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Wed, Sep 24, 2008

FAA Gives Its Blessing To Union Of Delta, Northwest

"If Anyone Has Any Objections... Yes, You In The Back, In The IAM Shirt?"

Delta and Northwest Airlines have checked off another big box on their to-do list in preparation for a merger. The Detroit News reports the FAA has given the two carriers its blessing to combine operations within the next 15-18 months.

The two big remaining hurdles are approval from shareholders of both companies, which is expected Wednesday, and a signoff from the US Department of Justice, anticipated in the fourth quarter.

If those approvals are received, Northwest shareholders will get 1.25 shares in the new Delta for each share of Northwest stock they own. Northwest will disappear as a separate entity, and Delta will become the biggest airline in the world, with major hubs in Detroit, Atlanta, Memphis, Cincinnati, Minneapolis/St. Paul, Salt Lake City, New York, Amsterdam and Tokyo.

Speaking of the FAA approval, Northwest Senior VP Ken Hylander commented, "Our ultimate goal is to implement a seamless transition for our customers and this is a big step toward that end."

Delta shareholders will meet Wednesday at the Georgia International Convention Center in College Park, while Northwest's meeting will be held at the AXA Equitable Center in New York.

Observers told the Atlanta Journal-Constitution they expect the vote to be a "rubber stamp" approval of the merger, after four proxy advisory firms all recommended "yes" votes. Airline consultant Darryl Jenkins tells the paper the volatile economy makes a stronger argument for the merger.

"There’s some strength in being large, especially when you’re kind of completing Delta’s network," Jenkins said. "Northwest is a very good fit to Delta, probably one of the better fits we’ve ever seen." He adds that maximizing the benefits of the merger could take a year or two.

Another big vote at Delta's meeting will be a new employee compensation plan which allocates 15 percent of stock to employees. Pilots for both airlines have already accepted their end of that deal.

Among the few remaining voices of dissent is the International Association of Machinists. The union has urged a "no" vote, calling the merger risky, and noting the combined airline will have a total pension fund deficit of $7 billion.

The IAM led picketers outside both shareholder meetings Wednesday.

FMI: www.delta.com, www.nwa.com, www.goiam.org

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