The Delta and Northwest Airlines Merger

            
 
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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.



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Case Details:

Price:

Case Code : BSTR319 For delivery in electronic format: Rs. 300;
For delivery through courier (within India): Rs. 300 + Rs. 25 for Shipping & Handling Charges

Themes

Mergers/ Acquisitions/ Strategic Alliances
Case Length : 20 Pages
Period : 2008-2009
Pub Date : 2009
Teaching Note : Not Available
Organization : Delta Air Lines Inc./ Northwest Airlines Inc.
Industry : Aviation
Countries : US

Abstract:

The case discusses the merger of the US-based Delta Air Lines Inc. (Delta) and Northwest Airlines Inc. (Northwest). Delta and Northwest announced their merger plans on April 14, 2008. The merger was expected to create the world's largest airline in terms of global traffic and second largest airline in terms of revenues. On October 29, 2008, the United States Department of Justice (DOJ) gave approval for the merger. After the completion of merger, Northwest became a wholly owned subsidiary of Delta. The new airline retained the name Delta and was headquartered in Atlanta. The merger was expected to save costs by combining airport operations of the two airlines and sharing information technology.

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The merged entity was expected to generate US$ 1 billion per annum in cost efficiencies. Customers were also expected to benefit from the merger, as they would get access to a global route system.

However, some analysts opined that Delta may eliminate some overlapping flights in the merger integration process, which would leave the consumers with fewer choices and higher prices. They were also concerned that the merger would lead to lesser competition. Analysts also pointed out that finalizing a combined seniority list of pilots of both the airlines would be a major challenge. The case ends with a discussion on the future prospects of the merged airline.

Issues:

Study the merger of Delta Airlines and Northwest Airlines and examine the rationale behind the same.

Analyze the synergies that may result from the merger.

Explore the challenges that Delta may face to make the merger successful.

Critically analyze the future business prospects of Delta post merger.

Study the changing dynamics of the US aviation industry.

Contents:

  Page No.
Introduction 1
Background Note 2
The Merger and its Rationale 5
The Response 7
Birth of the Largest Airline 8
Post-Merger Integration 9
The Road Ahead 10
Exhibits 12

Keywords:

Delta Air Lines, Northwest Airlines, Merger, Bankruptcy, US Aviation industry, Merger Integration Process, Fuel hedging, Synergies, Consolidation, Reorganization, Bankruptcy reorganization plan, Pilots joint contract, Golden share, Continental Airlines, Largest airline, United States Federal Aviation Administration, Revenue Passenger Kilometers, Airline Network, Passenger Traffic Data

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