The Delta and Northwest Airlines Merger
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Case Details:
Case Code : BSTR319
Case Length : 20 Pages
Period : 2008-2009
Pub Date : 2009
Teaching Note :Not Available
Organization : Delta Air Lines Inc./ Northwest Airlines Inc.
Industry : Aviation
Countries : US
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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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Introduction Contd...
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Ed Bastian (Bastian), Chief Financial Officer and President
of Delta, became the President and Chief Executive Officer (CEO) of the merged
entity and Northwest's President and CEO, Doug Steenland (Steenland), became a
member in the Board of Directors of the merged entity. As a result of the
merger, Northwest's shareholders would receive 1.25 shares in the new airline
for each share they had in Northwest. The merged entity would offer its services
to customers in 375 cities and 66 countries worldwide. Even though the
managements of both the airlines were confident about the potential synergies of
the merger, some analysts had their apprehensions about it.
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These analysts opined that as some of the routes of the two
airlines overlapped, some 'overlapping flights' would be dropped during
integration and the consumers would be faced with fewer choices and higher
prices.
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According to Fitch Ratings7,
"Unfortunately, such consolidation may have adverse impacts on the
consumer through increased air fares."8 Analysts were also concerned that after this merger, other
airlines may also start discussions among themselves to merge, and that
would lead to less competition.
They also pointed out that finalizing a 'combined seniority list of
pilots'9 of both the airlines would be a major challenge.
In late January
2009, although the pilots union of both the airlines agreed on a joint
contract, they could not agree to how seniority for the pilots would
work under the merged entity... |
Excerpts >>
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