Delta, Northwest airlines agree to combine
Updated: 2008-04-15 09:39
ATLANTA -- Delta Air Lines Inc. and Northwest Airlines Corp., squeezed by record high fuel prices and a slowing economy, are combining in a stock-swap deal that would create the world's biggest carrier.
The boards of both companies gave the deal the go-ahead Monday.
Delta said the combined airline, which will be called Delta, will have an enterprise value of $17.7 billion. It will be based in Atlanta, and Delta CEO Richard Anderson will head the combined company.
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Under the terms of the transaction, Northwest shareholders will receive 1.25 Delta shares for each Northwest share they own. The exchange ratio represents a premium to Northwest shareholders of 16.8 percent based on Monday's closing stock prices.
Delta Chairman Daniel Carp will become chairman of the new board of directors and Northwest Chairman Roy Bostock will become vice chairman. Delta President and Chief Financial Officer Ed Bastian will retain his titles.
The new board will be made up of 13 members, seven of whom will come from Delta's board, including Anderson, and five of whom will come from Northwest's board, including Bostock and Doug Steenland, the current Northwest CEO. One director will come from the Air Line Pilots Association, the union that represents pilots from both carriers.
There will be an unspecified number of job cuts or transfers through the consolidation of overlapping corporate and administrative functions, Delta said. The two airlines employ more than 80,000 people combined. The company expects no involuntary furloughs of front-line employees and said the existing pension plans for both companies' employees will be protected.
Delta doesn't plan to close any of the two airlines' hubs.
Delta also said that it has agreed with its pilot leadership to extend its existing collective bargaining agreement through the end of 2012. The agreement, which is subject to pilot ratification, facilitates the realization of the revenue synergies of the combined companies once the transaction is completed, Delta said. It also provides the Delta pilots a 3.5 percent equity stake in the new company and other enhancements to their current contract.
The agreement does not cover Northwest pilots.
Delta said it will use its best efforts to reach a combined Delta-Northwest pilot agreement, including resolution of pilot seniority integration, prior to the closing of the merger.
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