Pilots’ Deal Putting Delta Merger at Risk

By THE ASSOCIATED PRESS

ATLANTA – An impasse among pilot negotiators over blending seniority lists put a $20 billion deal to combine Delta Air Lines Inc. and Northwest Airlines Corp. in “serious jeopardy” as the boards of the two companies prepared to meet today, two people close to talks told The Associated Press.

The people said the pilots unions have agreed on a comprehensive joint contract, but they are unable to agree to how seniority for the 12,000 pilots would work under a combined carrier. The people asked not to be named because of the sensitive stage of the talks.

They said late Tuesday that the pilot talks were expected to continue today, but if no agreement is reached, a deal on a combination of the two airlines would be in real trouble.

The boards of both companies were expected to vote on a combination agreement if a pilot deal is in place by then. Otherwise, they were expected to just get an update on the merger talks, three people close to the talks said.

One of the officials close to the talks said Northwest’s board might only meet by teleconference or, if things fall apart, not meet at all.

A Delta spokeswoman declined to comment on consolidation issues involving Delta. Delta has previously said it was considering a possible consolidation transaction, but it has not commented beyond that.

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.

One of the people close to the talks said Tuesday night that a small group of Northwest seniority list pilot negotiators want thousands of young Delta pilots to go to the bottom of the combined seniority list as part of agreeing to a deal on seniority. The person said that was a major hang-up.

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