The proposed merger of Delta Air Lines Inc. and Northwest Airlines Corp. cleared another government hurdle Monday. The United States Federal Aviation Administration has accepted plans by Atlanta-based Delta and Eagan, Minn.-based Northwest for a single operating certificate for the combined carrier, the airlines announced in a news release.
The plans submitted by the carriers outline what the airlines would do over the next 15 to 18 months to combine their daily operations and achieve the single operating certificate, the carriers said. The certificate would allow the airlines to combine operations after the close of the proposed merger, which Delta officials have said could be completed by year’s end.
“This is a significant milestone in our efforts to bring together our two airlines,” said John Laughter, Delta senior vice president of maintenance operations, in a news release.
Delta announced in April it would merge with Northwest in a $17.7 billion all-stock deal, which would create the world’s largest carrier.
“Acceptance of our plan lays the groundwork for a smooth transition of our operations,” said Ken Hylander, Northwest senior vice president of safety, engineering and chief safety officer. “Our ultimate goal is to implement a seamless transition for our customers and this is a big step towards that end.”
Both carriers’ shareholders are scheduled to vote on the merger Thursday, with approval widely expected. The combination already has gained clearance from the European Commission and DL and NWA say they expect US Dept. of Justice approval by year end.
The merged airline, to be called Delta, will operate a mainline fleet of nearly 800 aircraft and employ approximately 75,000 workers worldwide.
Merger would threaten workers’ pensions – a scenario the airlines said was flat wrong.
Northwest’s 12,500 employees represented by the International Association of Machinists and Aerospace Workers have a traditional pension plan that pays a monthly benefit. “The ill-advised Delta-Northwest merger will jeopardize everything they have worked for while destroying two once-great airlines and threatening the solvency of our nation’s pension insurance agency,” said Robert Roach, general vice president of the IAM.
“This would burden the PBGC with more than $15.6 billion in additional liabilities on top of its $13.1 billion deficit for fiscal year 2007,” Roach said.
Delta vice president Robert Kight said the airlines’ executives “know our employees and retirees may be worried about the changes ahead,” but the merger will make them more secure by allowing the carriers to cut costs at a time when extremely high fuel prices are vaporizing profits. While the Justice Department alone has the power to block mergers on antitrust grounds, Congress writes the laws that protect pension benefits.
Lawmakers want to make sure that if the airline merger does get completed, retirees’ “lives are not shattered,” committee Chairman Robert Andrews, D-N.J., said. “There are profound pension issues involved here.”
Except for its pilots, Delta’s workforce is overwhelmingly nonunion. Nearly all eligible Northwest employees are unionized.
For airline workers, worries about pensions are not unfounded. Thomas Kochan, an MIT professor who studies airlines, told the committee that between 2001 and 2005, US airlines eliminated 100,000 jobs. Amid a wave of bankruptcies, 16 pension plans covering 240,000 employees were terminated and turned over to PBGC.