Delta, Northwest Pilot Talks Move Forward Slowly

February 13, 2008

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Talks between pilots at Northwest Airlines and Delta Air Lines to reach an equity and seniority agreement they can offer to management ahead of any merger bid are moving forward but slowly, industry sources said.

There is no indication that units of the Air Line Pilots Association (ALPA), who have been meeting in New York, will not come to an agreement but the effort is complex.

"I think it will get worked out but take more time. They don't like to be rushed," said one industry consultant who has been informed about the pace of discussions.

"Each side is trying to figure out their own positions and come to a side deal. But these are major issues. It's hard to come to some quick conclusion," said an aviation attorney who consults for carriers and is knowledgeable about union issues.

There had been reports that a Delta/Northwest merger bid could be announced as early as this week, but people briefed on the situation said that it could take a few weeks to bring a proposal to shareholders and the Justice Department. The structure of the deal remains unclear.

Pilots are considered key to any successful merger and unions at both airlines, representing a combined 11,000 pilots, have said they would not be rushed. They both have said there would be no consolidation without their input.

Both pilot groups endured bankruptcy at their carriers from 2005-07, which included severe wage and pension cuts. They are both looking to recoup a measure of what they lost through wage increases, equity or both.

Pilots also want to ensure their seniority, which is crucial for determining when they work, what routes they fly, and how much money they make.

Delta is the bigger carrier and analysts expect it would be the acquiring company in any merger. But many veteran pilots left before and during Delta's restructuring, raising tricky seniority questions. Additionally, pay rates at Northwest are lower than they are at Delta.

Bill Swelbar, an industry consultant, said it appears Delta and Northwest are trying to work out as much as possible behind the scenes before making a decision on whether to move forward with a proposal.

"We haven't seen that before," Swelbar said of the patient approach.

Swelbar and the other two sources believe the strategy partly stems from the serious problem US Airways has had combining its pilot groups under one contract after merging with America West Airlines in 2005.

Delta pilots also played a crucial role in helping the carrier fend off a hostile bid by US Airways last year.