Image: Protestors
Bebeto Matthews  /  AP
Northwest Airlines workers demonstrate outside a shareholder's meeting in New York on Thursday.
updated 9/25/2008 4:35:55 PM ET 2008-09-25T20:35:55

Delta Air Lines shareholders gave the go-ahead Thursday to the company's purchase of Northwest Airlines by approving the issuance of new stock as part of the transaction.

The vote, which was overwhelmingly in support of the deal, came at a meeting near Atlanta. Earlier in the day, Northwest shareholders approved the combination during a meeting in New York.

The deal announced April 14, which would create the world's biggest carrier, still requires Justice Department approval. One other potential hurdle for the deal is a federal lawsuit seeking to block the deal that is set for trial Nov. 5 in San Francisco.

Delta Chief Executive Richard Anderson, who will keep his position after the combination, would not discuss the lawsuit, but he indicated the carrier maintains its goal of completing the deal by the end of the year.

"We are still focused on that timeline and believe we can accomplish the timeline as stated," Anderson told reporters after the Delta shareholder vote.

Northwest shareholders will get 1.25 shares of Delta stock for each share they own if the combination is completed. That values Northwest at roughly $2.8 billion, based on Delta's current stock price and the 277 million Northwest shares outstanding or still to be issued as part of its bankruptcy reorganization plan. That's about $800 million less than the value when the deal was announced April 14.

The combined airline would be called Delta and keep its Atlanta headquarters. Northwest would become a wholly owned subsidiary of Delta during the integration process. Delta hopes to obtain a single Federal Aviation Administration operating certificate in 15 to 18 months.

Delta Chairman Daniel Carp would become chairman of the new board of directors and Northwest Chairman Roy Bostock would become vice chairman. The new board would be made up of 13 members — seven from Delta's board, five from Northwest's board, including Northwest CEO Doug Steenland, and one from the Air Line Pilots Association. A current Delta pilot would take the pilots' seat on the board.

If the deal is completed, Delta plans to issue a nearly 13.4 percent equity stake in the combined airline to employees. Delta's shareholders approved at their meeting Thursday a proposal to amend the company's performance compensation plan to allow Delta to issue the equity to employees.

Delta has already reached an agreement with pilots of the two airlines on a joint contract, though a deal to integrate the seniority lists of the two pilot groups remains elusive. Arbitration hearings on the seniority issue are set to begin Oct. 2 in Los Angeles. The pilots are the only major union at Delta, while Northwest is heavily unionized.

The two airlines had 85,071 combined full-time employees as of June 30, the last time they reported the figures to the Securities and Exchange Commission. Earlier this year, each carrier announced plans on their own for job cuts. Delta said it would shed 4,000 jobs, while Northwest said it wanted to cut 2,500 jobs.

The new airline would be the biggest in the world in terms of traffic and biggest in the U.S. in terms of annual revenue, which was a combined $31.7 billion at the end of last year.

At the Northwest meeting in New York, 98 percent of Northwest shareholders who voted approved the stock swap.

Approval from shareholders at both companies had been expected, with the only real potential obstacle being the Justice Department, which is scrutinizing the Delta-Northwest plan for antitrust considerations. On Thursday, Northwest President and Chief Executive Doug Steenland said they still expect to get approval and close the deal by the end of this year.

Steenland noted for the 50 people at the meeting in New York that this was likely the last shareholder meeting for the 82-year-old airline.

He said mergers have been part of the airline industry all along, and noted that Northwest itself grew dramatically after acquiring Republic Airlines in 1986.

Several dozen Northwest ground workers and flight attendants rallied outside the building where the meeting was held. Pilots at both carriers are unionized, but the rest of Delta's workforce is not.

Northwest is heavily unionized, and its unions have been split on the Delta deal — pilots support it, flight attendants have been neutral as they try to win representation of Delta's nonunion flight attendants. But the deal is opposed by Northwest's largest union, the International Association of Machinists and Aerospace Workers, which represents some 12,500 baggage handlers, reservations clerks, and other ground workers.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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