The New Northwest?



Could Delta and Northwest merge?

By Marilyn Adams, USA TODAY

Delta Air Lines (DAL) and Northwest Airlines (NWAC) entered bankruptcy court together this week, and few will be surprised if they emerge together — as a single combined carrier.

The twin Chapter 11 bankruptcy filings Wednesday night, almost simultaneous and in the same New York courthouse, are leading many industry experts to believe the carriers may be exploring a merger within bankruptcy protection.

"I wouldn't be at all surprised," Benchmark analyst Helane Becker said Thursday. "In the past, these two airlines have talked and they have very little route overlap."

JPMorgan Chase analyst Jamie Baker said his firm "already has coined the term 'Delta Orient,' " a play on Northwest's former brand name, Northwest Orient.

Atlanta-based Delta is concentrated in the East and launches more daily flights across the Atlantic than any other carrier. Eagan, Minn.-based Northwest is concentrated in the Midwest and has a strong route structure in Asia.

The minimal route overlap is considered an advantage with federal regulators.

Airlines proposing a major merger would have to convince government regulators that the combination would not significantly reduce competition, or that one or both of the airlines would fail without the merger.

Northwest declined comment when asked about a merger with Delta.

In a conference call Wednesday, Northwest CEO Doug Steenland said the timing and location of the filings was coincidental. He added he has long believed consolidation among airlines is likely.

Delta spokeswoman Chris Kelly said Delta "expects there will be more consolidation in the industry. Right now, Delta is focused on its own restructuring efforts."

The twin filings, outrageously high fuel prices and declining hope for financial relief from the government could spark a round of merger talks as the remaining big troubled airlines scramble for partners.

A judge today is expected to approve a merger between US Airways and America West Airlines.

Five big potential partners remain: United Airlines, Delta and Northwest, all of which are now in bankruptcy protection, as well as American Airlines and Continental Airlines.

A merger of No. 3 Delta and No. 4 Northwest would propel the combined airline to the front of the industry pack.

It would pass American and United and become the biggest airline in terms of revenue passenger miles, according to an analysis by Back Aviation Solutions.

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