Officials: Delta-Northwest deal in jeopardy
ATLANTA (AP) - February 20, 2008 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 Wednesday, 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 Wednesday 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 the carrier. Delta has previously said it was considering
a possible consolidation transaction, but has not commented beyond
that.
Greg Rizzuto, a spokesman for the Northwest pilots union, said
Wednesday that while most of the economic and contractual issues
between the unions have been worked out, protecting the seniority
of Northwest pilots remains a problem.
"We want any seniority integration to be fair to pilots at the
top, the middle and the bottom of the list," he said. "That is
what is required for the success and the growth of any airline."
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. 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.
But Rizzuto said Northwest's pilots union is united, and he
noted that a pilot's career is tied to his or her seniority
ranking. So a "short-time economic benefit is not worth
sacrificing the possibility of advancement," he said. "All
seniority lists need to take into account pilots that are retiring
and the advancement of those other pilots."
Northwest's pilots tend to be older than Delta pilots because
many senior Delta pilots retired before Delta terminated its pilots
defined benefit pension plan during bankruptcy. That didn't happen
during Northwest's bankruptcy because it froze its pensions - so
pilots still got what they had earned, although their pensions
stopped growing.
The pilots from both companies have agreed to a significant
equity stake for the pilots if a merger goes through, including
raises for some, one of the people close to the talks said.
However, a second person close to the talks said it was not clear
that the equity issue had been resolved.
Much of the terms of how the combined carriers would operate had
been resolved as of Tuesday, two people close to the talks said.
The combined carrier would be based in Atlanta, would be called
Delta and Delta's chief executive, Richard Anderson, would be head
of the new company, the people said.
It remained unclear what role Northwest's CEO, Doug Steenland,
would play in the combined carrier, the people said. A joint
Delta-Northwest would maintain a substantial presence in
Minneapolis and there would be no furloughs for front-line U.S.
employees, the people said. The two airlines have roughly 85,000
total employees.
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Associated Press Writer Chris Williams in Minneapolis and AP
Business Writer Dave Carpenter in Chicago contributed to this
report.