Merging Of Seniority Lists Key

We may be getting closer to the oft-rumored joining of Delta Air Lines and Northwest Airlines in the state of merged operations. According to two sources close to the talks, both sides shared details of a proposed merger agreement this weekend to their respective pilots unions.

Bloomberg reports union leaders with each carrier's chapter of the Air Line Pilots Association will study the proposals on how to merge both airlines' seniority lists -- a bone of contention with the last merger of two domestic airlines, the 2005 joining of US Airways and America West.

"The pilots' receptiveness to a merger is key," said Howard Wheeldon, senior strategist at BCG Partners LP in London. "If they're prepared to support a deal, it can go forward, and I think the sooner it happens the better. The markets want to see a merger between Northwest and Delta."

As ANN reported last week, some believe a formal announcement of a Delta/NWA merger could come as early as this week... although its unlikely ALPA executives would reach an agreement to support the merger in such a short time, given the stakes involved.

Labor support is seen as critical to the deal going forward. Pilots may be willing to support the deal, if it appears they'd be able to recoup some of the losses they incurred after both airlines filed for Chapter 11 bankruptcy on the same day in September 2005.

"Job losses and seniority issues are labor's chief concerns," said FTN Midwest Research Securities analyst Michael Derchin last week. "In return for support of consolidation, labor would likely demand stakes in the combined carriers, some job protection and higher wages."

If a Delta/NWA merger happens, the result would be the largest US airline by traffic volume... surpassing American Airlines. The deal would require regulatory approval, and could face anti-trust questions during that process.

As has become de rigueur throughout the rumored merger proceedings, neither Delta nor Northwest had any comment on the latest developments. Pilots union leaders didn't immediately return Bloomberg's calls for comments, either.

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