Delta-Northwest Merger Destined for a Rocky Landing According to NYU Stern Professor

Corporate merger expert NYU Stern Professor Robert Lamb argues that the Delta-Northwest merger looks great on paper, but is probably doomed to fail.

“Combining Delta’s southern and European routes and Northwest’s northern and Asian routes might make for a pretty map, but joining these two aging airline giants is more likely to be an indirect flight to failure,” remarks Professor Lamb.

As cited in his book, Capitalize on Merger Chaos: Six Ways to Profit from Your Competitors’ Consolidation on Your Own, co-authored with Thomas M. Grubb, 60 to 80 percent of mergers failed over the last 50 years.

He argues:

Focusing inward on integration of Delta & Northwest will negatively affect their profit.

The skills of employees from each company are not necessarily transferable.

The lack of a strategically powerful merger plan will lead to chaos and uncertainty, and both companies’ most valuable resources–their best people–will probably flee.

The size of these two airlines combined creates the largest US airline, which poses a threat, according to studies indicating that larger companies are historically the least successful in mergers.

Most companies don’t know the statistics on merger failure and let egos alter their judgment when determining how much the enterprise can afford to pay and how much they will recoup.

Union issues may delay the merger, causing airline executives to focus too much on internal operations, and not enough on competitors.

A significantly more profitable merger would result from a joint venture between either Delta or Northwest and a strong foreign airline.

To speak with Professor Lamb, please contact him directly at 212-998-0231, rlamb@stern.nyu.edu, or contact Carolyn Ritter in NYU Stern’s Office of Public Affairs, 212-998-0624, critter@stern.nyu.edu.