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October 30, 2008

Monsters, Inc.: Delta Is World's Biggest Airline Thanks to Northwest Deal

AP Photo

by Barbara S. Peterson

Back in early 2001, Senator Chuck Schumer warned of a wave of "monster airlines" as lumbering legacy lines like United and TWA rushed to find merger partners. It took a few years, but the era of air behemoths may finally be upon us. Yesterday the Justice Department (DOJ) gave its blessing to the union of Delta and Northwest. With 75,000 workers, nearly 800 planes and 375 destinations around the globe, it'll be the world's largest airline, leapfrogging American, which has 675 jets (thanks in part to its own merger with TWA eight years ago). 

Delta today took out full-page ads in major newspapers and sent emails to SkyMiles members  trumpeting the creation of a "premier global airline" and promised&well, not a lot, except business as usual at both airlines as they figure out how to combine forces. In the short term you probably won't notice much of a change. The airlines say it'll take from one to two years to integrate their operations fully; in the meantime, they'll maintain separate Web sites, reservation lines and frequent flier programs.  Elite status and membership at airport clubs is "secure," said Delta. Both carriers are members of the Skyteam Alliance, which includes KLM and Air France.

But there's a lot to sort out, and if the past is any guide, we may all be in for a bumpy ride.  Mergers are typically followed by a rash of operational snafus and labor strife as airlines attempt to mesh separate workforces with different cultures and rules. Indeed, Delta is largely non-union, except for their pilots, while Northwest is highly unionized--and its unions have already vowed to add Delta's workers to their rolls. Consumer groups and organizations such as the Business Travel Coalition predict that the combo could bring higher fares and service cuts.  There's also speculation that hubs like Northwest's at Memphis and Delta's at Cincinnati may be scaled back.

The differences even extend to the department of nickel-and-diming: a look at the most recent fee comparison chart shows that you'll do better on Delta if you're only checking one bag--you pay nothing on Delta, $15 on Northwest. But check two bags and you'll be better off on Northwest, which charges just $25 for the second one, versus a whopping $50 on Delta. The airlines also differ on how much they charge for making reservations over the phone, checking an oversize or overweight bag, and other minutiae of your trip. 

But these are minor points. The big question for consumers is whether this merger will encourage a me-too wave of dubious deals.  American Airlines, for one, is hoping the friendly climate in Washington will help pave the way for swift action on its proposed transatlantic alliance with British Airways.  The DOJ, after all, practically gushed about the potential benefits of a new, super-sized Delta, claiming the merger will be good for passengers and won't harm competition, since the carriers compete directly on only 12 nonstop routes.

"Consumers are&likely to benefit from improved service made possible by combining under single ownership the complementary aspects of the airlines' networks," said the DOJ.
American argues that this logic ought to apply to its deal--and Washington insiders note that regulators are more sympathetic to the ailing airlines than they were back in 2001, when United's bid to acquire US Airways was shot down by the feds. AA-BA are hoping to get a nod before a new administration--potentially a less friendly one--arrives in the capital.

Further reading:
* "It's a Done Deal" (Minneapolis Star Tribune)
* "As Delta Air Lines and Northwest merge their operations into one, Delta plans to expand some of its amenities to Northwest flights, including free in-flight snacks for coach passengers, and pillows and blankets in flight...But Delta also is adopting some policies Northwest already has which passengers may not be as happy with, including charging a $5 to $25 fee for some window, aisle and exit row seats." (The Atlanta-Journal Constitution)
* On the Fly: The airline industry


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