Washington: Delta Air Lines and Northwest Airlines are combining to form what will be the world’s largest airline by traffic if the deal is approved, the two carriers said.
The third largest US airline and its fifth will marry under the name Delta, in an all-stock transaction valued at $17.7 billion, the two companies said after their boards approved the merger late Monday.
Delta will head the combined airline, “creating America’s premier global airline” if the deal passes regulatory approval, a joint statement said.
“Combining Delta and Northwest will create a global US flag carrier strongly positioned to compete with foreign airlines that are continuing to increase service to the United States,” it said.
“We said we would only enter into a consolidation transaction if it was right for all of our constituencies; Delta and Northwest are a perfect fit,” said Delta CEO Richard Anderson, who is also to head the new airline.
The deal was announced as skyrocketing fuel costs, a suffering economy and increasing dissatisfaction among travelers have put a chokehold on the airline industry.
Both Delta and Northwest emerged from Chapter 11 bankruptcy last year.
Delta said the new airline would “provide employees with greater job security, an equity stake in the combined airline, and a more stable platform for future growth in the face of significant economic pressures from rising fuel costs and intense competition.”
The terms of the deal call for Northwest shareholders to receive 1.25 Delta shares for each Northwest share they own.
The transaction was forecast to generate more than $1 billion in annual revenue, with one-time cash costs for integrating the two airlines also set at $1 dollars.
The merger must be approved by shareholders of both companies and is subject to antitrust review, a process which is expected to be completed later this year, Delta said.
The merger would increase international and domestic reach without reducing the number of hubs, serving “140 small communities in the US — more than any other airline,” the company said.
In addition, the new company and its partners, operating a fleet of close to 800 planes and employing 75,000 people globally, will service more than 390 destinations in 67 countries, it said.
“The new carrier will offer superior route diversity across the US, Latin America, Europe and Asia and will be better able to overcome the industry’s boom-and-bust cycles,” said Northwest Chief Executive Officer Doug Steenland.
The headquarters of the combined operation are to be in Atlanta, Georgia.
“We are pleased that the people of Delta and Northwest will participate directly in the growth and future success of the combined company,” Anderson said.
“Our new, combined company will be positioned for a bright future as a leader in the global airline industry.”
Delta cited staggering job losses and fuel prices that have doubled since 2007 as primary reasons for the merger.
“In an industry where the US network carriers have shed more than 150,000 jobs and lost more than $29 billion since 2001, the combination of Delta and Northwest creates a company with a more resilient business model that is better able to withstand volatile fuel prices than either can on a standalone basis,” it said.
“Merging Delta and Northwest is the most effective way to offset higher fuel prices and improve efficiencies, increase international presence and fund long-term investment in the business.”