A great deal can happen in six or eight months, perhaps even a merger between Delta Air Lines and Northwest Airlines. Even if the proposed deal survives regulatory scrutiny and labour retaliation, achieving the estimated $35 billion in annual revenues touted by the carriers' top executives could prove to be arduous.
Delta chief executive Richard Anderson believes the proposed deal is about "addition not subtraction", and indeed with only twelve routes between the two airlines having direct overlap, few communities risk losing service.
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But a combined carrier still faces oil prices that have recently settled at more than $110 a barrel, and if little is done to shrink the two carriers' existing operations, what remains is a monolith airline battling those energy costs, instead of two of the top six major US airlines scrutinising every aspect of their business to find ways to offset fuel costs that could reach well over a billion dollars for some US airlines in 2008.
Two variables also need clarification for the efficiencies Delta and Northwest are seeking through their proposed combination - anti-trust clearance and labour. While the complementary network structures are not likely to spur major Justice Department concerns, follow-on US airline merger scenarios seeking a nod could cast doubt over an easy approval from the government of a Delta-Northwest tie-up.
And while Delta heads into the merger with the blessings of its pilot union leaders - it only took the pilots getting a pay rise and a stake in the merged company - Northwest's pilots say they were essentially shut out of the deal and risk being on lower pay scales for years.
That is not exactly an ideal way to open negotiations to reach a single contract. Disgruntled employees rarely make achieving desired revenue targets easy for carrier managements, who ultimately are responsible to their respective shareholders.
Source: FlightGlobal.com
