- The Washington Times - Friday, September 26, 2008

Delta Air Lines Inc. and Northwest Airlines Corp. shareholders gave the go-ahead Thursday to a combination that would create the world’s biggest carrier, deciding that in their volatile industry, they like their chances better together than on their own.

The stock-swap deal announced April 14 still requires Justice Department approval. One other potential hurdle is a federal lawsuit seeking to block the deal that is set for trial Nov. 5 in San Francisco.

Delta Chief Executive Richard Anderson, who will keep his position after the combination, would not discuss the lawsuit, but he indicated that the carrier maintains its goal of completing the deal by the end of the year.

“We are still focused on that timeline and believe we can accomplish the timeline as stated,” Mr. Anderson told reporters after the Delta shareholder vote.

At a Delta meeting near Atlanta, 99 percent of shares voted were in favor of issuing new stock as part of the transaction. Earlier in the day, at a meeting in New York, 98 percent of Northwest shares voted were in favor of Delta acquiring Northwest.

The deal was not trumpeted by everyone, however. A few retired Delta pilots complained that current employees will get equity when the deal is completed, but retired pilots won’t. They suggested Delta consider reinstating the defined-benefit pension plan for pilots that the airline terminated while the carrier was under bankruptcy protection.

Mr. Anderson said he understood the retired pilots’ concerns, but he was firm that the pension termination was final.

“I think we’ve been clear we’re not going to reopen that issue,” Mr. Anderson said.

Northwest shareholders will get 1.25 shares of Delta stock for each share they own if the combination is completed. That values Northwest at roughly $2.8 billion, based on Delta’s current stock price and the 277 million Northwest shares outstanding or still to be issued as part of its bankruptcy reorganization plan. That’s about $800 million less than the value when the deal was announced.

The combined airline would be called Delta and keep its Atlanta headquarters. Northwest would become a wholly owned subsidiary of Delta during the integration process. Delta hopes to obtain a single Federal Aviation Administration operating certificate in 15 to 18 months.

Delta Chairman Daniel Carp would become chairman of the new board of directors and Northwest Chairman Roy Bostock would become vice chairman. The new board would be made up of 13 members - seven from Delta’s board, five from Northwest’s board, including Northwest Chief Executive Officer Doug Steenland, and one from the Air Line Pilots Association. A current Delta pilot would take the pilots’ seat on the board.

If the deal is completed, Delta plans to issue a nearly 13.4 percent equity stake in the combined airline to employees. Delta’s shareholders approved at their meeting Thursday a proposal to amend the company’s performance compensation plan to allow Delta to issue the equity to employees.

Delta has already reached an agreement with pilots of the two airlines on a joint contract, although a deal to integrate the seniority lists of the two pilot groups remains elusive. Arbitration hearings on the seniority issue are set to begin Oct. 2 in Los Angeles. The pilots are the only major union at Delta, while Northwest is heavily unionized.

The new airline would be the biggest in the world in terms of traffic and biggest in the U.S. in terms of annual revenue, which was a combined $31.7 billion at the end of last year.

Approval from shareholders at both companies had been expected, with the only real potential obstacle being the Justice Department, which is scrutinizing the Delta-Northwest plan for antitrust considerations. On Thursday, Mr. Steenland said they still expect to get approval and close the deal by the end of this year.

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