Delta and Northwest will merge

Marketplace Staff Apr 15, 2008

TEXT OF STORY

Renita Jablonski: Rising oil prices finally helped Delta and Northwest say, let’s go for it. The airlines agreed last night to go for a merger. Now regulators need to give the OK and the carriers need to make their unions happy, especially when it comes to seniority issues among pilots. Kevin Done joins us now. He’s aerospace correspondent at the Financial Times. Kevin, if this deal happens, it will create the world’s largest airline. What does that mean in today’s market?


Kevin Done: First of all, it’s important to remember that the global airline industry remains a highly fragmented industry. And even the biggest players, in a global sense, have less than 10 percent of the market.

Jablonski: With that, bringing Delta and Northwest together, what kind of example is this going to set for other possible consolidations?

Done: Well, it will immediately make rival airlines in the U.S. study very, very closely indeed what their opportunities are, especially perhaps between United and Continental, American too would have to be looking at what options it has.

Jablonski:The new company would be called Delta; Delta would be keeping the headquarters in Atlanta, Ga.; and the Delta pilot agreement would be extended through 2012. What does Northwest stand to gain here?

Done: Northwest stands to gain from being an integral member of a much larger group. The reason why these two airlines are pressing ahead is that the airline industry is very focused on the fact that it’s in a lot of trouble at the moment. We’ve seen a number of other small airlines already going bust in the last few weeks. That’s given the airline industry an awful lot to think about. And Northwest will think that it has a safer home inside a merged entity rather than outside and struggling by itself.

Jablonski: Kevin Done is aerospace correspondent at the Financial Times in London. Kevin, thanks so much for speaking with us.

Done: You’re welcome.

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