Delta merger talks have big impact on Salt Lake
It's hard to believe the stakes could be higher for Salt Lake City as Delta Air Lines begins merger talks with Northwest Airlines and United Airlines. Northwest has no airport hubs in the West. A merger with the Minneapolis-based airline could lay the groundwork for more growth at Delta's Salt Lake City International Airport hub, just as when Delta took over Western Airlines and absorbed its Salt Lake City hub in 1987.
United, on the other hand, operates a larger hub at Denver International Airport with more flights and more destinations, giving it an advantage over Salt Lake, said George Hamlin, managing director of ACA Associates, an airline consulting firm in Virginia.
"With United, it would be difficult to retain both the Delta and Salt Lake hubs, due to [market] concentration and competitive issues. And given the fact that Denver is larger than the Salt Lake hub, I think Salt Lake would be on the block," Hamlin said Friday.
"In the case of Delta-Northwest, I think Salt Lake would continue to fill the same geographic role that it does [now]. Salt Lake is Delta's westernmost hub. Northwest's hubs are all clustered in the Midwest and the upper South."
It's far from clear a merger is likely to happen. Delta is saying little, in spite of news reports Thursday that a study group would tell Delta's board Friday that the airline should begin formal discussions with Northwest and United, which has indicated for several months it's open to consolidation with another carrier.
Delta executives were silent on the outcome of the meeting reported to have taken place in New York. Airlines and analysts have argued for more than a year that a merger of two airlines would help the industry out of its financial problems and make it easier to weather an economic downturn.
"We have regularly scheduled board meetings, but we don't confirm date, location or content of any specific board meeting," said Delta spokesman Anthony Black.
Several options could ensue from the meeting. The board could accept the study group's recommendation with the idea that Delta could ultimately choose to combine with one of the two other airlines. The board could also reject the request. It could send the request back for more work. Or it could begin talks with one carrier and not the other.
Delta has held exploratory discussions with United and Northwest in the past. If formal talks commence, there is no certainty a deal could be reached, though if an accord is struck, Salt Lake might have much to lose or gain.
"If it's United, your hub is toast. You are not going to have two connecting hubs. Salt Lake would be pulled down," said Michael Boyd, an airline analyst in Evergreen, Colo.
"If Delta and Northwest had a full-blown, plain vanilla merger, it's uncertain what would happen to Salt Lake. Probably it wouldn't be pulled down. But keep in mind what mergers are all about. It's all about less and less."
Delta employs 3,900 people in Salt Lake City, including 600 pilots. With nonstop flights to about 110 destinations and a market share of over 70 percent, Delta is the dominant carrier at the airport.
The hub dodged a potentially crippling blow last year when Delta successfully fended off an unsolicited merger bid from US Airways. Although the Tempe, Ariz.-based carrier promised to keep a hub in Salt Lake, businesspeople and politicians were skeptical and mounted a campaign in support of Delta.
Merger talk this time hasn't stirred as much opposition in Salt Lake as the US Airways bid. Salt Lake Chamber President Lane Beattie said he would support a Delta-Northwest combination. He would support a United merger with less enthusiasm, if it was clear local air service wouldn't be harmed.
"If I could be king for a day, I would prefer the Northwest partnership. They don't have a hub here. Internationally, they are very strong and would give us an opportunity to strengthen our international business, as well as Delta strengthening Northwest's domestic flights," Beattie said.
Ed Thiel, a Delta pilot and former chairman of the union local representing Salt Lake-based pilots, said a merger would have to involve the pilots or it won't succeed.
"If it's not in our best interest, we will oppose it. Obviously, Delta pilots, along with other Delta employees [and] Delta management, stopped the US Airways merger," Thiel said.
Boyd said either merger would be fraught with problems. "You are stuck with fleets that don't match, employees that don't match, maintenance," he said.
Founded: 1929 in
Domestic hubs: Atlanta, Cincinnati, New York City, Salt Lake City
CEO: Richard Anderson
Like other airlines, Delta is facing higher fuel prices and other costs that make mergers desirable, if not imperative. A merger could lower costs by shrinking the size of the industry, reducing competition and giving airlines more power to raise fares.
Founded: 1926 between Minneapolis and Chicago
Domestic hubs: Minneapolis/St. Paul; Detroit; Memphis, Tenn.
Headquarters: Eagan, Minn.
CEO: Douglas Steenland
A merger between Delta Air Lines and Northwest Airlines would be a boon for Delta's Salt Lake City International Airport hub. Salt Lake is Delta's westernmost hub in the United States; Northwest has no competing hubs in the West.
Founded: 1926 in Boise, Idaho
Domestic hubs: Los Angeles, San Francisco, Denver, Chicago, Washington
CEO: Glenn F. Tilton
A Delta-United Airlines merger would be a calamity for Salt Lake City. United has a huge hub at Denver International, less than 600 miles to the east. Analysts say Delta would have little reason to maintain both hubs, even if federal officials approved.
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