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My how a month of waiting can change perception. A deal between Delta Air Lines Inc. and Northwest Airlines Corp., widely seen as a forgone conclusion just weeks ago, is being viewed as considerably less likely in the current news cycle. The Wall Street Journal Wednesday proclaimed in a headline that deal talks have hit a "snag," in the story describing the deal as "foundering" and at an "impasse," while The New York Times similarly reported that ongoing pilot negotiations are playing "havoc" with airline mergers.
The stories follow a Delta memo to employees late Tuesday saying that at the moment no "potential transaction meets all our principles," specifically the company's desire to keep its Atlanta headquarters and secure protection for its employees. Delta does not mention Northwest specifically, but after nearly two months of leaked deal discussions the airline doesn't have to. Sources say the two companies have agreed to the outline of a merger that would create the world's largest carrier, but they are currently waiting in hopes that the pilots will be able to come up with a plan to integrate seniority lists at the combined airline. Lost in the latest round of headlines is the fact that a deal between Delta and Northwest, though not assured, remains the most likely outcome. Investors and directors at both airlines have become convinced that combined, and backed by a cash investment and strong alliance with partner Air France-KLM Group, the airlines would be better prepared for battle in an increasingly global business passenger market. To be sure the protracted nature of the pilot talks has slowed deal momentum, and perhaps management had hoped for a quicker resolution. With every day that goes by, it becomes less likely that the merger will be concluded before the business-friendly Bush administration leaves office, missing a goal often mentioned as merger talk was heating up late last year. However, many would say that Delta would be better served having its pilots fully on board regardless of what party or what president reviews the deal. Any airline deal is going to face tough scrutiny from politicians fearful of losing service to their home market, but antitrust sources believe there is little legal reason to prevent Delta and Northwest, who have little overlap, from combining. The support of a powerful labor group would help blunt criticism when managers are called before a Washington committee to justify a deal, and could help prevent a repeat of past airline merger horrors where an unhappy labor group has staged sickouts and other work actions that have cost airlines money and have led some deals to be considered failures. Media impatience aside, a pilot deal might just be worth the wait. - Lou Whiteman See Wall Street Journal story Categories Deal Video
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