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Delta, NWA boards may meet Wednesday on merger

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Merger partners?
The possibility of merger between Northwest and Delta Airlines seemed more likely with both boards holding emergency board meetings on Tuesday.
Photo courtesy of Michael Carter

A source close to merger discussions between Northwest and Delta airlines says no deal has been reached so far to win the support of the airlines' pilots for a merger. That conflicts with published reports earlier Tuesday indicating a settlement with the pilots was in hand.

The Detroit News reported Tuesday morning that pilot union leaders had reached an agreement on how to combine the pilots of Northwest and Delta. The purported deal ostensibly included stock for the pilots, a seat on the combined airline's board and resolution of seniority issues.

The source said no deal had been reached between the pilots and the two airlines and that the pilots themselves have not yet reached a consensus on how to resolve all the issues that merger presents, including pay scales.

Key measures for Northwest and Delta
Combined, Northwest and Delta would be the biggest U.S. airline by several measures, including passengers and revenue.
MPR Graphic/Martin Moylan

The boards of directors of both airlines are expected to vote Wednesday on their merger, provided the pilot unions can reach agreement, people briefed on the discussions said Tuesday.

If the pilot agreement can't be reached by the time of the meeting, the boards were expected to just get an update on the status of merger talks between the two airlines, according to three people familiar with the situation who asked not to be named because the talks were in a sensitive stage.

A fourth person familiar with the talks also confirmed that Delta's board was expected to meet Wednesday, and the company is mulling a Thursday announcement if everything falls into place.

As of midday Tuesday, there was no deal between the pilots unions, according to one of the people briefed on the talks.

Another person briefed on the talks said that as far as the aftermath of a combination of Delta and Northwest is concerned, there would be staff reductions at the senior level only. At the bottom levels there would be very little, the person said.

Northwest employees in Minnesota
Northwest has cut thousands of Minnesota workers in recent years.
MPR Graphic/Martin Moylan

Delta has said that if it combines with another carrier, it wants to keep the airline based in Atlanta and called Delta.

Officially, all it has said in recent weeks is that its board is considering strategic options, including a possible consolidation transaction.

A Delta spokeswoman declined to elaborate Tuesday on the company's previous statements.

Talk of airline consolidation has heightened in recent months amid persistently high fuel prices, which are eating away at the industry's bottom line.

A combination of Atlanta-based Delta and Eagan, Minn.-based Northwest would create the world's largest airline in terms of traffic. That's before any divestitures regulators might require them to make if they combine.

There also has been speculation about a possible combination of Chicago-based UAL Corp.'s United Airlines and Houston-based Continental Airlines Inc., which would be a bigger airline than Delta-Northwest in terms of traffic.

The clock is ticking to get any deals accomplished quickly, some observers say. That's because industry observers believe a combination has a better chance of surmounting the considerable political and regulatory hurdles under the current administration than under President Bush's successor.

Delta and Northwest don't need a labor agreement between their pilots unions before announcing a combination, but having one in place now could help them speed up the integration of the two carriers down the line.

The head of Delta's pilots union said in a letter to members last week that in a typical situation once a corporate merger is publicly announced by the participating companies, each pilot group's elected leadership would analyze the deal, seek input from advisers and eventually decide whether to oppose the combination or enter into the combination process.

He noted that US Airways and America West followed the typical approach following their 2005 announcement that the two carriers would combine, but nearly three years later a joint pilot contract has yet to be reached.

That, he said, has resulted in the pilots of those two carriers not being able to capture any meaningful value from the merger transaction.

The possibility of a Delta-Northwest combination led Minnesota Gov. Tim Pawlenty to cancel an out-of-state trip. Pawlenty was due to fly Tuesday to Las Vegas to address a renewable energy conference.

Spokesman Brian McClung said the administration hasn't gotten any word that a deal is about to happen, but Pawlenty wants to "be able to stay in direct contact with staff and commissioners in case his involvement is needed."

The Republican governor said it's too soon to say if he'll fight the merger because he doesn't know what a combined Northwest-Delta company would mean for Minnesota. Northwest employs 11,500 people in Minnesota.

(The Associated Press contributed to this report)