ATLANTA — Delta Air Lines has reached an agreement to take over Northwest Airlines, creating the world’s biggest carrier in a move that is widely expected to trigger further industry consolidation.
Although both Delta and Northwest have relatively small footprints at Denver International Airport, their marriage could trigger United Airlines, DIA’s largest carrier, to pair up with Continental Airlines. The two carriers reportedly are in advanced talks.
The boards of Northwest and Delta gave the go-ahead to their deal on Monday.
Delta said the combined airline will have an enterprise value of $17.7 billion. It will be based in Atlanta, and Delta chief executive Richard Anderson will head the combined company.
Delta and Northwest do not have hubs in Denver, but they connect passengers from Colorado to their hubs and some other cities. Combined, they have about 63 departures daily and employ about 400 people in the state.
The merged airline plans to maintain all hubs.
Delta and Northwest said they generate about $2.3 billion in annual economic benefit in Colorado.
The Delta-Northwest deal, posed as a way to help offset record oil prices, comes just after Denver-based Frontier Airlines filed for Chapter 11 bankruptcy protection last week with plans to continue to fly.
As speculation about a United merger grew, the Association of Flight Attendants and International Association of Machinists at United Airlines both issued statements Monday saying they oppose any merger that would harm its members.
Under the terms of the Delta-Northwest transaction, Northwest shareholders will receive 1.25 Delta shares for each Northwest share they own. The exchange ratio represents a premium to Northwest shareholders of 16.8 percent based on Monday’s closing stock prices.
The announcement comes a year after the two carriers emerged from Chapter 11 bankruptcy protection.
Both carriers are losing money again but are in much better shape than the four much-smaller airlines that have filed for bankruptcy or gone out of business in recent weeks.
The deal will need antitrust approval, and integrating the workforces will be tricky. Northwest is fully unionized, and at Delta, pilots are the only major unionized work group.
The joining of Atlanta-based Delta and Eagan, Minn.-based Northwest, if approved by regulators, will result in combined annual revenue of $31.7 billion, vaulting it ahead of Fort Worth, Texas-based AMR Corp.’s American Airlines for the top spot in the United States.
It would be the biggest carrier in the world in terms of traffic, before any further domestic capacity cuts and any divestitures that might be required by antitrust regulators.
Little overlap
The agreement comes after several months of merger discussions between Delta and Northwest and at one time between Delta and Chicago-based UAL Corp.’s United Airlines.
Analysts think that a Delta-Northwest combination will stand up better to regulatory scrutiny because the carriers have less overlap, even though a Delta-United combination could have created more scale and had greater synergies.
Years of mounting losses forced Delta and Northwest to file for bankruptcy protection in New York on Sept. 14, 2005. Both emerged from bankruptcy as leaner carriers last spring, after shedding billions in costs during their reorganizations.
While in bankruptcy, Delta fended off a hostile takeover bid by Tempe, Ariz.-based US Airways Group Inc.
Wall Street and some airline executives have pushed for consolidation for years, arguing that too many seats are chasing too few passengers. The resulting discounting has made it difficult for airlines to cover their expenses.
However, Northwest and Delta overlap relatively little in the U.S., which could help them gain antitrust approval.
Denver Post staff writer Kelly Yamanouchi contributed to this report.
Delta Air Lines
Headquarters: Atlanta
Hubs: Atlanta, Cincinnati, New York JFK, Salt Lake City
Ranking: Third-largest in the U.S.
Employees: 55,000 (including regional subsidiary Comair)
Employees in Colorado: About 300*
Departures in Colorado: 43 daily*
Passengers at DIA in 2007: 1.4 million
Market share at DIA in 2007: 2.8 percent
Gates at DIA: 3
Northwest Airlines
Headquarters: Eagan, Minn.
Hubs: Detroit, Memphis, Minneapolis-St. Paul, Tokyo, Amsterdam
Ranking: Seventh-largest in the U.S.
Employees: 32,800 (including regional carriers Mesaba and Compass)
Employees in Colorado: 100*
Departures in Colorado: 20 daily*
Passengers at DIA in 2007: About 1.1 million
Market share at DIA in 2007: About 2.2 percent
Gates at DIA: 3
*Includes DIA and other airports in Colorado
