The Delta and Northwest Airlines Merger
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Case Code: BSTR319 Case Length: 20 Pages Period: 2008-2009 Pub Date: 2009 Teaching Note: Not Available |
Price: Rs.300 Organization: Delta Air Lines Inc., Northwest Airlines Inc. Industry: Aviation Countries: US Themes: Mergers, Acquisitions, Strategic Alliances |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
The Merger and its Rationale
In 2008, both Delta and Northwest continued facing financial problems. In the first quarter of 2008, Delta reported a net loss of US$ 274 million in comparison with its net loss of US$ 6 million in the first quarter of 2007, excluding special and reorganization items. The US$ 268 million year over year increase in net loss was mainly because of the US$ 585 million increase in costs due to higher fuel price...
The Response
The announcement of the merger between Delta and Northwest airlines evoked mixed reactions from industry experts. While some analysts welcomed the merger, some were apprehensive about its effect on the US aviation industry...
Birth of the Largest Airline
On June 24, 2008, Delta announced that the ALPA units at Delta and Northwest airlines' had reached a tentative agreement on a joint contract that would bring together both pilot groups under one pilot working agreement...
Post-Merger Integration
On October 29, 2008, Delta's management announced that Delta and Northwest would integrate their operations over the next 12 to 24 months. The merged entity was expected to incur a one-time cost not exceeding US$ 600 million to integrate the airlines. It was expected to generate US$ 2 billion in annual revenue and cost synergies. On December 02, 2008, Delta announced that it would reduce its consolidated system capacity by between 6 and 8 percent in 2009, compared to 2008...
The Road Ahead
On January 07, 2008, Delta reported passenger traffic for December 2008. Delta's domestic traffic had decreased 3.7 percent year over year while international traffic had increased by 9.2 percent year over year. Northwest's domestic traffic had decreased 4.7 percent year over year and international traffic had decreased by 2.0 percent year on year...
Exhibits
Exhibit I: Delta - Highlights of Plan of Reorganization
Exhibit II: World's Top Ten Airlines by Revenues (As of April 2008)
Exhibit III: World's Top Ten Airlines by Traffic (As of April 2008)
Exhibit IV: A Note on the US Aviation Industry
Exhibit V (A): Passenger Traffic Data of Delta
Exhibit V (B): Passenger Traffic Data of Northwest
Exhibit VI: Delta's Consolidated Statement of Operations (1) (Unaudited)
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