Delta's Bastian: Merger Benefits Increasing
That's because Delta now believes the merger will produce $2 billion in savings and benefits, up from an original estimate of $1.2 billion, and will cost about $600 million, down from the $1 billion projected earlier.
"When we announced in April with oil at $110, we wanted to make certain we did not over-commit to Wall Street what the real value was," said Delta President Ed Bastian, in an interview with TheStreet.com. "We would rather under-commit and then deliver good news.
"Now that we've had an opportunity to do more detailed work, we've been able to validate the synergies we thought were there, but had a difficult time quantifying," he says. "With oil at $130 a barrel, we have to make sure we are getting every last nickel of synergies and also make sure we have good transparency."Having two dozen employee teams fully scrutinize Northwest's operations -- which could not happen during negotiations -- has been a big factor. The evaluation suggests the combined company could gain back $500 million in 2009 and another $500 million to $600 million annually until 2012. Under the tentative contract agreement reached last month with the pilot groups from the two airlines, Delta can attach either carrier's code to the flights it chooses, as soon as the deal closes. Delta expects to complete the transaction in the fourth quarter.
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