Delta Air Lines and Northwest Airlines are close to a deal that would create the world's largest carrier and could jump-start what is expected to be the biggest airline consolidation wave in decades.
The long-awaited pact between Delta, the nation's third-largest airline, and No. 5 Northwest could come as early as today, following an agreement by the airlines' pilots unions for a common contract.
The marriage - pending regulatory approval - would create a new and expanded Delta with a fleet of 1,115 planes and 85,000 employees. It would fly more than 130 million passengers annually to more than 1,100 cities. The combination would bring together two airlines that each emerged from bankruptcy only a year ago.
While the deal could mean higher fares for some passengers in some markets, widespread or prolonged increases are less likely, because the two airlines have fewer routes that overlap, analysts said. Also, the combined airline could face increased competition from low-cost carriers looking to move into markets left behind by the combined carrier.
"The impact on fares will be neutral," said Terry Trippler, an aviation consultant who runs TripplerTravel.com, a travel advice Web site. "I can't find too many places where these two airlines combining would create a monopoly."
A deal could still be delayed or even scuttled, particularly if pilots don't come to an agreement on meshing their seniority lists and other issues. Delta and Northwest don't want to repeat the expensive labor issues that have stymied the merger of US Airways and America West.
If a deal is struck, the new airline would retain the Delta name and base its headquarters in Atlanta, where Delta has its largest airport hub. In hope of winning political support in Minneapolis, Northwest's hometown, the combined airline is likely to keep major operations there, including maintaining Minneapolis-St. Paul International Airport as a second hub.
The deal is expected to encounter significant scrutiny from regulators.
Analysts believe the next combination could involve United Airlines, the nation's fourth-largest airline, and No. 6 Continental Airlines.
"The orchestra is playing and the dance is beginning, so you better pick a partner or you'll lose out," Trippler said.
The prospective Delta-Northwest deal marks the latest attempt at a merger in an industry that has seen a number of failed deals in recent years, including last year's hostile bid for Delta by US Airways and an attempt by United and Continental to tie the knot in 2001.
One investor group estimated that the Delta-Northwest merger could result in cost savings of $1.5 billion a year. The airlines together posted more than $31 billion in revenue last year.
