Delta-NW merger would axe 1,000 headquarters jobs
The Atlanta Journal-Constitution
Published on: 04/24/08
WASHINGTON — Delta Air Lines chief executive Richard Anderson told Congress on Thursday that a merger with Northwest Airlines would mean the loss of nearly 1,000 additional jobs at the blended headquarters.
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Those layoffs, along with other cost savings, would be needed to help offset fast-rising fuel costs, Anderson told one committee in the House and another in the Senate. "Oil is the game-changer," he said. "We've had oil double in price in about a year."
A few lawmakers, worried about the loss of jobs or air service, gave Anderson and his Northwest counterpart Doug Steenland a cool reception. But many expressed sympathy for the airlines' plight, and appeared friendly toward the proposed transaction.
"My preliminary review of this merger is that it's a good one," Sen. Charles Schumer, D-N.Y, said at the Senate Judiciary Committee hearing on the antitrust implications of the proposed consolidation. "There is very little overlap" in the routes of the two carriers, he said.
Unlike previous major airline mergers, "the negatives seem more benign, and the positives seem more real," Schumer said. Echoing Anderson, he said, "fuel costs really are a game-changer."
Sen. Amy Klobuchar, D-Minn., whose state stands to lose Eagan-based Northwest's headquarters if the merger takes place, was more skeptical.
She noted that the airlines have promised not to cut any hub operations or front-line workers as part of the merger's cost-saving strategy. But should Congress expect that "you will come back a year or two from now and say your positions have changed?" she asked.
Anderson said that if the combined carrier had to announce layoffs in the future, it would be a result of higher jet fuel costs, not the merger itself.
"Fuel is going to be the determinant," he said.
Anderson said the nearly 1,000 merger-related job losses are just a "guess-timate" that could change. But whatever the figure, it would be separate from the 2,000 job cuts the Atlanta-based carrier already has announced for this year. The additional losses would come after the deal closes, and would be concentrated in the headquarters, Anderson said.
"It's the management jobs, not the front-line jobs," he said. They would involve "finance, accounting -- the functions that are important in the headquarters."
He did not say whether most of the merger-related cuts would affect Northwest or Delta employees. After the hearing, Delta spokeswoman Chris Kelly said that because the consolidated company would be based in Atlanta, more of the people losing jobs may be from Northwest because they may not want to make the move to Georgia.
Next month, Delta and Northwest face additional hearings, including one before Rep. James Oberstar, D-Minn., who has harshly condemned the merger plan. But compared to a Senate hearing last year when US Airways discussed a hostile takeover of Delta, the tone at Thursday's sessions was mild.
For example, Sen. Orrin Hatch, R-Utah, said that with fuel prices rising the way they are, Americans may have to accept a broad restructuring of the airline industry to reduce overlapping routes and cut costs.
"This is a reality we're going to have to face in the future," Hatch said. "This may be in the best interests of transportation."
Steenland promised the lawmakers that the two carriers would be stronger together than they are as separate companies, especially when competing with large foreign carriers. The executives say the combination would save roughly $1 billion in costs each year.
At a morning session before the House Judiciary Committee's Task Force on Competition Policy and Antitrust Laws, Chairman John Conyers Jr., D-Mich., criticized the Bush administration's merger-friendly policies, but promised to keep an "open mind" about Delta-Northwest. He also said the merger would be represent a "momentous" change in the industry by creating the world's largest carrier, and possibly triggering "a cascade of other mergers."
Plans call for the consolidated airline to be named Delta, with headquarters in Atlanta and Anderson at the helm. The Justice Department alone has the power to block the deal on antitrust grounds, but Congress can exert political influence.
After the hearings, Klobuchar said in an interview that she was glad to have gotten the two executives to promise under oath that they won't close any hubs as a direct result of the merger.
"I continue to be concerned," she said. But she agreed the mood in Congress is very different from the US Airways hostile takeover attempt, she said.
"The difference is, these CEOs are working together," she said.
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