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VOL. 123 | NO. 36 | Thursday, February 21, 2008

Officials: Delta-Northwest Deal in Jeopardy

By HARRY R. WEBER | AP Business Writer

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ATLANTA (AP) - A $20 billion deal to combine Delta Air Lines Inc. and Northwest Airlines Corp. was in "serious jeopardy" by press time because the pilots unions from both companies were unable to reach an agreement on blending their seniority lists, two people close to talks told The Associated Press.

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 the pilot talks were expected to continue Wednesday, but if no agreement is reached, the combination of the two airlines would be in "serious jeopardy."

The boards of both companies were expected to vote on a combination agreement Wednesday if a pilot deal was 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 fourth person familiar with the talks said Tuesday that Delta was mulling an announcement today if everything fell into place.

A Delta spokeswoman earlier Tuesday declined to comment on the developments. Delta has previously said it was considering a consolidation transaction, but it has not commented beyond that.

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. That's because 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 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. A spokesman for the Northwest pilots union, Greg Rizzuto, did not immediately return a call and a page Tuesday night to his cell phone seeking comment.

The pilots from both companies have agreed to a significant equity stake for the pilots, 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, sources said.

It remained unclear what role Northwest's CEO, Doug Steenland, would play in the combined carrier, they said. A combined 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.

The possibility of a Delta-Northwest combination has led Minnesota Gov. Tim Pawlenty to cancel an out-of-state trip.

Pawlenty was due to fly Tuesday to Las Vegas to address a renewable energy conference, but his spokesman said the trip was called off because of "ongoing activities involving Northwest and Delta."

Spokesman Brian McClung said the administration hasn't gotten any word that a deal is about to happen, but Pawlenty wants to "be able to stay in direct contact with staff and commissioners in case his involvement is needed."

The Republican governor said it's too soon to say if he'll fight the merger because he doesn't know what a combined Northwest-Delta company would mean for Minnesota. Northwest employs 11,500 people in Minnesota.


Associated Press Writer Chris Williams in Minneapolis and AP Business Writer Dave Carpenter in Chicago contributed to this report.

Look for updates to this story at www.memphisdailynews.com.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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