Delta is said to be talking merger with Northwest
Delta Air Lines Inc., fighting a hostile takeover bid from US Airways Group Inc., has held talks with Northwest Airlines Corp. about a merger, a person familiar with the matter said Wednesday.
Northwest, the fifth-largest U.S. carrier, wants to ensure that it is not left out of any industry consolidation, said the person, who declined to be identified because the meetings are private. The discussions are preliminary, the person said.
A tie-up with Northwest may give No. 3 Delta another way out of bankruptcy aside from its own restructuring plan and US Airways’ offer, which was sweetened by 28% to $10.2 billion Wednesday.
Delta and Northwest, the biggest air carriers under U.S. Bankruptcy Court protection, already cooperate on ticket sales and frequent-flier programs.
“Their combined networks are superior, there’s far less overlap, and there would be fewer antitrust hurdles than a US Airways-Delta merger,” said Dan Kasper, managing director of consulting firm LECG in Washington. “Having both of them in bankruptcy at the same time may give them both some more flexibility.”
Northwest, of Eagan, Minn., is being represented in the talks by New York-based financial advisory firm Evercore Partners, the person said. The person said a merger wasn’t the only discussion topic, without giving specifics. Northwest hired Evercore on Dec. 8 after US Airways disclosed its bid for Atlanta-based Delta on Nov. 15.
Northwest spokesman Dean Breest and Delta spokeswoman Betsy Talton declined to comment. Evercore also declined to comment.
The Wall Street Journal reported the Northwest-Delta talks earlier Wednesday.
US Airways’ bid for Delta spurred other merger talks as the airline industry closed out what may be its first profitable year since 2000. UAL Corp.’s United Airlines and Continental Airlines Inc. have held discussions about a combination of the second- and fourth-largest U.S. carriers, and AirTran Holdings Inc. is pursuing a hostile offer for Midwest Air Group Inc., parent of Midwest Airlines.
Last week, Northwest reached an agreement to buy Mesaba Airlines from Mair Holdings Inc. Mesaba is a Northwest regional carrier under bankruptcy protection.
“Everyone is talking to everybody, so in that sense here’s no surprise” that Delta and Northwest would be in discussions, said Kevin Mitchell, chairman of the Radnor, Pa.-based Business Travel Coalition, which represents corporate travelers.
“If the nod is given to any one of these, everyone is going to feel that they have to jump in the fray.”
Shares of Delta rose 10 cents to $1.40. Northwest shares gained 43 cents to $5.03. Both airlines have said they expect to cancel the shares upon leaving bankruptcy protection.
“Merging with Northwest has potential” and would allow Delta to stay in control of a combined carrier, said Roger King, an analyst at bond research firm CreditSights Inc.
“Northwest wants to be bought out. Both airlines are in similar positions in their reorganizations, but running a plan concurrently through two bankruptcy cases presents unique hurdles.”
