The proposed merger between US Airways and Delta Air Lines could result in the termination of a major IT outsourcing deal that Delta signed with IBM earlier this year, according to InformationWeek.

Published: 20 Nov 2006

The proposed merger between US Airways and Delta Air Lines could result in the termination of a major IT outsourcing deal that Delta signed with IBM earlier this year, according to InformationWeek.

According to a document obtained by the publication, in a letter to Delta CEO Gerald Grinstein, dated September 29, US Airways chief executive officer Douglas Parker says that Delta’s IT outsourcing contracts “are appropriate for a standalone plan, but that would be different were Delta to be merging.”

“The value of the deal wasn’t disclosed, but it’s likely to be worth at least tens of millions of dollars to IBM given the price tag on similarly sized contracts,” reported the publication. “US Airways’ Parker tells Grinstein that if Delta proceeds with IT outsourcing deals and other contracts, any potential merger with US Airways could be significantly devalued.”

“If we defer a joint investigation of a potential merger, only to find many of the synergies are no longer achievable because of actions taken in support of a standalone plan, your stakeholders could lose significant potential value,” Parker, whose letter was released to Delta shareholders, reportedly said.

In August this year, Delta Air Lines, Delta Technology, Delta’s wholly-owned subsidiary, and IBM announced a seven year, IT infrastructure services agreement to help support the airline’s ongoing IT needs as it restructures its operations and progresses toward emergence from bankruptcy in the first half of 2007. “Under the agreement, IBM will partner with Delta Technology to provide Delta with comprehensive IT mainframe and mid-range services. By outsourcing the airline’s IT infrastructure management, Delta will realize a significant cost savings over the term of the agreement,” it was stated.