The announcement that Delta (DAL) and Northwest (NWA) are finally getting on with their long-planned merger doesn’t exactly have airline investors doing cartwheels. Airline stocks were losing altitude Tuesday in a big way, with Delta down 13%, Northwest off 9% and UAL (UAUA) and Continental (CAL) - seen as potential partners in the next round of consolidation - each down 5%. Fortune’s Barney Gimbel points out that making a Delta-Northwest deal work is “certainly no slam-dunk,” as the new Delta will see its costs rise without any clear way of boosting revenue.

Meanwhile, the online travel agents are faring better, with Expedia (EXPE) and Orbitz (OWW) up modestly and Priceline (PCLN) down about 1%. This despite a note out this morning from Stifel Nicolaus saying the consoldation will hurt the online travel agents, or OTAs.

“Based on our analysis, we believe the Delta-Northwest merger and the airline closures will result in a one-time negative domestic revenue impact at the OTAs of 2% to 2.5%,” writes analyst George Askew, who rates the travel agencies hold. “Second, we believe demand for OTA services as a travel aggregator diminishes as airlines merge. We believe this impact is compounded as the airlines become increasingly web savvy and attract more users.” While that may indeed happen, right now savvy doesn’t seem like a good word to apply to the airlines in any context.

The merger of Delta Airlines (DAL) and Northwest Airlines (NWA) is finally in the books. Delta agreed late Monday to buy Northwest for $3.09 billion in stock, creating the biggest airline in the United States. “Today, we’re announcing a transaction that is about addition, not subtraction, and combines end-to-end networks that open a world of opportunities for our customers and employees,” Delta chief Richard Anderson said. “We believe by partnering with our employees, including providing equity to U.S.-based employees of Delta and Northwest, this combination is off to the right start.”

Getting off to the right start certainly took long enough. The deal comes more than two months after news of serious talks between the companies emerged. In February, when the Delta-Northwest linkup first appeared imminent, the market was a much more hospitable place for airline stocks: Shares of both companies traded as much as 80% above their recent levels of $10-$11 each. Since then, while Delta and Northwest have tried to work out pilot seniority arrangements, crude oil prices have hit new highs and the Federal Aviation Administration has cracked down on airplane maintenance practices, forcing big airlines such as AMR’s (AMR) American Airlines to take hundreds of planes out of service for repairs. Meanwhile the U.S. economy continues to weaken, potentially weighing on demand for travel.

That aside, the biggest question mark for this deal is whether Delta can bring the Northwest pilots union on board. Delta said Monday it has reached agreement with Delta pilots to exteand an existing collective bargaining agreement through the end of 2012. The airline said it will “use its best efforts to reach a combined Delta-Northwest pilot agreement, including resolution of pilot seniority integration, prior to the closing of the merger.” But the last two months show it won’t be easy.

Delta (DAL) and Northwest Airlines (NWA) still can’t get together. The carriers are close to agreeing on a merger, but plans continue to be hung up on the question of pilot seniority, The Wall Street Journal reports. Pilots at the two carriers can’t agree on a formula for determining how their ranks will be combined. The standoff, which stems from pilot anxiety about career advancement — no one wants to get stuck flying regional jets — caused top execs at the two companies to break their silence on the talks. Northwest said for the first time that it is “prepared to consider positively a transaction” that’s good for workers, investors and passengers. Delta, engaging in a bit of posturing, told workers in a memo that no “potential transaction meets all our principles” at the moment.

The waiting is making Wall Street anxious. Investors have sent shares in Delta and Northwest down 14 percent since Feb. 7, when a deal appeared imminent. Still, observers expect the merger to happen, because a combined carrier would be more robust in the face of rising energy prices and tough competition. “We will eventually get an agreement,” airline consultant Julius Maldutis tells Bloomberg television. He says that despite the problems now, he expects to see a merger announced “over the next several days.”

The merger of Delta (DAL) and Northwest (NWA) isn’t ready to push back from the gate just yet. The air carriers’ pilots unions haven’t reached an agreement on seniority arrangements for 12,000 pilots, the Associated Press reports, potentially imperiling the multibillion-dollar deal. The companies’ boards were ready to vote on the deal Wednesday, but now they must wait to see if an agreement can be reached that would clarify the pilots’ pecking order in the new company. An agreement by the pilots isn’t a prerequisite for the merger, but would smooth the way toward a quick integration, the AP reports.

Many other details of the Delta-Northwest linkup have been worked out, according to the AP: The combined carrier, which would surpass AMR’s (AMR) American Airlines as the nation’s largest by traffic, would be based in Atlanta, would be called Delta and wouldn’t lay off any front-line U.S. workers. The companies aim to slash costs and overcapacity by merging, and hope to get a deal under way soon to take advantage of the Bush administration’s pro-merger stance.

Not everyone is rooting for this deal to get done. Mark Hulbert, editor of an investment newsletter, writes at Marketwatch that the airlines have been a money-loser for investors — not to mention taxpayers. Hulbert points out that Delta would still be in bankruptcy if it weren’t for the government’s willingness to assume its pension obligations. “That means that, depending on how the combined company performs, we all could end up paying for this deal,” he writes. Maybe this isn’t such a good arrangement after all.

Delta (DAL) chief Richard Anderson is serious about getting his airline together with his former employer, Northwest Airlines (NWA). Anderson told the board of Atlanta-based Delta that he’ll forgo his right to as much as $15 million in pay that he’d be contractually due in the years after a merger, The Wall Street Journal reports.

Anderson’s move shows he plans to stay with Delta and could help the companies sell the deal to their unionized workers by showing executives aren’t unfairly benefiting at the expense of the rank and file. Union leaders at Delta and Northwest are reportedly studying the possible merger, Bloomberg reported earlier this week. Despite all the complications, it seems likely that some deals will take shape soon. Northwest chief Doug Steenland said last week that the industry is headed for consolidation as airlines seek to combat high fuel prices and reduce overcapacity. Doing nothing, he warned, “could be our worst alternative.”

Has merger time finally arrived in the airline industry? Delta (DAL) and Northwest (NWA) are closing in on a deal that would create the biggest U.S. air carrier, Bloomberg reports, citing two people familiar with the matter. The report says union leaders are studying the combination, which could be announced within weeks and would vault the combined company past AMR’s (AMR) American Airlines into the No. 1 slot. The merger would match two carriers that emerged just last year from Chapter 11 bankruptcy, though Delta and Northwest are hardly unusual in that regard. Two other big airlines that have reportedly been in the early stages of discussing a merger are UAL’s (UAL) United and Continental (CAL), both of which have been through bankruptcy court as well (though Continental, which has avoided the post-2001 swoon of many of its peers, hasn’t been in Chapter 11 for more than a decade). The industry is marching toward consolidation as the deal-friendly Bush administration serves out its last year in office, and as a rise in oil prices makes scale more essential for big carriers. The big question, assuming the companies can get union support for the deals, is how much ticket prices might rise.