Delta and Northwest Merge to form World's Largest Airline

Delta Air Lines Inc. and Northwest Airlines Corporation officially confirmed it agreement to merge the two carriers, creating America's premier global airline, with a combined enterprise value of $17.7 billion.

Under the terms of the transaction, Northwest shareholders will receive 1.25 Delta shares for each Northwest share they own, Delta said in a statement released late Monday.

The newly formed company will be headed by Delta CEO Richard Anderson and the board of directors will be made up of 13 members.

Seven of whom will come from Delta's board, including Anderson, and five of whom will come from Northwest's board, including Roy Bostock and Doug Steenland, the current Northwest Chairman and CEO, respectively.

The merged company is now the world's largest carrier, surpassing AMR Corps's American Airlines, and prompting a series of other mergers that could reshape the U.S. airline industry, as the industry continues to be hard hit by rising fuel prices.

The two airlines hoped to announce a deal in February, but their pilots' unions failed to agree on how to merge their seniority lists, a crucial factor in airline mergers. Following talks last week, the airlines reached tentative agreements on most issues and are now discussing differences on the size of pilot's pay increase.

The companies said that in an industry which has more than 150,000 jobs and lost more than $29 billion since 2001 in the U.S., the combined company will create a company with a more resilient business model that is better able to withstand volatile fuel prices than either can on a standalone basis.

Merging Delta and Northwest is the most effective way to offset higher fuel prices and improve efficiencies, increase international presence and fund long-term investment in the business, the companies said in a statement.

The average price per gallon of jet fuel for airlines has increased by 62 percent over the past year to $3.22, according to the International Air Transport Association, a global industry group.

Fellow airlines are hot in pursuit, with claims that Continental Airlines and United Airlines ready to merge pretty quickly once Delta- Northwest deal is confirmed, according to reports released by Reuters today.

A merger between United and Continental, the second and fourth-largest U.S. airlines respectively, would surpass a Delta-Northwest combination as the world's largest carrier.