CHICAGO - Shortly after clearing its final federal regulatory hurdle, Atlanta-based Delta Air Lines formally closed on its acquisition Wednesday of Eagan, Minn.-based Northwest Airlines Corp., six months after the proposed union was first announced.

The combined companies elevate Delta to the top spot among air carriers internationally, with expected annual revenues of $35 billion and 75,000 employees. Delta president Ed Bastian will lead the merged companies, which believe they can save $2 billion annually by combining in the $2.6 billion all-stock transaction.

The combined airlines will be headquartered in Atlanta. The companies said flight schedule and other operational changes would not be seen until next year as the airlines await the receipt of a single operating certificate from the Federal Aviation Administration.

The deal received final clearance on Wednesday, when the Justice Department's antitrust fivision closed its required investigation, determining that "the proposed merger between Delta and Northwest is likely to produce substantial and credible efficiencies that will benefit U.S. consumers and is not likely to substantially lessen competition."

Prior to the merger, Delta was the third-largest airline in the United States, with revenues last year of $19.1 billion generated from carrying 73 million passengers, while Northwest was the fifth largest, serving 53 million passengers and generating $12.5 billion of revenue.

The corporate credits of both Delta and Northwest had been on negative credit watch stemming from the looming merger and the industry's financial struggles due to high fuel costs and the sluggish economy.

In Minnesota, elected officials have raised concerns over possible cuts to Northwest's ranks of 11,500 employees in the state. Whether the company will have to immediately repay bonds issued by the Minnesota Metropolitan Airports Commission also has not yet been resolved.

The commission several years ago negotiated a package that provided $240 million in financial relief for Northwest in exchange for the airline's agreement to keep its hub and headquarters in the Minneapolis-St. Paul area, maintain two maintenance hangars, and continue making payments on $275 million of outstanding Northwest bonds that carry the commission's general obligation pledge. Under the agreement, the airline is required to retire the bonds in the event it closes its hub or headquarters. Northwest accounts for about 78% of travel through the airport.

The airline - which has said it would maintain a Minnesota hub and a strong local presence - is in discussions with the commission about possibly modifying the terms, officials said. The airline has said it would maintain all of its current hubs, including Northwest's in Minnesota, Detroit, and Memphis, and Delta's in Atlanta, Cincinnati, New York City, and Salt Lake City.

Both Northwest and Delta filed for federal Chapter 11 bankruptcy protection in September 2005 and emerged as stronger reorganized companies last year after shedding debts and winning union concessions.

Northwest's debts before the filing included $650 million in special facilities revenue bonds and interest in another $111 million. Much of the debt was the subject of settlements or repaid as unsecured debt.

Delta shed $1.2 billion of its special facilities revenue bond debt while in bankruptcy. The airline entered bankruptcy with $1.8 billion of tax-exempt municipal debt. The two now have about $15 billion corporate and other municipal debt outstanding.

While federal regulators cleared the deal, it had received widespread criticism from key lawmakers, including Rep. James Oberstar, D-Minn., chairman of the House Transportation and Infrastructure Committee, who last spring called it "the worst development in aviation history in the aftermath of deregulation of 1978."

Rating agencies have said the merger would negatively affect some credits, but it will be some time before the impact is felt as network changes have not yet been made. Some analysts believe the key hubs will likely remain unscathed but as the airlines seek to cut costs, overlap, and capacity, the secondary hubs could be adversely affected.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.