogant people, such as—well Dick Cheney.

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By cyrena, April 15, 2008 at 5:51 am Link to this comment

I did miss it. They’ll keep the Atlanta headquarters, where Delta has been for decades. If I’m not mistaken…another ‘right to work’ state, and Delta has always been a completely NON-labor union airline. NOT good for labor.

But, the article says this about how consumers will be affected.

“For the two carriers, this merger is a very important step to keep from going out of business,” said Dana Hobart, an aviation law expert at the Los Angeles firm of Hennigan Bennett & Dorman. “But for the flying public, it’s not so good because there will be reductions in routes and services.”

I disagree with this, and further down in the article, this suggestion is contradicted. In reality their routes and operations are complimentary to each other, so I don’t see how this would create a reduction in service.

And, if the merger is going to SAVE THEM MONEY, it should follow that it would save the consumer as well, UNLESS they’re planning to make billions in profit for their stockholders and corporate execs.

Layoffs are likely, but that’s because they’ll dump higher paid employees in the shuffle, and replace them with minimum wage folks based on a payroll generated in a right-to-work state.

Now THAT might not be so good for the traveling consumer. A staff of tens of thousands of underpaid and overworked airline employees does not make for the best of service.

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By cyrena, April 15, 2008 at 5:38 am Link to this comment

I had a feeling this was gonna happen. It’s actually a good deal for the consumer, since we’ve been at the mercy of American Air for a long time now. Nothing new with them, since they’ve (American) battled anti-trust (MONOPOLY) law suits for decades, which is in part how they managed to survive all of the earlier fallouts, even after that very bad deal that they made in taking over TWA back in 2000.

This definitely puts a bit more real competition back in the skies, and that’s always a good thing.
I’m curious to know where the combined Delta-Northwest will maintain it’s headquarters. I didn’t see that in the article, unless I missed it.

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