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Delta pilots call merger proposal 'poisonous vision'
November 20, 2007 / 8:11 PM / 10 years ago

Delta pilots call merger proposal 'poisonous vision'

<p>A Delta airlines Boeing 767 jet airplane takes off from Frankfurt airport, March 14, 2007. Pilots at Delta Air Lines &lt;DAL.N&gt; on Tuesday called an overture by a private equity shareholder for the carrier to merge with United Airlines &lt;UAUA.O&gt; a "poisonous vision" and said any attempt at consolidation would fail without support of the union. REUTERS/Kai Pfaffenbach</p>

WASHINGTON (Reuters) - Pilots at Delta Air Lines Inc (DAL.N) on Tuesday called an overture by a private equity shareholder for the carrier to merge with United Airlines a “poisonous vision” and warned that any attempt at consolidation would fail without the union’s support.

Hedge fund Pardus Capital Management LP urged Delta management last week to seek an all-stock merger with United Airlines parent UAL Corp UAUA.O. Pardus holds about 2.5 percent of Delta’s outstanding shares and about 4.8 percent of UAL.

“Pardus’ demand for a merger between Delta and United is a poisonous vision built upon an artificial timeline and focused primarily on a financial transaction,” said Lee Moak, chairman of the Delta pilot’s union.

Moak said in a letter to members that consolidation involving Delta may be inevitable and could be supported by the union, “given the right set of circumstances.”

But, he said, pressure by Pardus for a Delta-United deal is tantamount to a hostile takeover.

Representatives for Pardus and Delta had no immediate comment on Moak’s letter.

Airline shares sagged on Tuesday as oil prices creeped closer to $100 per barrel. Delta closed down $1.56, or 8.2 percent, to $17.45 on the New York Stock Exchange, while UAL lost $2.57, or 6.3 percent, at $38.19 on Nasdaq.

The pilots are the only unionized work group at Delta and were instrumental in helping to fend off a merger bid earlier this year by US Airways Group Inc LCC.N.

“As we demonstrated in the case of the US Airways assault on our company, we can stop a consolidating event that is not in our best interests, and we will treat the demands by Pardus no less seriously than those presented by US Airways last year,” Moak said.

Delta and United pilots are represented by the Air Line Pilots Association.

In an interview, Moak stopped short of saying the union would try to block the attempt by Pardus, but he questioned its analysis. He was also skeptical of Pardus’ wish for a relatively quick deal to blunt the impact of soaring fuel prices on operating costs.

“I don’t like Pardus’ tactics. This is a very complex, difficult strategic decision that will have effects for many years,” Moak said.

He said any consolidation attempt should be carefully handled “or else we’ll all end up in bankruptcy again.”

Delta emerged from bankruptcy last spring after 18 months in Chapter 11 protection. Prior to its exit, the company fended off the US Airways bid.

Delta and United have said they are interested in industry consolidation, but have denied they are in talks with each other. Delta has formed a committee to explore merger options.

Industry analysts say shrinking the number of big players would reduce excess airline seating capacity, cut operating costs, and increase profits.

The most recent major airline merger, which involved US Airways and America West in 2005, was deemed successful by Wall Street and the industry in general at the time.

But US Airways has yet to resolve key contract differences with pilots.

Reporting by John Crawley; Editing by Toni Reinhold/Jeffrey Benkoe

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