Delta and pilots closer to contract

Delta Air Lines Inc. and its pilots agreed in principle Friday on a contract that would clear the way for a merger with Northwest Airlines Corp. to create the world’s largest carrier, people familiar with the talks said.

An accord would raise pilots’ pay and give them an equity stake in the combined airline, which would keep Delta’s name and Atlanta headquarters, said the sources, who requested anonymity. Some terms are still being negotiated, two of the people said.

A proposed tie-up with Northwest may be announced next week, the people said. Delta, the third-largest U.S. carrier by traffic, is betting that combining with No. 5 Northwest will boost revenue and reduce costs. Airlines are struggling with a 76% surge in the price of jet fuel in the last year.

“It’s going to be difficult to find any profits with stand-alone plans,” said Kevin Crissey, an analyst at UBS Securities in New York, citing fuel costs and a weakening U.S. economy. “All the labor groups understand that something has to happen.”

Delta and Northwest lost money in the October-December period after posting a profit in the previous two quarters following their exits from bankruptcy. The carriers’ combined first-quarter losses may be $244 million, analysts estimate.

Delta spokeswoman Betsy Talton declined to comment other than to reiterate that the company’s board committee that assesses possible mergers remains active. Tammy Lee, a spokeswoman for Eagan, Minn.-based Northwest, declined to comment.