Nation & World

Ten years after its merger with Northwest, Delta is flying high

Minneapolis Star Tribune/TNS

Delta CEO Ed Bastian leads the world’s most profitable airline, with more than $5 billion in earnings.
Minneapolis Star Tribune/TNS Delta CEO Ed Bastian leads the world’s most profitable airline, with more than $5 billion in earnings.

It has been 10 years since Delta Air Lines and Northwest Airlines merged — and the sky didn’t fall.

When Delta announced plans to purchase Eagan, Minn.-based Northwest in April 2008, Northwest employees, officials at Minneapolis-St. Paul International Airport and many area residents worried Delta would gut its presence in the Twin Cities. Jobs would evaporate, along with the convenience of going elsewhere. And eventually, the stability of the local economy would diminish.

A decade later, the worst-case scenarios didn’t happen. Instead, the airline, airport and region are flourishing.

Delta still employs about 10,000 people in the Twin Cities, a number company leaders promised at the time of the merger to maintain for at least eight years. Northwest’s local payroll was about 11,500.

From a financial standpoint, the merger has produced a windfall. Today, Delta is the world’s most profitable public airline, reporting more than $5 billion in earnings last year. In recent years, Twin Cities workers earned annual bonuses averaging more than $10,000.

“I think it’s been, without question, the most successful airline merger in history,” Delta Chief Executive Ed Bastian said during a recent interview in Minneapolis. “We’ve been able to pull them together and unify to a point that ... with our crews and staff, you can’t distinguish between who was Northwest and who was Delta.”

Bastian, who was appointed head of Northwest for the merger’s transition period between 2008 and 2009, said he believes Delta’s success is a direct result of Northwest’s business acumen and Delta’s customer service.

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“We talked at that time of building the ‘best of,’?” Bastian said. “There were things Northwest was best in class at — the operational prowess, the efficiency, the reliability — so a lot of the foundational elements you now see in the new Delta came out of Northwest.”

On the other side of that, Delta was known for its customer service, which laid the framework for the airline’s high customer satisfaction scores today, said Bastian.

Delta maintained its large hub at MSP with around 450 daily departures, including 24 to international destinations. But there were losses for the Twin Cities, especially at the start.

With the impending demise of its hometown airline, the community was rife with anxiety in the summer of 2008 over the future of the hometown airport. Even before the merger, Northwest Airlines was in cost-cutting mode. Not only was the U.S. economy in the throes of the Great Recession, record oil prices were clobbering the airline industry. Ten years ago this month, Northwest announced 2,500 layoffs, decreased flight schedules, increased checked-bag fees and posted a quarterly loss of $377 million.

When the merger was approved and closed in October 2008, the Twin Cities lost its major airline headquarters, and the prestige that comes with it, as well as several high-paying corporate jobs to Delta’s hometown of Atlanta. The combined airline trimmed redundant routes where Northwest and Delta had previously competed against one another and people lost jobs — either involuntarily or because they couldn’t relocate to Georgia.

Then, everything quieted down. There has been a trickle of functions that have been beefed up in Atlanta, like IT and maintenance, but Delta maintains MSP bases for both.

“I think if you look down the path of what would’ve happened if they hadn’t merged, or if they had bought a smaller airline, my guess is it would’ve been a much more perilous path,” said Jon Austin, Northwest’s managing director of corporate communications from 1991 to 2001. “From a strategic standpoint, I think this was a better choice for the community given the cards they were playing in 2008.”

The Metropolitan Airports Commission, which runs MSP, also played with a short hand in negotiating job and air-service commitments from Delta because Northwest owed money to the airport that the commission wanted Delta to absorb. Dan Boivin, the current MAC chairman, voted against the service agreement ultimately reached with Delta, saying it conceded too much to the airline.

“But the economy was in the tank,” Boivin said. “We had to be careful we didn’t end up like Pittsburgh.”

He said he is relieved his fears didn’t come true.

“We have as strong a relationship with Delta as we ever had with Northwest in the past,” Boivin said. “Northwest tended to have more confrontation. Delta is more collaborative. I think they are committed to us, to this community, to this town.” Anytime Delta has an issue in Georgia, “I tell them to move their headquarters back here,” he said.

The Delta-Northwest merger was the first of three mergers of the biggest six U.S. carriers in the last decade. It was the model for United and Continental in 2010 and American and US Airways in 2013, industry analyst and former airline executive Bob Mann said.

“It is outperforming any of the recent ones,” Mann said. “It has the best operating performance of any major carrier out there. It is the standard that others aspire to.”

Delta benefited from being the first and having more time to work through its problems, but Mann and others credit then-CEO Richard Anderson with having the foresight to settle contentious labor issues, like pilot seniority and union votes, before the merger closed.

Delta and Northwest pilots formed a joint union while flight attendants and ground workers later voted against organizing.

Marv Sandrin, a longtime leader of District 143 for the International Association of Machinists and Aerospace Workers (IAM), which represented 12,500 Northwest ground-crew members before the merger, said the outcome could have been much worse.

“I think (the workers) came out OK compared to how other airlines treated their workers during mergers,” said Sandrin, who was closely involved in four separate airline mergers over several decades and became a national mediator for labor issues.

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Doug Killian, who was Northwest’s director of international communications throughout the 1990s, said Northwest had a long history of unrest. “Once a reputation is set it’s hard to change that,” Killian said.

But Northwest was a leader in innovation and route strategy, something its workers were proud of, Killian said. Northwest’s expansion to Asia after World War II and its decision in 1993 to form a joint-venture relationship with Dutch carrier KLM were ahead of the curve.

“The perception was that Delta was always comfortable and not particularly aggressive, whereas Northwest was the most interesting airline in the industry,” Austin said. “What Delta got through the merger was the injection of a certain degree of scrappiness.”

The two airlines’ cultures were so different, Bastian said. “It was great that we were able to find strength together,” he said.

Delta’s share of the MSP market has gradually shrunk, but that has more to do with an increase in competition from low-cost carriers than from Delta drawing down operations, Boivin said.

And while MSP airfare has long trended higher than the U.S. average, that is slowly changing. Before the merger in July 2008, average airfare from MSP was $127 more expensive than the national average, according to the U.S. Bureau of Labor Statistics. As of October 2017, the most recent reporting period, that gap had narrowed to just $17.

Five years ago, Delta established regional airline Endeavor Air and put its headquarters at MSP. Today, Bastian said, it provides a pilot, flight attendant and ground worker pipeline into mainline Delta.

Bastian wants to grow Delta’s revenue, about two-thirds of which comes from U.S. routes, to be evenly split between domestic and international. For the Twin Cities, that means more direct flights overseas.

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