Northwest gives Delta merger nod: source

By Kyle Peterson

CHICAGO (Reuters) - Northwest Airlines Corp (NWA.N: Quote, Profile, Research, Stock Buzz) has proposed to Delta Air Lines Inc (DAL.N: Quote, Profile, Research, Stock Buzz) that they go ahead with a merger, despite the lack of support from pilots, two sources with knowledge of the matter said on Friday.

Intense speculation that the carriers would try to create the world's biggest airline fizzled out earlier this month when their respective units of the Air Line Pilots Association (ALPA) failed to negotiate a formula for working together.

Delta's ALPA group had no comment while Northwest union officials could not immediately be reached. Both unions had previously said their support was crucial and they would not support a merger that did not work in their favor in several areas.

Delta pilots were instrumental in fending off a hostile merger attempt by US Airways Group Inc (LCC.N: Quote, Profile, Research, Stock Buzz) last year.

Neither Delta nor Northwest commented on the latest development, which the Wall Street Journal first reported on its Web site.

But the revived merger prospects boosted both airlines' share prices, which have fallen recently as expectations for a deal evaporated and global oil prices soared well above $100 a barrel. No. 5 Northwest rose 3.5 percent to close at $8.76, while No. 3 Delta was up 3.1 percent to $8.61. Both companies trade on the New York Stock Exchange.

Seeking to avoid the labor headaches still afflicting US Airways after its merger with America West Airlines in 2005, Delta and Northwest had sought to get their pilots on board before proposing a merger to shareholders and U.S. antitrust officials.

The unions received information from the companies about how the deal would work and agreed in principle to higher wages, an equity stake in the merged company and other benefits. The pilots, however, could not agree on merging their seniority lists after several weeks of talks.