October 30, 2008
Delta, Northwest Become One
By Dan Reed and Marilyn Adams
Delta Air Lines completed its purchase of Northwest Airlines Wednesday, hours after the Justice Department announced that the merger of two of the nation's largest airlines will save consumers money without damaging competition.
The deal makes Delta the world's largest airline, operating more than 800 large jets, employing about 75,000 people and producing about $35 billion in annual revenue. American Airlines, formerly the world's largest by revenue, operates 635 large jets, has about 80,000 workers and about $23 billion in annual revenue.
Northwest shareholders will receive $9.99 a share in Delta stock, valuing it at $2.6 billion. Delta shares closed Wednesday at $7.99; Northwest's at $9.90.
Justice's approval was no surprise. The airlines overlap on just 12 routes, and their deal did not seem to attract the same level of opposition and controversy that the proposed United-US Airways merger did seven years ago. The Justice Department blocked that deal, citing serious concerns about the impact on competition.
On Wednesday, Justice said that it expects the Delta-Northwest merger to drive down the combined carrier's operating costs and, as a result, airfares. Delta officials say savings and additional revenue from the merger ultimately will be about $2 billion a year.
But one of Congress' most prominent members on aviation issues called the decision "unfortunate" and said it would lead to more mergers.
"Creeping consolidation in the airline industry will likely mean fewer choices, higher fares and diminished levels of service for the traveling public," said Rep. James Oberstar, D-Minn., who chairs the House Transportation and Infrastructure Committee. Northwest is based in Eagan, Minn.
Justice dismissed such concerns, saying Delta and Northwest "compete with a number of other (conventional) and low-cost airlines ... on the vast majority of non-stop and connecting routes where they compete with each other."
Airline consultant Jon Ash, president of InterVistas-ga2, called the merger "a perfect fit" that "now puts a good, solid U.S. player out in the world."
Delta and Northwest passengers should notice few or no changes through the winter holidays, company officials said. The airlines will continue to operate separate websites, separate reservation systems and separate frequent-flier programs. The integration of the two carriers will take place gradually over 15 to 24 months.
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