World’s biggest carrier from Delta and Northwest

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Apr 15 2008
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Global oil prices are seeing its effect when U.S. Delta Air Lines Inc. and Northwest Airlines Corp. are combining in a stock-swap deal that would create the world’s biggest carrier. Under the terms of the Delta transaction, Northwest shareholders will receive 1.25 Delta shares for each Northwest share they own – represents a premium to Northwest shareholders of 16.8 percent based on Monday’s closing stock prices.

Delta said the combined airline, which will be called Delta, will have an enterprise value of $17.7 billion, which includes the combined market values of the two companies and combined net debt – reported AP. Delta Chairman Daniel Carp will become chairman of the new board of directors and Northwest Chairman Roy Bostock will become vice chairman.

As with any other merger or consolidation, head-cuts could be on the horizon but Delta said at the moment there will be an unspecified number of job cuts or transfers through the consolidation of overlapping corporate and administrative functions. Both airlines have more than 80,000 people on its’ payroll.

Delta also announced it will provides the Delta pilots a 3.5 percent equity stake in the new company and other enhancements to their current contract. However the agreement does not cover Northwest pilots. Northwest pilots and the union representing most of Northwest’s ground workers immediately announced they would fight the combination. Delta and Northwest filed for bankruptcy protection in New York on Sept. 14, 2005 but both emerged from bankruptcy as leaner carriers last spring, after shedding billions in costs during their reorganizations.

Could this set the tone for more global merger in aviation sector in the future?

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