Delta Air Lines may enter merge talks with Northwest or United Airlines

January 12, 2008

Delta Air Lines may enter merge discussions with one of two other major United States air carriers - Northwest Airlines or United Airlines.

It is known that Chief Executive Richard Anderson has asked for authorisation to begin talks, and believed executives have held a meeting at which permission was sought to enter discussion with one of the two airlines, but the results are yet to be confirmed.

Ajc.com reported that airline spokesman Kent Landers refused to confirm even the existence of the meeting, saying "Delta has a longstanding policy not to comment on board meeting dates or agendas. Our board is working with management to look at all strategic options to remain a leader in the industry, including potential consolidation transactions. [Delta] won't provide updates on the board's process."

The airline has been in exploratory talks with both Northwest and United since late 2007, and it is believed that the purpose of the New York meeting was to select which airline offered Delta the better deal and authorise moving talks on to the next level. If a deal goes ahead and survives regulatory checks and potential opposition from politicians and consumer advocates then a merge with either airline would be the biggest between two US airlines, and would result in the biggest airline in the world.

Rapidly rising costs in the aviation industry are driving airlines towards merges. In particular, the price of jet fuel jumped 58% in 2007, driven by the rapidly increasing price of oil. When Anderson joined Delta in early September, he commented that he was not interested in potential merge deals. However, as prices rise and shares fall for airlines, he publicly changed his stance to being open to Delta-led mergers. Shares in all three companies shot up amid the news of a potential deal, although they have begun falling again, and did not hit last year's highs. Delta has a current market value of around $4.2 billion, less than half the amount US Airways offered last year in an attempt to buy Delta, which failed.