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Tue, Feb 12, 2008 - Page 10 News List

Delta, Northwest tell pilot union of proposed merger

AVIATION GIANT A link-up of the two US carriers would surpass American as the biggest airline, but gaining the support of labor unions is crucial to the deal taking place

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Delta Air Lines Inc may reach a merger agreement with Northwest Airlines Corp that would form the world's largest carrier, two people familiar with the talks said.

Delta and Northwest have shared details of a proposed combination with Air Line Pilots Association chapters at each carrier, the people said. Union leaders will study how to mesh seniority lists, said the people, who asked not to be identified because the plan is still private. An announcement of the merger may come within weeks, one of the people said.

Labor support is important so airlines can operate smoothly and achieve their planned savings. Pilots at Atlanta-based Delta and Northwest see consolidation as the only way to recoup concessions they made in bankruptcy, said Michael Derchin, an analyst at FTN Midwest Research Securities in New York.

"Job losses and seniority issues are labor's chief concerns," Derchin said in a report last week. "In return for support of consolidation, labor would likely demand stakes in the combined carriers, some job protection and higher wages."

A combination between Delta, the third-largest US carrier by passenger traffic, and No. 5 Northwest would bypass AMR Corp's American Airlines as the biggest airline.

Tammy Lee, a spokeswoman for Eagan, Minnesota-based Northwest, and Delta spokeswoman Betsy Talton said the airlines had no comment. Pilot union leaders at the two airlines didn't immediately return calls seeking comment.

The carriers have declined to confirm merger talks that others, including Northwest's pilot union, say are under way.

Delta's pilot union helped derail a hostile takeover bid by US Airways Group Inc last year by rallying opposition from Delta's bankruptcy creditors committee and employees. Labor groups at US Airways have been feuding since that carrier merged with America West Holdings Corp in 2005.

Seniority is critical for pilots because it helps determine pay, work schedules and the size of aircraft they fly. Pilots can't take seniority with them if they leave one airline to move to another carrier.

Northwest CEO Doug Steenland told employees last Wednesday that industry consolidation was "highly likely."

Reaffirming previous remarks, Delta CEO Richard Anderson said on Friday that Delta "will only go ahead if a merger meets our goals to strengthen the company and create job security for both companies' employees."

US carriers are studying mergers and considering selling off assets like frequent-flier programs in response to rising fuel prices and concern that demand may slow. More low-fare competition and excess seating capacity have also crimped airlines' ability to raise ticket prices.

Delta fell US$0.30 to US$18.19 on Feb. 8 in New York Stock Exchange composite trading, while Northwest fell US$0.05 to US$18.45.

The two carriers each filed for bankruptcy protection on Sept. 14, 2005, and exited last year after securing lower-cost union deals.

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