Not only is the devil you know better than the devil you don't know, but there is also no doubt the January 2009 transition in the White House could lead to a delay for such a merger deal, no matter which of the three presidential candidates is elected. The risk of a delay would increase in a Democratic administration, since both of the parties' presidential contenders are considered less sympathetic to airline mergers than Bush is.
While the situation remains fluid, the long-awaited announcement of the Delta-Northwest merger is likely to come Tuesday, a source said. The announcement is just the first step in a process that could take months before regulatory approval and years before the carriers are integrated.
NWA Pilots a Probable Speed Bump
Pilots are one hangup. While Delta pilots are being incented for their support, Northwest pilots remain a wild card, concerned their seniority could be sacrificed if they integrate with younger Delta pilots. The carriers appear willing to bet that the advantage to consideration by the Bush Administration outweighs the disadvantage of partial support from pilots.Shares in Delta were rising 2.8% to $10.28 in recent trading Monday, while Northwest shares were up 2% at $11.18. In general, Wall Street takes a positive view on mergers, which not only generate fees, but also promise capacity reductions, synergies for merged carriers and pressure for competitors to merge as well. In a recent report, FTN Midwest Securities analyst Mike Derchin said the likelihood of a Delta/Northwest deal being announced this week is 80%. A merger would "create a world class network with, we estimate, over $1 billion in revenue synergies," he says. "It will be a merger of equals with a small premium for NWA shares." Still, with the barriers that remain, it is easy to imagine that late next fall in the waning days of the Bush Administration, the airline industry will be waiting anxiously for an antitrust ruling. While a favorable ruling is generally considered to be likely, given the minimal overlap between the two carriers and the harsh economic conditions facing the airline industry, objections will get a full hearing.