Most Jobs Likely to Survive a Delta-NWA Deal

Feb. 6--If Delta Air Lines and Northwest Airlines merge, the vast majority of their employees would be expected to keep their jobs while the executive ranks of the combined company would be thinned.

Delta's leaders envision a merger as a way to build their route network, so they are not contemplating wholesale job cuts, people familiar with Delta's thinking said Tuesday.

Northwest now employs about 32,000 people -- including 12,000 in Minnesota -- while Delta has about 55,000 employees.

Delta also understands the importance of keeping a significant presence in the headquarters city of its merger partner, the sources indicated.

The fate of airline employees could be crucial to helping a merger succeed.

Part of the reason the last major consolidation attempt -- US Airways' hostile bid for Delta in late 2006 -- failed was that it came with the threat of major job losses. Then-Delta CEO Gerald Grinstein estimated that US Airways' plan would have cost 10,000 Delta jobs, and that aspect of the deal galvanized opposition within the airline and Congress.

Atlanta-based Delta is attempting to construct a merger that could win support from employees on both sides of the deal. In particular, Delta believes a merger that paired Delta's strong transatlantic routes with a carrier that is strong in the Pacific would limit the number of overlapping routes and allow both partners to form a huge global airline. Consequently, it could be characterized as a merger by addition rather than subtraction, when viewed by seat capacity and workforce size.

Delta has approached both Northwest and United Airlines for merger talks, but is thought to view Northwest as its first choice. Northwest and United Airlines are the top two U.S. carriers that serve Asia and they both have major hubs in the Midwest.

Officials from Northwest and Delta have declined to comment on their merger talks, which continue. In a Jan. 11 message to employees, Northwest CEO Doug Steenland said the airline's leaders would carefully consider merger deals. "Doing nothing could be our worst alternative," he said. "If we wait to react to what others do we could be left with options that are undesirable or with no options at all."

Pilot groups at Delta and Northwest, both represented by the Air Line Pilots Association, have said they could support a merger, if it allowed them to get stock in the new company as well as contract improvements.

"There must be a significant economic benefit to both pilot groups to provide the incentive to make the hard decisions necessary to integrate seniority and contracts expeditiously," Northwest pilots chairman Dave Stevens said in a recent memo to union members.

Northwest pilots spokesman Greg Rizzuto said in an interview that both pilot groups share the goal of benefiting from a fair merger that would give them greater job security by forging a stronger carrier.

In a Friday message to employees, Delta CEO Richard Anderson said any merger would have to serve the "best interests of all Delta stakeholders, including employees, customers, our shareholders and the communities we serve." Anderson was Northwest's chief executive from 2001 to 2004.

One tough issue is the location of the merged company's headquarters. In mid-November, Anderson said he would only enter into a deal that retained the Delta name and its Atlanta headquarters.

Northwest has legal agreements with the Metropolitan Airports Commission that would financially penalize the airline if it fails to maintain a hub and headquarters in the Twin Cities. "We are pretty darn confident in a Northwest-Delta merger that the hub plays a strong role," said MAC Chairman Jack Lanners. However, he added that if Northwest fails to maintain its headquarters in Minnesota, then the MAC could require it to immediately pay $245 million in bond debt.

Delta's leaders don't support operating dual headquarters, according to people with knowledge of Delta's plans. However, if Delta does a deal with Northwest or another carrier, Delta recognizes that a substantive commitment should be made to the community that loses its headquarters, those sources said.

In mid-January, Gov. Tim Pawlenty wrote to Steenland and Anderson to urge them to "ensure continued operations and presence in Minnesota at a high level." Pawlenty spokesman Brian McClung said Tuesday that the governor spoke with Steenland "a couple of times over the past few weeks and we anticipate discussions may continue as needed." In addition, McClung said the governor recently talked with Anderson.

U.S. Sen. Amy Klobuchar, D-Minn., said Tuesday that she spoke with Steenland on Monday about her desire to preserve airline jobs at Minnesota airports, the Eagan headquarters and Chisholm call center. "He reiterated how important the [Twin Cities] hub is," Klobuchar said.

Klobuchar reported that Steenland did not brief her on the status of merger talks, but told her "there was a limited timeline where this could get done."

In December, Dave Davis, Northwest's chief financial officer, said that an airline merger probably would need to take shape by this month to receive a regulatory decision before the end of the Bush administration.

Liz Fedor --612-673-7709