Delta becomes the world's largest airline
Posted
Oct 29 2008, 05:10 PM
by
Kim Peterson
Rating:
Say goodbye to another airline, now that the Justice Department has approved Delta's $2.6 billion purchase of Northwest Airlines. And that's not a bad thing, given the miserable state of the airline industry these days.
The merger will produce the world's largest airline, which will continue to be called Delta. Northwest shareholders will get 1.25 Delta shares for each share they own in the all-stock deal.
Even though the companies have been meticulously planning the marriage, it'll still take up to three years to integrate them. There will be a bit of culture clash at first, particularly since Delta is mostly non-union (except for its pilots) and Northwest is unionized.
Former Delta workers bemoaned what's happened to their company, [readmore] telling one paper that Delta used to be a family-oriented place that people stayed at forever. "It took an act of Congress to get hired and an act of God to get fired," said one former executive.
But the world's largest airline will have to be more disciplined than that, particularly with the spiraling economy. Oil prices have skyrocketed, and consumers and businesses are cutting back on travel expenses. Even with the best of planning, merging two giants in these tough times will be a major challenge.
The combined company will have $35 billion in sales, 800 planes and 75,000 employees, according to the Wall Street Journal.
The merger was widely expected. The airlines didn't overlap many routes, so there weren't huge antitrust concerns.
The share prices of both companies didn't move much today. Delta dropped 2% to close at $7.99, and Northwest rose 1% to close at $9.90. Northwest shares are up 3% in after-hours trading, however.
Related reading:
Can the legacy airlines win back customers?
Don't bother with the airlines
Merging in the friendly skies
Chapter 11 could hit airlines seeking mergers
Delta donks the deal
