Delta Air Lines Inc. has closed on its deal to acquire Northwest Airlines Corp., less than a day after the U.S. Department of Justice gave the merger antitrust approval.
Eagan-based Northwest (NYSE: NWA) and Delta announced plans to merge in April. The deal will create the world’s largest airline. The combined carrier’s headquarters will be based in Atlanta and it will retain the Delta (NYSE: DAL) name.
The Department of Justice handed down its decision earlier this afternoon, saying in a statement it does not believe the merger is likely to “substantially lessen competition.”
Analysts have called the carriers a natural match for one another. There is little overlap between Delta’s network and that of Northwest.
Delta, the nation’s third largest airline, is strongest east of the Mississippi River and in Europe, Africa and Latin and South America. Northwest, the fifth largest carrier in the U.S., is strong along the West Coast, Midwest and in Asia.
Delta CEO Richard Anderson (formerly CEO at Northwest) told the Atlanta Commerce Club Wednesday that the combined airline will not only be the world’s largest, but the largest American player in New York, Los Angeles, Atlanta, the upper Midwest and in Europe, Asia, Africa and Latin and South America.
The combined airline will see $2 billion in annual synergies, Anderson said.
“Even in tougher times, the acquisition makes even more sense,” Anderson said.
The Justice Department noted cost efficiencies and said the merger will not be detrimental to competition.
“In addition, the merger likely will result in efficiencies such as cost savings in airport operations, information technology, supply chain economics, and fleet optimization that will benefit consumers,” regulators said in a statement. “Consumers are also likely to benefit from improved service made possible by combining under single ownership the complementary aspects of the airlines’ networks.”
A lawsuit to stop the merger filed in federal court in San Francisco is the only remaining legal hurdle.
Despite a decline in oil prices from record highs in the $140 range per barrel to today’s current price around $65, Anderson said the airline industry is still operating in difficult times. Fuel costs are “still too high,” he said, and airline demand is falling.
In July, Delta announced its leadership team for the combined carrier. Anderson will remain as CEO of the new Delta, with his eight most senior officers evenly split among Delta and Northwest executives.
In August, Delta and Northwest pilots agreed to a joint contract, though seniority issues remain unresolved. The carrier also obtained clearance on its plan for a single operating certificate, a step that often is not achieved until after anti-trust approval, Anderson said.
Integrating the two companies isn't expected to be quick, said airline analyst Mike Boyd in a recent interview with the Atlanta Business Chronicle.
“It’s going to take them years,” said Boyd, the president of Evergreen, Colo.-based The Boyd Group International Inc. “They’re not going to rush to put things together.”
It will take at least six to nine months to integrate what the customer sees and experiences, Boyd said, and at least two years to integrate flight and logistics technology, reservations, frequent flier programs and other divisions.
Anderson said Delta will keep the best of each airline and plans to have the integration complete by the end of 2010. It will base its technology on Delta’s mainframe, though Northwest’s technology guru, Theresa Wise, will take the role as chief information officer.
The new carrier also will have to deal with merging two fleets of aircraft. Delta is heavily Boeing, with a fleet full of 737s, 757s, 767s, 777s, as well as McDonnell Douglas MD-88 aircraft. Northwest will counter by adding dozens of Boeing 747 jumbo jets, a size plane Delta lacks, as well as Airbus A330s.
The two airlines said they will consolidate their frequent-flier programs, allowing customers to combine miles from Delta's SkyMiles and Northwest's WorldPerks accounts at a one-to-one ratio.
The combined carrier will release a consolidated flight schedule before next summer. Northwest flight attendants will begin wearing the Delta uniform beginning next spring."
