US merger forms 'largest airline'

Rival US companies Delta Air Lines and Northwest Airlines have agreed to merge in a $5bn (£2.5bn) deal that will create the world's biggest carrier.

The new airline, to be called Delta, will have annual revenue of more than $35bn and employ about 75,000 staff.

Analysts say the deal could prompt similar moves by other US airlines struggling with rising oil prices.

But the deal, sealed a year after both carriers exited bankruptcy protection, could face resistance from unions.

Pilots for Northwest and the union acting on behalf of most of the carrier's ground workers said they would oppose the merger.

Airlines worldwide are suffering in the wake of a consumer slowdown in the US and Europe, making it harder to raise ticket prices to offset rising fuel-prices.

"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," said Delta chief executive Richard Anderson, who is also to lead the new airline.

However, shares in both companies had fallen by market close on Tuesday. Northwest shares fell 94 cents, or 8.4%, to $10.28, while Delta lost $1.32, or 12.6%, to $9.16.

'Pro-merger'

The merger agreed on Monday night will see Northwest shareholders receiving 1.25 Delta shares for each of their Northwest shares.

The combined company will be based in Atlanta.

An unspecified number of job cuts are expected to reduce overlap in corporate and administrative departments, Delta said.

Before the merger, Delta had said it would eliminate 2,000 jobs this year.

The deal still requires approval from competition authorities but it is not expected to face hurdles on that front.

"We will look at the competitive effects of the transaction and how it would affect consumers," Justice Department spokeswoman Gina Talamona said on Tuesday afternoon.

"This administration has taken a very pro-merger stance," said Diana Moss, an economist at the American Antitrust Institute.

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