Delta, Northwest pilots OK pact

Pilot unions from Delta Air Lines and Northwest Airlines have agreed to a tentative joint contract and on a plan to create a single union seniority list. (JOHN BAZEMORE/ASSOCIATED PRESS/FILE 2007)

DALLAS - Delta Air Lines Inc. and Northwest Airlines Corp. pilots have agreed on a tentative joint contract and on a plan to create a single union seniority list, clearing a hurdle in a merger that will create the world's largest carrier.

Union negotiators sent the accord to the airlines' pilot leaders for votes this week, and it will then go to rank-and-file members. Seniority is critical for pilots because it sets pay, vacation, routes, and type of planes flown.

The agreement is a victory for Delta, which has said it expects to complete its purchase of Northwest by the end of 2008.

The merger almost fell apart when pilots failed to agree on meshing seniority lists in March, forcing Delta to seek an accord just with its 7,300 pilots. Northwest has 5,000 pilots.

"It's big," said Ray Neidl, a Calyon Securities analyst in New York who has a "neutral" rating on Delta. "Pilots are always the toughest" labor group with which to come to terms, he said. "But they realize how important this merger is."

The carriers' Air Line Pilots Association chapters declined to give details about the contract or the seniority-integration rules pending the union leadership votes. The accord was reached Monday after a week of almost-continuous talks, pilots at Atlanta-based Delta said yesterday in a statement.

"The merger must now have the support of both pilot groups," Monty Montgomery, union vice chairman at Eagan, Minn.-based Northwest, said in a statement.

Delta's all-stock acquisition of Northwest was valued at $3.63 billion when it was unveiled on April 14. That figure had slumped to $1.82 billion yesterday as rising jet-fuel prices erode industry profits.

Delta rose 26 cents, or 5.2 percent, to $5.26 in New York Stock Exchange composite trading, while Northwest climbed 41 cents, or 7.4 percent, to $5.92.

The carriers are betting that expanding their networks and eliminating duplicate jobs and service would produce at least $1 billion in savings and new revenue.

The earlier Delta pilot agreement, which didn't cover Northwest employees, provided a 3.5 percent equity stake in the new company. Pilots also would get a 5 percent annual pay raise on Jan. 1, followed by 4 percent increases in each of the next three years.

Delta is the third biggest US airline by traffic, and Northwest is the sixth biggest. Together, they will be larger than AMR Corp.'s American Airlines, now the world's biggest carrier.