-- Pressured by extraordinary jet fuel prices, Delta dal and Northwest nwa airlines want to announce a merger deal as soon as next week, according to two sources briefed on the airlines' plans.
The companies, which were ready to announce a merger in February, have held off for two months in hopes the unions representing their pilots would agree quickly on how to merge their memberships. Merging the pilots into one union with one labor contract would allow the airlines to use each others' planes, airport gates and pilots most efficiently as soon as the merger closed.
Although the pilots have not come to agreement, the companies feel pressured to move forward now with a merger — with or without an agreement between the pilot groups — because of the crisis in jet fuel prices, the sources say.
Delta's board met last week and encouraged the merger plans to go forward, one of these sources says.
The sources requested anonymity because they are not authorized to speak publicly. Delta, Northwest and both pilots unions declined to comment Tuesday.
The companies had vowed not to proceed without a pilot seniority agreement, but the jet fuel crisis may force them to renege. That could risk alienating the pilots, whose support would be essential to making the merger successful.
Jet fuel is the single largest expense for commercial airlines, and crude oil is hovering close to $110 a barrel.
The airlines say a merger would strengthen their businesses. They also worry that the Bush administration is coming to a close. Such a large airline merger could not go forward without the approval of the Justice Department, whose antitrust review would take several months at least.
If the companies wait longer to begin the review, they risk putting a proposed merger before a Democratic-controlled Justice Department, which they believe would be less receptive.
The merger would be closed through an exchange of stock, with shareholders of Delta and Northwest trading stock for shares in the new company, the sources said.
European carrier Air France-KLM has publicly offered to inject $750 million into a merged Delta-Northwest to support the deal and receive a stake in the company. Air France-KLM has joint marketing agreements with both airlines.
The Air Line Pilots Association, the union representing 12,000 pilots at both carriers, seeks an equity stake of 5% of the merged airline.
Delta operates airport hubs in Atlanta, New York, Cincinnati and Salt Lake City. Northwest has hubs at Minneapolis, Detroit, Memphis and Tokyo. Plans do not call for closing any of those immediately.