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A review on Delta Air Lines and Northwest Airlines merger

By Amarendra Bhushan for CEOWORLD Magazine Updated:September 26, 2008

To say Northwest Airlines was a well run airline is not smart…not one of them has been….the last well run airline was Continental under Gordon Bethune who actualy put employees first and turned a joke of a airline into one the stronger ..if not strongest domestic/international airline…Northwest Airlines has been very customer oriented, with a consistently higher customer service rating than Delta. Delta has been rated pathetically. I doubt that this merger will work any better. The equipment and cultures will not be compatible, and there will be extra workers to dispose of, … that will cost both money and anger among the remaining employees.

Robert Roach Jr., general vice president of the International Association of Machinists and Aerospace Workers, said the two airlines have “vastly different corporate cultures and mismatched aircraft fleets.” Roach said combining the two work forces would require solving issues including workers union representation, job security, pensions and seniority at the combined company. “Delta refuses to address these and other employee concerns,” Roach said. “Delays, expenses and other challenges to integrating the work forces are likely to have a significant impact on the financial performance of the combined company.”

Delta Air Lines and Northwest Airlines have announced that shareholders of both airlines have approved the proposed merger of the companies. The merger, overwhelmingly approved by shareholders at both companies, is expected to close by year-end. The U.S. Justice Department still has to give its go. Northwest shareholders voted 75% in favor of the Delta-Northwest merger, which will create the world’s largest airline carrier. The airline will keep Delta’s name and have 800 aircraft with 75,000 employees, and corporate headquarters will remain in Atlanta. Northwest shareholders will get 1.25 shares of Delta stock for every share they own. At $35 billion in aggregate revenue, the airline will have almost twice the annual revenue of current leader AMR Corp., parent of American Airlines

“By distributing equity to our employees we’re not only recognizing the critical role employees will play in successfully integrating two customer-focused companies, we’re also making good on a longstanding commitment that our employees will share in the success their hard work makes possible,” Delta Chief Executive Richard Anderson.

“Fleet rationalization offers the greatest upside,” said Michael Derchin, an analyst with FTN Midwest. That includes downsizing the “over-hubbed” Midwest region, including Cincinnati, Detroit and Milwaukee. “It will create the world’s most powerful airline. There’s no doubt in our minds about that,” said Ed Bastian, Delta’s chief financial officer, at an analyst meeting last week.

While many analysts are still projecting a net loss for the near future, the estimates continue to increase. The consensus earnings estimate for the current quarter is a loss of three cents up from a loss of 35 cents just 60 days ago. Over the same period of time, the loss expected by analysts has been cut in half, now a loss of 96 cents from $1.82.

Bigness does not mean greatness!! Unless these guys figure out how to make flying them a friendly experience, they will continue to spin out of control…. ask the people at American and United!!

Good luck to the employees of both groups…
What is this going to mean for the customers?

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