Justice Department approves Northwest-Delta merger

Entrance sign
Delta headquarters in Atlanta.
MPR Photo/Annie Baxter

The Department of Justice's ruling on the merger means the deal can go forward. The department could have blocked the airlines' plan if Justice felt it would harm competition. But the department said Delta's acquisition of Northwest is not likely to substantially lessen competition.

The department said consumers are likely to benefit from improved service, made possible by uniting the two carriers' ownership and networks. Northwest spokeswoman Tammy Lee said the ruling validates the airlines' stance that the merger is pro-consumer.

Delta CEO Richard Anderson
Delta CEO Richard Anderson said that Delta had the most successful merger in the industry with the Delta/Western merger in 1986-'87, and is expecting this one to go smoothly.
MPR Photo/Annie Baxter

"The fact they decided not to challenge the merger leads us to believe that there were very few competitive concerns, just as we said when we announced the merger," Lee said. "In fact this is a very competitive combination of two companies and will benefit consumers of both airlines."

Lee said the carriers hope to close the deal "very soon."

Travelers will still see the Northwest name through the next year and it's expected the integration of the two airlines will take about 18 months.

The combined carrier will take the Delta name and be based in Atlanta. Delta has promised it will keep most of Northwest's major operation and jobs in Minnesota. That includes maintaining Minneapolis-St. Paul as a major hub airport, with a high level of air service.

Airline industry consultant Darryl Jenkins said no one gave the Justice Department good reasons to scuttle the proposed deal.

The merger "is likely to produce substantial and credible efficiencies that will benefit U.S. consumers, and is not likely to substantially lessen competition."

"I don't think I've ever seen one go through as smoothly as this one did," Jenkins said. "This is about as smooth an approval as I've sever seen. Nobody put forth any opposition whatsoever that the DOJ took seriously."

But a number of parties aren't happy with the Justice Department's action.

Kevin Mitchell is chairman of the Business Travel Coalition, a company that represents large buyers of business travel. Mitchell expects the merger won't be good for travelers.

"Undoubtedly we're going to see higher business fares and declining customer service levels," Mitchell said. "And, mid-size communities are going to lose connectivity as the new Delta rationalizes its fleet, it routes and other assets."

The approval was mocked by the union representing some 12,500 Northwest reservation and customer service agents and other ground workers.

"This deal should not have been approved, just based on the current reality of today's economy," said Stephen Gordon, who heads the ground workers' union at Northwest.

Gordon said his union is working to unionize some 30,000 ground employees at Delta. Currently at Delta only pilots are unionized.

"We are not just going to sit there and be dictated to terms and conditions and policies and procedures of a carrier," Gordon said. "We will absolutely maintain a voice at the collective bargaining table."

But that choice rests largely with the Delta workers, who outnumber their Northwest counterparts, and, numerically, have the clout to remove the union in a representation election. The Northwest flight attendants union is also intent on unionizing its peers at Delta. Northwest union leader Mollie Reiley said labor representation is a critical issue for the new Delta.

"We're union and Delta isn't," Reiley raid. "So, that's an issue. Obviously. I'm hoping we will stay union."

The Justice Department decision caps a six-month investigation, which was closed without objection to the deal from the department.

When Delta and Northwest announced their deal in April, it was widely thought that they were looking for government approval before a new President took office.

It was also expected to be the first of a wave of airline mergers. That hasn't happened, despite talks between most of the big carriers. Delta also removed another potential stumbling block for the deal Wednesday, settling a federal lawsuit filed in San Francisco by 28 air travelers who were seeking to block the combination.

A spokesman for the Metropolitan Airports commission said he expects the combined airline will pay off an obligation of more than $200 million to resolve a commitment its headquarters in Minnesota, but the question is over what period of time.

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