October 30, 2008 2:00 am
Delta Air Lines' proposed merger with Northwest Airlines won approval from US antitrust officials, clearing the companies to create the world's largest carrier.
The merger, which closed late yesterday, comes six months after Delta and Northwest struck a deal they argued would insulate the combined company from a surge in fuel costs that had threatened to overwhelm even the nation's biggest airlines.
While a deepening economic slowdown has replaced record fuel costs as the industry's top concern, a combined Delta-Northwest may still pressure rivals such as United Airlines and American Airlines to pursue deals of their own.
"The airline industry faces a very difficult economic environment around the world, and this merger gives Delta increased flexibility to adapt," Richard Anderson, Delta's chief executive, said in statement.
Mindful of the challenges that organised labour had posed in past airline mergers, Delta and Northwest executives sought to secure their pilots' support before announcing an agreement. The carriers also emphasised the lack of overlap between their route networks and hubs, blunting the arguments of airline consolidation's traditional opponents in Congress.
The strategy nearly backfired when a stand-off between the two pilots unions over how to rank their members by seniority threatened to derail the carriers' negotiations. Nevertheless, the Delta-Northwest merger may now serve as a template for other airlines in an industry with a history of deals that failed to win the support of regulators, labour leaders and other key constituents. "I think it might well do that," said Larry Scarborough, an antitrust lawyer with Bryan Cave. "The lack of significant overlap made traditional antitrust analysis pretty easy to satisfy."
United Airlines, Continental Airlines and US Airways were among the other US carriers to discuss potential combinations this year.
US Department of Justice officials said yesterday that the merger "is likely to produce substantial and credible efficiencies that will benefit US consumers and is not likely to substantially lessen competition".
The two airlines ferried 126m passengers last year. The combined company, called Delta and based in the Atlanta, will serve more than 375 cities in 66 countries.
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