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Delta-Northwest Merger

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Ben Kading

on 5 May 2011

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Transcript of Delta-Northwest Merger

Delta-Northwest Merger The New Delta Pre-Combination Change Initiative Reason for the Merger
Intended Change
Scope of the Change
Reason for the Merger NWA filed bankruptcy
Delta reemerging from bankruptcy
Delta’s need to compete with American Airlines for the nation’s largest airline carrier
Intended Change Gain competitive advantage

Adding NWA’s Asian air cargo market

Financial strength and global reach to “thrive” Timeline Scheduled Jan. 2008 – Jan. 31st, 2010
Early 2009: Single Image
-Physical aspects
-One brand and its identity
Oct. 2009: Merge frequent flier programs, flight schedules, and policies
Dec. 31, 2009: Operating certificate received
Jan. 31, 2010: Merge reservation systems Scope of Change Corporate Level

-Customers Goals of the Merger Create world’s largest airline carrier

Combine end to end networks

Get passengers to just about any destination

Gain more business travelers

Produce over 1 billion overall in annual revenue and cost savings
Legal Combination Phase Terms
Register the Transaction
Gain Government Approval Terms Retain Delta Name and headquarters
Retain Richard Anderson as CEO
Merge airline operations into the largest U.S. Airline.
On September 26, 2008 it was announced that both Delta and Northwest's shareholders had approved the merger.
Register the Transaction Gained Government approval by a federal antitrust review board consisting of members of the U.S. Congress -August 7, 2008, the merger won regulatory approval from the European Union.
-October 29, 2008- U.S. Department of Justice approved Operational Combination Phase: Day 1 activities
Operational and technical integration
Cultural Integration
Day 1 Changes Needed Return to profitability
Regain trust of employees and customers
-Letter to employees detailing plans for future
Re-establish Delta as leader in quality of service
Re-establish commitment of employee job security Day 1 Activities Northwest WorldPerks was merged into Delta SkyMiles on October 1, 2009
As of December 31, 2009, -216 of NWA's 303 aircraft have been pained in Delta colors.
-Operating certificates were merged
-Northwest's three US Hubs have been fully rebranded and gates have been consolidated. Reservation systems were merged on January 31, 2010; officially retiring the Northwest brand. Day 1 Activities Layoff announcements
2000 management positions eliminated
No reduction of blue collar employees or pilots
R.Thomas Buffenbarger (IAM pres.) doubted that the airlines could merge "without eliminating service and purging employees.“
-He was wrong

Day 1 Activities Soundness of Plan The deal would join two big airlines with complementary route networks.

Delta is the leading U.S. airline in the trans-Atlantic market and has strong domestic routes, especially in the Northeast, South and West.

Northwest has been one of the leading U.S.-Asia carriers for more than half a century, and it's a formidable domestic presence in the upper Midwest.

The new Delta would have major hubs in Atlanta, Detroit, Minneapolis/St. Paul, New York, Amsterdam and Tokyo. Operational and Technical Integration Physical Moves
-Repaint AC
-New Delta employee uniforms
-Rebranded NWA hubs
Structural Changes
-Eliminate overlapping routes and gates
-Eliminate duplicate office space
-Retire aging aircraft Operational and Technical Integration Strategic Objectives Integrating route structures
The integration on NWA and DAL's route structure has worked well, particularly the lucrative Asian cargo routes, as have combining most other operations Integrating reservations, scheduling and pricing the merger gained Delta market share in Asia, and the Midwest, allowing for more competitive pricing. Operational and Technical Integration Cost savings- Combined operations will reduce costs by:
Eliminating overlapping routes
Ability to purchase fuel at reduced costs (volume)
Elimination of redundant positions (2000)
Elimination of redundant facilities
Eliminate aging inefficient Aircraft
Creating efficient scheduling of flights
Cultural Integration Re-Establish commitment to employees/stakeholders
Return to profitability
Regain trust of employees and customers
Re-establish Delta as leader in quality of service
Re-establish commitment of employee job security Cultural Integration Defeat flight attendants union representation
A major ingredient of the change is eliminate the threat of union representation for groups other than pilots.
Prior to the merger, NWA had union representation in all employee groups except its mechanics.
Delta has historically been non-union with the exception of its pilots.
-Delta conducted "the largest anti-union campaign that this country has ever seen," said AFA President Pat Friend.

-Delta Offered pilots a 3.5 percent equity stake

-Offered non pilot employees 4% equity stake

-Committed to returning employees to industry standard pay

-Offered pay and benefits, including expanded flight privileges. Beginnings
Global expansion
Merger with Republic

Corporate affair & Identity
Merger with Delta Airlines Foundation
Delta goes to war (1942)
International Expansion

Global Carrier
Sky Team Alliance
Merger with Northwest Airlines Pre-Merger Delta Airlines (2008) Northwest Airlines (2008) Post Merger Delta Airlines (2008) Northwest Airlines (2008)
Delta Airlines (2010) Increased Revenue by 39.6 %
Decreased Employees by -5.48%
Financials looks stable
Customer service has taken a turn for the worse
Best Buddies? Northwest Airlines CEO Doug Steenland & Delta CEO Richard Anderson
Results Greater scale economies
Greater worldwide presence
Stronger financial position
Operational performance difficulties
Moving Forward Process Consultation
Team Building
Large Group Intervention
Employee Involvement Intervention
Full transcript