US. Delta Air Lines Inc. (DAL) has initiated merger negotiations with UAL Corp’s United Airlines and Northwest Airlines Corp (NWA), and hopes to negotiate a merger agreement with one of the airlines over the next two weeks, according to a major report in today’s Wall Street Journal.
The move, if realised, would create the largest airline in the US, according to the report.
DAL’s board is said to have given permission to Chief Executive Richard Anderson on 11 January to begin talks with both carriers at the same time. The DAL executives involved are said to have completed a round of preliminary discussions with UAL and NWA before seeking board permission for formal talks.
These executives are planning to move quickly and present the preferred partner to DAL directors at their next meeting in early February. It is claimed that the deal could be announced as early as mid-February.
A spokeswoman for DAL declined to comment.
NWA is considered the more likely choice of partner, according to Wall Street Journal’s sources. Anderson, who was the former NWA Chief Executive, remains close to his successor Douglas M. Steenland, the newspaper said. NWA and UAL also declined to comment.
A merger with NWA, the report speculated, is less likely to encounter regulatory barriers – as any merger would be judged for its impact on fares and competition. NWA is the fifth largest US airline by passenger traffic, while UAL ranks second and DAL ranks third.
At the same time, the report pointed out that UAL CEO Glenn F. Tilton has been one of the most outspoken advocates for consolidation in the airline industry.
According to the report, many airline executives believe consolidation in the industry is necessary, especially considering the rapid rise in oil prices. They also believe merger talks must happen quickly as such deals are more likely to be approved by federal regulators under the current Republican administration.
Besides competitive hurdles, other issues that will be discussed include labour structures, route networks, and the broader airline alliances that already exist among major US and foreign carriers, the report concluded.
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