Delta, Northwest CEOs Say Oil Cost Justifies Merger

June 25, 2008

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The network formed by a merged Delta Air Lines and Northwest Airlines would help them avoid cutting the number of cities they serve if oil prices force more capacity reductions, their chief executives wrote in The Wall Street Journal on Wednesday.

"(If) extraordinary oil prices force further capacity reductions, the revenue generating capability of our worldwide network will better allow us to rationalize capacity by trimming frequencies rather than eliminating destinations," Delta's Richard Anderson and Northwest's Doug Steenland wrote in a letter to the paper's editor.

If Delta bought Northwest it would produce more than USD$1 billion in cost and revenue improvements, with transition costs of USD$750 million spread over four years, they said.

This would help offset high oil prices, something they could not do alone, they also said.

The CEOs also said integration planning is on track and that a regulatory review of the merger would be completed later this year.

The letter comes about three weeks after the US Justice Department asked Delta and Northwest for more information on the merger proposal. So far Delta's bid is moving forward on a timetable largely anticipated by legal and aviation experts.