|
JOINT ASSETS: Delta and Northwest together have 800 aircraft, 75,000 employees and an annual revenue of US$35 billion (S$47.6 billion). -- PHOTO: AFP
|
ATLANTA - DELTA Air Lines will buy Northwest Airlines for more than US$3 billion (S$4.08 billion) to create the world's biggest airline, as carriers seek to counter skyrocketing fuel prices and a weak economy. The move may unleash more airline mergers.
After racking up US$35 billion in losses and finally emerging from a five-year slump in 2006, US airlines are hoping mergers could lead to higher fares as combined carriers reduce flights and use their increased market power to raise prices.
'It is a very optimistic view on an industry that has been very dismal for the last couple of weeks,' said airline consultant Robert Mann.
Airlines also face a renewed sense of urgency to consolidate and cut costs amid the relentless upward march of fuel prices, a weakening economy and a growing competitive threat from European carriers. Jet fuel prices have more than doubled since the start of last year.
If given regulatory approval, the new airline, led by Delta chief executive officer (CEO) Richard Anderson, will operate under Delta's flag with over US$35 billion in annual revenue, 800 aircraft and 75,000 employees.
It would vault past AMR's American Airlines as the world's largest by traffic. Delta, Northwest and their regional partners carried 176 million people last year.
The two carriers both exited bankruptcy last year, and merger speculations surfaced after Mr Anderson, a former Northwest CEO, took the helm at Delta.
A Delta-Northwest deal could also accelerate another tie-up - that of No. 4 carrier Continental Airlines and No. 2 United Airlines.
Those two carriers have laid most of the groundwork for a merger, two people briefed on the matter have said, They could have a deal ready 'pretty quickly' following the Delta and Northwest announcement, one of them said earlier on Monday.
Four small airlines have ceased flying in recent weeks and another, Frontier Airlines , filed for Chapter 11 bankruptcy on Friday. Major airlines are expected to report quarterly losses in the coming weeks.
Delta and Northwest said the deal would generate US$1 billion in annual revenue and cost benefits.
Mr Anderson said cost savings would be derived from a reduction in operating expenses, more efficient use of technologies, cutting administrative costs and more bargaining power with vendors.
Market concentration will be the central focus of Justice Department antitrust officials, who must clear the deal. A review could take months, but experts see few roadblocks.
REUTERS, BLOOMBERG NEWS
|
