Filed under: Deals, Industry, Employees, Delta Air Lines (DAL)
Northwest (NYSE: NWA) does not care what the pilots’ union thinks. It plans to go ahead with a merger with Delta (NYSE: DAL) despite resistance from the sky captains. Pilots have held up a deal while they negotiate seniority provisions for a combined company.
According to The Wall Street Journal (subscription required), “a jump-started deal wouldn’t include terms of a combined pilot labor agreement and the salary enhancements previously foreseen.”
Aside from regulatory approval, the deal has two real problems. The first and most obvious is that the pilots may strike the airlines if they feel they have been mistreated. A shutdown, especially if it is prolonged, could cost tens of million of dollars in lost passenger revenue.
In addition, it is not clear that merging airlines has a clear benefit. Fuel costs do not change. The number of employees may fall, but some of the unions involved may ask for higher compensation in exchange for supporting cuts. Customer service department mergers almost always cause problems because putting together incompatible reservations platforms can take several quarters. This can damage relationships with consumers and cause them to use other carriers.
Pushing the merger may be a bad idea, whether the pilots are on board or not.
Douglas A. McIntyre is an editor at 247wallst.com.
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