business

By ANDREW ROSS SORKIN and JEFF BAILEY

Merger talks between Delta Air Lines and Northwest Airlines picked up pace again on Sunday, and people briefed on the negotiations said an announcement of a deal could come as soon as Tuesday.

The two companies have seemed on the verge of announcing a deal several times in recent months — raising hopes among some investors and worrying those concerned about loss of competition among airlines — only to back away from a merger.

During that period, the airline business has deteriorated sharply. Record-high fuel prices have sent a handful of smaller carriers into bankruptcy in recent weeks. The latest was Frontier Airlines on Friday.

Some analysts now expect the industry to lose money this year after two years that were mostly profitable. And the slowing economy is making it hard for airlines to raise fares to cover fuel costs.

A representative at Delta could not be reached and a Northwest spokesman declined to comment.

Shares in Delta and Northwest have plunged since they emerged from bankruptcy about a year ago. Delta closed at $10.01 on Friday, down from a high of $21.95 last spring. Northwest closed at $10.96, down from a high of $26.50 last spring. If the deal was structured as a stock acquisition of Northwest by Delta, it would be worth Northwest’s market capitalization of $2.59 billion.

The broad outlines of a deal have remained constant: an exchange of stock at a ratio close to market prices; a combined airline that would be called Delta, with headquarters in Atlanta; and Richard H. Anderson, Delta’s chief executive, keeping that position, with Northwest’s chief executive, Douglas M. Steenland, stepping aside.

Pilots at Delta and Northwest earlier could not agree on how to merge their seniority lists, which is important to them because it determines their ranking for pay, what kind of plane they would fly and their days off. So last month, Northwest asked Delta to proceed toward a deal without a combined list.

The carriers had hoped to get a merged list before a deal so that operations could be combined quickly and without rancor. US Airways and America West Airlines have been unable to fully combine operations more than two years after merging because of disputes over a seniority list.

Pilots have no legal power to block a merger, but they could appeal to lawmakers to help prevent a deal.

James L. Oberstar, chairman of the House Transportation and Infrastructure Committee, has said he opposes big airline mergers because competition would suffer and some markets would lose service.

Putting a deal together now without a merged pilots list and amid an industry downturn could be difficult. The carriers had promised the pilots a raise and a lot of stock in the merged airline in exchange for a combined seniority list.

Leaders of the Delta and Northwest pilots’ unions met separately over the weekend. There was no immediate action by either union.

Micheline Maynard contributed reporting.

News sourced : http://www.nytimes.com/2008/04/14/business/14deal.html?ref=us

``In the short-term the G-7 communiqué will be quite significant,'' said Sue Trinh, a currency strategist in Sydney at RBC Capital Markets, the global investment banking unit of Royal Bank of Canada. ``We don't think intervention is imminent but certainly a step-up in rhetoric is to be expected. I expect to see this underpinning the U.S. dollar in coming weeks.''

The dollar rose to $1.5718 per euro at 12:57 p.m. in Tokyo, from $1.5808 late in New York on April 11. It reached $1.56, the strongest level since April 3. The currency strengthened to 101.12 yen from 100.95 yen. The yen traded at 158.92 per euro from 159.55. The U.S. currency may advance beyond $1.55 this week, Trinh said.

The yen pared losses against the dollar as a drop in Asian stocks reduced investor appetite for so-called carry trades, in which they borrow funds in a country with low borrowing costs and buy assets where returns are higher.

The Australian dollar, a favorite for carry trades, fell 0.8 percent to 92.33 U.S. cents and dropped 0.3 percent to 93.36 yen. The New Zealand dollar declined 0.6 percent to 78.86 U.S. cents and 0.4 percent to 79.73 yen.

`Sharp Fluctuations'

Japan's interest rate of 0.5 percent is the lowest among industrialized countries. Rates are 2.75 percent in Switzerland, 7.25 percent in Australia and 8.25 percent in New Zealand.

``Since our last meeting, there have been at times sharp fluctuations in major currencies, and we are concerned about their possible implications for economic and financial stability,'' the G-7 statement said. ``We continue to monitor exchange markets closely, and cooperate as appropriate.''

The change in the G-7 statement was the most significant since the Boca Raton, Florida, meeting in February 2004, when officials cautioned against ``excess volatility.'' The latest statement didn't explicitly mention the dollar or suggest plans for intervention. Central banks intervene by arranging purchases or sales of foreign exchange.

Dollar Policy

``The markets tend to take the view that the U.S. wants to see the weakening of the dollar,'' Makoto Utsumi, a former top currency official at the Finance Ministry from 1989 to 1991, said in an interview with Bloomberg Television. ``This was denied in a clear-cut way. The G-7 clearly shared concern over the weakening of the dollar. I think that's the most important point in the communiqué,'' said Utsumi, now president of Japan Credit Rating Agency Ltd. in Tokyo.

The Dollar Index, which measures the currency against six of its main counterparts, rose 0.5 percent, the most since April 1. It has tumbled the past two months amid concern that credit- market losses will push the U.S. economy into a recession. The index is down 6 percent in 2008, after dropping 8.3 percent in each of the past two years.

``Traders will be more reluctant to push the dollar lower, even if there are factors that suggest it should fall,'' said Akio Shimizu, chief manager of foreign-exchange trading in Tokyo at Mitsubishi UFJ Trust & Banking Corp., a unit of Japan's second-largest bank by assets. ``The G-7 statement may prompt some to give up on their bets for further dollar weakness.''

The dollar may rise to 102.20 yen and $1.56 per euro today, he said.

Futures Traders

Futures traders decreased their bets that the yen will gain against the dollar, figures from the Washington-based Commodity Futures Trading Commission show. The difference in the number of wagers by hedge funds and other large speculators on an advance in the yen compared with those on a drop -- so-called net longs - - was 43,067 on April 8, compared with net longs of 52,298 a week earlier.

The last time the G-7, which comprises the U.S., Japan, Germany, the U.K., France, Italy and Canada, intervened in the currency market was on Sept. 22, 2000, when they bought the euro after it tumbled 27 percent from its 1999 debut. The euro initially rose 4 percent, only to end that year 13.8 percent lower. The G-7 last propped up the dollar in 1995, when it sank to a post-World War II low of 79.75 yen. The U.S. currency rose 4 percent against the yen that year.

U.S. Economy

Gains in the dollar may be limited before a Commerce Department report today that may show retail sales in the U.S. stagnated in March after dropping 0.6 percent in February, according to the median estimate of economists surveyed by Bloomberg News.

Signs of slower growth may prompt traders to add to bets the Federal Reserve will cut interest rates further, diminishing the allure of dollar-denominated assets. Builders broke ground on 5.2 percent fewer houses last month, a report April 16 will show, according to a separate survey.

``The dollar's rally after the G-7 meeting should be temporary,'' said Tetsuhisa Hayashi, chief currency manager of foreign-exchange trading in Tokyo at Bank of Tokyo-Mitsubishi UFJ Ltd., Japan's second-largest bank by assets. ``The U.S. economy may have entered a recession since the end of last year,'' which may push down the dollar to 92 yen by June 30, Hayashi said.

Fed funds futures show traders see a 46 percent chance that policy makers will cut the benchmark rate by 50 basis points to 1.75 percent at the next meeting on April 30, compared with zero odds a month ago. The odds for a cut to 2 percent at the meeting fell to 54 percent from 64 percent.

The G-7 downgraded its outlook for the world economy from that of two months ago, blaming the U.S. housing recession, credit-market turmoil, high commodity prices and inflation pressures. The Nikkei 225 Stock Average fell 3.4 percent, its biggest decline since March 17.

To contact the reporters on this story: Stanley White in Tokyo at swhite28@bloomberg.net Kosuke Goto in Tokyo at kgoto2@bloomberg.net

Delta-Northwest Merger Talks Pick Up Pace Again