Egos slow airline merger talks
Headquarters site, company name among hurdles
By Harry R. Weber, Associated Press
Published January 22, 2008 at 12:05 a.m.
A particularly thorny issue for Delta Air Lines Inc. in its talks with United Airlines and Northwest Airlines about a combination with one of the carriers is where the merged company would be based and what it would be called, industry observers say.
In recent months, Delta executives have spoken in near absolute terms about their intention of keeping the Delta name and the headquarters in Atlanta. But aviation experts say such certainties are hard to achieve in complex negotiations that involve competing interests.
"This is a business of egos," said Robert Mann, a Port Washington, N.Y.-based airline consultant. "While lots of things get negotiated, some of the toughest to negotiate are those sorts of issues that go with what it's going to be called, where it's going to be headquartered and who is going to run it."
Delta spokeswoman Betsy Talton reiterated Monday that Delta's board is analyzing strategic options, including potential consolidation transactions, but she declined to provide any update on the process or address the name and headquarters issues.
Northwest Airlines Corp. officials are likely just as eager to see any combination they are involved in keep the Northwest name and the company based in Eagan, Minn., as United officials likely would want to keep the United name and keep its parent company, UAL Corp., based in Chicago.
In Northwest's case, Minnesota Gov. Tim Pawlenty pointed out last week in a letter to the chief executives of Northwest and Delta that Northwest has made financial commitments to keep its headquarters and a hub in Minnesota. Northwest would give up $215 million of financial incentives at the airport between now and 2020 if it moves its headquarters out of Minnesota.
The clock is ticking to get any deals accomplished, some observers say.
That is because industry observers think a combination has a better chance of surmounting the considerable political and regulatory hurdles under the Bush administration than whatever might follow it.
But Mann said he thinks the airlines will take their time.
"I don't think it's going to happen soon because of the nature of not only the individual negotiations but also the need to game out what will be the competitive responses," Mann said.
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