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Delta buys Northwest, creating world’s largest airline

After months of speculation, Delta officially proposed purchasing Northwest for more than $3 billion Monday evening. This deal would create the world’s largest airline, with a fleet of nearly 800 jets connecting more than 390 destinations in 67 countries. Regulatory approval is still pending.

This merger is the latest in a series of airline upheavals as the industry struggles to find ways to counter skyrocketing oil prices and economic downturn, a situation the new company spells out on its new website, “Significant economic pressures from record fuel prices and intense competition, particularly from discount carriers and foreign airlines based in Europe, the Middle East and Asia have fundamentally changed the airline industry in recent decades. This new environment has resulted in diminished profits, restructurings, more than 150,000 lost jobs and financial losses of over $29 billion among U.S. network carriers since 2001.” The past few weeks have seen three U.S. airlines fold (Aloha, ATA, and Skybus) under these pressures and one (Frontier) declare bankruptcy but continue flying.

Delta will take the reins of the mega-airline, which will keep the Delta name, its Atlanta headquarters, and its CEO Richard Anderson. On its website, the company claims it will keep all Delta and Northwest hubs open because the airlines’ route systems have very little overlap. In addition, it says the company “is committed to retaining significant jobs, operations, and facilities in Minnesota,” which is Northwest’s base. However, Reuters is reporting Northwest pilots are strongly against the deal after the pilot unions of the two airlines failed to agree on terms to work together.

Many of the consequences of the merger are still unknown. There have been no announcements of job losses or route cutbacks, but industry insiders expect these will be inevitable. A press conference Tuesday morning shed a little more light on possible changes, but not much. The status of both airlines’ frequent flyer programs is also up in the air, but Northwest sent an email to its WorldPerks members saying their miles and elite status would not change. The Wall Street Journal speculates that miles could be devalued, however. Read Tim Winship’s blog for a closer examination of the frequent flyer situation.

Here’s my prediction: This merger will spur Continental and United, who’ve been in consolidation talks, to rush their merger in order to stay competitive with this new giant. With decreased competition, unprofitable routes to smaller communities will be cut and fares will go up across-the-board. Check back with to see if I’m right.

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