Delta set to take control of mega-carrier

THE US$1.3 billion cargo behemoth created by the merger of Delta and Northwest Airlines, will be controlled by the junior partner in the freight segment, writes Ian Putzger.

Delta Cargo boss Neel Shah, has been designated as head of the combined cargo division, and the structure will follow the set-up currently in place at Delta.

The merger is actually a takeover of NW by the larger airline in terms of passenger business and overall revenues, and it shows in the composition of the amalgamated outfit’s top management. DL chief executive officer, Richard Anderson, is going to be the new chairman, and DL chief financial officer and president Ed Bastian, is the designated chief executive officer and president of the new carrier, which will operate under the Delta banner and have its headquarters in Atlanta. NW president and chief executive officer, Doug Steenland, will take a seat on DL’s new board of directors.

Until the two airlines obtain a single operating certificate necessary for a full merger, NWA will carry on as a subsidiary of its Atlanta-based partner. During that time, NWA Cargo president, Tom Bach, will continue in his present function. Shah, who took over the reins at DL Cargo in January, is leading the integration and will ultimately be in charge of the combined cargo unit.

NW posted $840 million in cargo revenues last year, while DL Cargo had $482 million. Much of NW’s higher total is attributable to its fleet of 747-200Fs, but the carrier is taking three out of service this summer, and question marks remain over the remaining 10. Shah said that it would be premature at this point to comment on their future.

The freighter fleet was also a major factor behind NWA Cargo’s status as a separate profit centre. In the post-merger airline, the cargo division’s place in the organisation will be similar to the current DL set-up – less autonomous than at NW but with significantly more leeway to make its own decisions than in the past, Shah said.

“We will partner with the passenger side and work on what’s best on the network side. The goal is to create the best revenue overall,” he commented.

Shah expects no major challenges from systems integration, pointing out that both carriers have similar, Unisys-based set-ups in place. As for aligning the different cargo operations, this will be led by Tim Strauss, an industry veteran who joined DL Cargo earlier this year to overhaul its operations and tackle the problem spots at the carrier’s main hubs. Previously Strauss had overseen operations at NWA Cargo.

Shah intends to integrate the two airline sales forces quickly, but acknowledged that this will require some culture change. Thanks to its Asian freighter network, NW has traditionally concentrated on selling full ULD positions, whereas DL is more geared toward maximising bellyhold yield.

“We’ll have to get everybody selling the bellies. It’s a little bit different selling, but the customers are the same,” Shah said.

Since his arrival in Atlanta, Shah has set a number of projects in motion to inject lost momentum into DL Cargo, from revamping processes at the hubs and developing new products to rebuilding the sales force. Having invested $2 million in a new perishables facility at ATL, DL is about to launch a new product aimed at the pharmaceutical industry, the first of some high-yield products, which Shah wants to establish.

None of this will be affected by the integration with NW Cargo, he declared. “We can leverage these things across Northwest. We can’t stand still and wait till the merger is done. We have a business to run this year,” he said.

“This is not about re-inventing the wheel. It’s looking at what works best, pick it and take it for the whole company.”