Delta, Northwest executives tout merger

— -- A merged Delta and Northwest airlines will be a powerful competitor everywhere the new airline flies, Delta's top executive vowed Tuesday morning.

"This gives us the opportunity to have the No. 1 or No. 2 market share in every market in the world," said Delta Air Lines chief executive officer Richard Anderson in a conference call with Wall Street stock analysts, hours after the two carriers announced a landmark merger proposal last Monday night.

Anderson, who would be CEO of the combined airline as well, says the merger will create a true global juggernaut, offering service to 390 destinations around the world, and to more than 840 destinations via the SkyTeam global airline alliance of which both Delta and Northwest already are members.

In fact, the merged Delta would rank as the largest carrier in the USA's domestic market, and as the top U.S. carrier in providing service across the Pacific, to Europe, to Africa and the Middle East, and as the No. 2 U.S. carrier to Latin America and the Caribbean.

The proposed merger, which the airlines hope to close by year's end, requires Justice Department and other regulatory approvals and approval by both airlines' shareholders. It faces opposition from two Northwest unions, representing pilots and ground workers, and some powerful members of Congress.

Anderson and Northwest CEO Doug Steenland, who would leave management but become a member of the combined carrier's board, predicted the merger will easily clear the regulatory review process.

Just last week, they noted, antitrust regulators in both the USA and the European Union cleared their previous request for antitrust immunity for their international alliance venture, which is an aspect of their membership in the SkyTeam global alliance. That immunity will allow them to cooperate not only in selling seats on their trans-Atlantic flights, but to share sensitive marketing data, to cooperate in determining which carrier will fly which routes and at what times, and to share revenues and costs from those joint venture operations as if they were already one company.

"The international competition issues already have been addressed by the (U.S. Department of Transportation) and the European Union's competition authorities," Steenland said. "Because of this we know that there are no international competition issues" for the full Delta-Northwest merger.

Nor does he expect there to be significant antitrust issues in the domestic market because the merger is almost entirely an "end-to-end" combination of complementary route networks. Only 2% of Northwest seats are flown in direct competition with Delta's seats, and only 3% Delta's seats compete directly with Northwest's, he said. And the two carriers compete head-to-head on only 12 routes, including eight on which there are least two other competing carriers. On each of the other four routes, Steenland said, the total daily demand is less than 500 passengers.

Steenland emphasized that fast-growing low cost carriers continue to provide plenty of competition in the domestic market for big, full-service global network airlines. "Low cost carriers have grown in recent years at a rate of more than 10% annually, and now carry a third of all US travelers," he said.

"There'll be no carrier with truly a dominant position," he added. "Southwest would remain, if not the leading domestic airline, pretty close to it."

Anderson sought to diffuse concern about operational and cost problems resulting from the combination of the two carriers' vastly different fleets.

In many previous airline mergers, fleet complexity issues have greatly inflated costs at the merged airline beyond what was anticipated and eventually became a major cost issue that contributed to the widely held view that there have been no truly successful airline mergers since the industry was deregulated in late 1978.

Operating a wide variety of models of airplanes raises airlines' costs for training pilots and flight attendants, maintenance, and scheduling flight crews, which are certified for specific models of aircraft. and stocking spare parts.

The only plane both carriers operate is the aging Boeing 757-200.

Otherwise, Delta has a larger, all-Boeing fleet of midsize widebody planes like the 767 and 777, while Northwest has a fleet that includes the very large Boeing 747, the large Airbus A330, the very small Douglas DC-9, Airbus A319s and A320s that are similar in size to Delta's Boeing 737s and MD-80s. Northwest also is the launch customer for the now-delayed Boeing 787 Dreamliner, which replaces the midsize 767 in Boeing's family of products.

"The 'fleet issues' are bit of a misnomer," Anderson said. "The fleet integration actually works quite well because we don't have common fleet types except the 757-200s.

"We will have a fleet that includes 800 mainline jets, plus about 650 regional jets, a total fleet of about 1,450 planes. That gives you the ablity to match the right plane to the right market anywhere in the world," he said. "Lots of benefits come from being able to put the exact right airplane on any given route."