Twists In The Delta Northwest Merger

Delta C.E.O. Richard Anderson shakes hands with Doug Steenland, president and C.E.O. of Northwest Airlines, while Edward Bastian, Delta president and C.F.O., looks on after a press conference in April.

Image: Chris Hondros/Getty Images

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I’ve lost track of the number of real or attempted airline mergers that I’ve flown through in the last 30 years, but I can tell you this: The play is old and the plot is tired, but there are always enough twists to keep you watching until the final scene.

If it lives up to form, the week-old proposal to combine Delta Air Lines with Northwest Airlines will be a four-act melodrama and a months-long struggle among squabbling labor unions, petulant managers, and queasy stockholders and investors.

We’re already watching Act One, in which the two C.E.O.’s do the “done-deal dance.” The chief executives of both carriers proclaim that there are no impediments—legal, regulatory, or competitive—to a swift, seamless merger of equals. They give interviews to the hometown papers that are long on platitudes and promises and short on reality and circumspection. So-called media influencers—industry analysts, talking heads, even cranky columnists like yours truly—are offered private briefings. Slick promerger websites appear; the C.E.O.’s write predictable op-ed pieces. And key national media outlets—the New York Times, the Wall Street Journal, and USA Today—crank out reams of copy and acres of charts, all of which help foster the idea that the merger is, in fact, a done deal.

In a later scene, the plot thickens as all that is revealed to be baloney. Airline mergers require the blessing of both the Justice and Transportation departments, and there are always meaningless but time-consuming congressional hearings. The process takes months—or, in the case of a never-consummated United-US Airways merger, first pitched in 2000, more than a year. As Continental Airlines, itself eyeing a merger, told its employees last week: Aviation combinations happen only after a complex, “lengthy, and rigorous regulatory review.”

And this time, the State of Minnesota has a sizable role. A $245 million bond held by a state agency immediately comes due if Northwest Airlines leaves Minnesota. The combined carriers will be based in Atlanta, so Delta chief executive Richard Anderson, who once ran Northwest, is talking about his desire to “fulfill the spirit” of the bond’s covenants. But the state’s political infrastructure, embarrassed by its past largesse toward Northwest, will want more than spiritual restitution.

Act Two of the all-too-familiar airline-merger melodrama is what I call the time’s-a’wasting warning. As the regulatory process drags on, the airlines begin to raise the specter of dire consequences: Jobs will be lost; service to small communities will disappear; travelers will be inconvenienced; and one or both of the carriers will disappear if the government doesn’t move with dispatch.

The plot twist this time? Delta and Northwest seem desperate to get the merger approved before the presumably business-friendly Bush administration departs. All of the aforementioned talking-head experts are already prophesying that the next administration will be unwilling to approve a $17.7 billion deal that would create the world’s largest carrier.

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