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Delta, Northwest Nearing Merger
In a move to consolidate forces and create one of the world's largest airline carriers, Delta Air Lines (DAL) and Northwest Airlines (NWA) are quickly nearing a merger agreement. The move marks the beginning of long-anticipated consolidation in an industry strapped with higher fuel costs, pension and union obligations, and intense competition.
A deal has yet to be finalized as unionized pilots still need to reach an agreement. According to this morning's edition of The Wall Street Journal, the pilots do not have formal veto power, but failure to win their support may complicate the deal. The article also indicated the companies are committed to reaching an accord with their pilots before a deal announcement. The boards of the two companies are expected to vote on a deal tomorrow.
A deal will likely prompt competitors to seek out strategic opportunities more fervently. In particular, a merger centered around Continental Airlines (CAL) virtually becomes a foregone conclusion. The company has reportedly been in preliminary merger talks with United Airlines (UAUA) and exploratory talks with American Airlines (AMR).
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