Delta-Northwest Combination Deal

An impasse among pilot negotiators over blending seniority lists put a $20 billion deal to combine Delta Air Lines Inc. and Northwest Airlines Corp. in "serious jeopardy" as the boards of the two companies prepared to meet Wednesday, two people close to talks told The Associated Press.

The people said the pilots unions have agreed on a comprehensive joint contract, but they are unable to agree to how seniority for the 12,000 pilots would work under a combined carrier. The people asked not to be named because of the sensitive stage of the talks.

They said late Tuesday that the pilot talks were expected to continue Wednesday, but if no agreement is reached, a deal on a combination of the two airlines would be in real trouble.

The boards of both companies were expected to vote on a combination agreement Wednesday if a pilot deal is in place by then. Otherwise, they were expected to just get an update on the merger talks, three people close to the talks said.

One of the officials close to the talks said Northwest's board might only meet by teleconference or, if things fall apart, not meet at all.

A Delta spokeswoman declined to comment on consolidation issues involving Delta. Delta has previously said it was considering a possible consolidation transaction, but it has not commented beyond that.

Talk of airline consolidation has heightened in recent months amid persistently high fuel prices, which are eating away at the industry's bottom line.

A combination of Atlanta-based Delta and Eagan, Minn.-based Northwest would create the world's largest airline in terms of traffic. That's before any divestitures regulators might require them to make if they combine.

There also has been speculation about a possible combination of Chicago-based UAL Corp.'s United Airlines and Houston-based Continental Airlines Inc., which would be a bigger airline than Delta-Northwest in terms of traffic.

The clock is ticking to get any deals accomplished quickly, some observers say. That's because industry observers believe a combination has a better chance of surmounting the considerable political and regulatory hurdles under the current administration than under President Bush's successor.

Delta and Northwest don't need a labor agreement between their pilots unions before announcing a combination, but having one in place now could help them speed up the integration of the two carriers down the line.

One of the people close to the talks said Tuesday night that a small group of Northwest seniority list pilot negotiators want thousands of young Delta pilots to go to the bottom of the combined seniority list as part of agreeing to a deal on seniority. The person said that was a major hang-up.
A spokesman for the Northwest pilots union, Greg Rizzuto, did not immediately return a call and a page to his cell phone seeking comment.

The pilots from both companies have agreed to a significant equity stake for the pilots, including raises for some, one of the people close to the talks said. However, a second person close to the talks said it was not clear that the equity issue had been resolved.

Much of the terms of how the combined carriers would operate had been resolved as of Tuesday, two people close to the talks said. The combined carrier would be based in Atlanta, would be called Delta and Delta's chief executive, Richard Anderson, would be head of the new company, the people said.

It remained unclear what role Northwest's CEO, Doug Steenland, would play in the combined carrier, the people said. A combined Delta-Northwest would maintain a substantial presence in Minneapolis and there would be no furloughs for front-line U.S. employees, the people said. The two airlines have roughly 85,000 total employees.

United to charge $25 for second checked bag

Starting next spring, United Airlines will begin charging certain domestic passengers for more than one piece of checked-in luggage to help offset the soaring cost of jet fuel, the No. 2 U.S. carrier said Monday.

The move by the operating subsidiary of UAL Corp. (UAUA:38.66, -2.48, -6.0%) is the first taken among the so-called legacy carriers including Northwest Airlines (NWA:17.85, -2.14, -10.7%) , Delta Air Lines (DAL:17.60, -0.93, -5.0%) and Continental Airlines (CAL:27.85, -1.40, -4.8%) , but it's bound to be imitated as a way to defray expenses without alienating fare-conscious travelers.

"They are the first, but they certainly won't be the last," said airline consultant Terry Trippler of Trippler Associates. For the airlines, each bag is additional weight and thus represents fuel expense.

"The airlines are looking for every possible revenue source they can find and still cut fares without cutting wages, because right now they can't go any lower," Trippler said.
Airlines across the industry have struggled to deal with soaring jet fuel prices while remaining competitive. Chicago-based United said the new policy is expected to generate $100 million in annual cost savings and new revenue.

In the quarter ended Dec. 31, UAL Corp. said fuel costs increased $359 million, or 25%, from a year earlier.

For domestic passengers who do not have status in a Mileage Plus or Star Alliance, a second piece of checked luggage will cost them $25, effective May 5. There will be no charge for their first bag.

United will now also charge a flat rate for all customers checking in up to four additional bags at $100 each. Previously, the airline charged in a range of $85 to $125 a bag.
Some smaller airlines already have been charging passengers for checking in more than one piece of luggage, while at least one low-cost carrier, Spirit Airlines, charges $10 each for the first two bags.

United said that, based on research into passengers' habits, it determined that only one in four check in more than one bag. By charging the 25% of people who check in more than one bag, the airline said it can bring down the weight of the airplane and help keep fares in check.
UAL's shares slipped 4.9% at last check to $39.15, in line with weakness