Fred Harteis News Articles - Delta Airlines and Northwest Airlines agreed to merge late Monday, in a $3.1 billion deal that would create the world’s biggest carrier and could trigger other airlines to pursue mergers of their own.
The agreement came despite failed efforts to get pilots at both airlines to agree on how to combine their ranks, an issue that could lead to labor unrest and disruptions to flight operations.
But the threat of rising fuel prices — and a belief that a merger would bring huge cost savings — overcame those concerns.
Northwest shareholders would receive 1.25 Delta shares for each of 236.4 million Northwest shares outstanding. That represents a premium of 17 percent based on Monday’s closing prices. Delta closed 48 cents higher at $10.48; Northwest closed up 26 cents, to $11.22.
Seven directors from Delta and five from Northwest would join the board of the new airline, to be known as Delta. The Air Line Pilots Association, which represents pilots at both airlines, would receive a seat.
Delta’s chief executive Richard H. Anderson would run the new airline and Delta’s chairman Daniel A. Carp would retain that role, with Roy J. Bostock, a Northwest director who also sits on the board at Morgan Stanley, as vice chairman. Northwest’s chief executive, Douglas M. Steenland, would have a seat on the board but would not have a role in day-to-day operations.
The two companies persevered because of the rising cost of fuel, which has destroyed the bright financial prospects of the carriers since they emerged from bankruptcy a year ago.
Delta and Northwest filed for Chapter 11 on Sept. 14, 2005. Both ran into cash shortages that were worsened when oil prices spiked in the wake of Hurricane Katrina. Many people in the airline industry expected that the two airlines, which already had a marketing arrangement, would join forces once they emerged from bankruptcy protection.
Mr. Anderson became Delta’s chief executive in September, succeeding Gerald Grinstein, who led the airline through its restructuring. He was a surprise choice: Delta had been expected to name one of two younger executives to the post, but directors pushed for Mr. Anderson. He ran Northwest before being succeeded by Mr. Steenland in 2004.
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Source: NyTimes.com
About Fred Harteis: Fred Harteis leads Harteis International. Fred Harteis has a background in agriculture and has created many successful business ventures.
