Stanton Champion

What does 1 + 1 equal? Well, if you’re Delta and Northwest, the answer is Delta. The two companies have agreed to combine, but in the world of Mergers and Acquisitions (frequently called M&A among business geeks), there’s always a whole lot of ‘A’ and never that much ‘M’. MOEs or Mergers of Equals are rare, and when they do happen they fail even more often that plain old acquisitions (which fail pretty darn often themselves).

So what’s up with DAL and NWA? Well, according to Dealbook, Delta wins for a lot of reasons:

• The CEO of the new company will be Delta’s CEO
• The Northwest CEO “won’t have a role in daily operations…”
• The chairman of the board of the new company will be Delta’s chairman
• The Northwest pilots are getting screwed in the deal (and may obstruct it)
• Northwest’s shareholders are getting Delta stock
• The new company will be called…Delta

From a business point of view, there’s a lot to like and dislike about airline consolidation right now. The biggest dislike is that it’s not clear that consolidation works. America West survived buying US Air (no, it wasn’t the other way around), but I’m not really sure that deal worked out for shareholders. On the other hand, Delta’s shareholders would have been a whole lot better off had they been bought by US Air/America West back in 2007.

The biggest advantages to consolidation are the cost savings and the sharing of valuable landing slots at major airports. The latter is very important right now as European air carriers begin entering the US market. American air carriers will have to raise their own efficiencies to compete, and improving airport access is one way to do that. We’ll see if any of this actually works out or not for Delta.