The Delta-Northwest Merger

Paper Summary:

The paper discusses the merger of Delta and Northwest airlines and relates that, while the merger may have provided the intended revenue increase for Northwest, it did not result in the decreased operating costs for Delta and only increased legal expenses in a time of continually rising oil prices. The paper also reveals that the Delta-NWA merger was a temporary measure to quench the fears of shareholders, but notes that the stock price performance indicates that the merger did not have that effect either. The paper therefore concludes that the net effect of the merger resulted in increased costs for the new conglomerate.

From the Paper:

"The root of the problems confronting the airline industry stems from rising oil prices and the influence of labor unions on higher employee wages (Gimbel). Opinion within the industry is that the merger will resolve many of the industry's problems (Gimbel). However, no reasonable explanation for this supposition has been provided to date. If two airlines with the same industry-wide problems combine, the debt and underlying problems will not go away. The underlying cause of the problems lies outside of the industry and is not the direct result of factors within the industry's control. They may be able to influence union wages to a certain degree, but they can do nothing about high oil prices."

Sample of Sources Used:

• Delta-NWA. "Delta and Northwest Pilots Approve Joint Collective Bargaining Agreements." 11 Aug. 2008. New Global Airline. Accessed 10 Sept. 2008. < http://www.newglobalairline.com/index.php?option=com_content&view=article&id=189 %3Adelta-and-northwest-pilots-approve-joint-collective-bargaining- agreement&catid=3%3Anewsflash&Itemid=84>.
• Gimbel, B. "Why Delta-Northwest won't work." 20, Feb.2008. CNNMoney.com. Accessed. 9. Sept. 2008. <http://money.cnn.com/2008/02/20/news/companies/delta_northwest_analysis.fortune/in dex.htm>
• Nasdaq.com. Delta Air Lines (New)(DAL) Stock Charts. Accessed 10 Sept 2008. http://www.nasdaq.com/aspx/chartingbasics.aspx?symbol=DAL&symbol=NWA&selecte d=DAL
• Tharpe, J. "After troubled courtship, Delta and Northwest might merge this week." 13 April 2008. The Atlanta Journal-Constitution. Accessed 10 Sept. 2008. <http://www.ajc.com/news/content/business/delta/stories/2008/04/13/anderson_0414_we b.html?cxntlid=homepage_tab_newstab>.

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