Delta Air Pilots Meet to Weigh Merger Possibility
Leaders of the Delta Air Lines pilots' union are meeting this week to address merger possibilities involving the carrier, the labor group said late on Wednesday.
"Consolidation may indeed be at our door," Lee Moak, chairman of the pilots' union, said in a letter to members. "How we face its challenges will have a significant impact on our careers and profession for decades to come."
Merger speculation has engulfed Delta since the autumn. The carrier set up a special board committee to review potential consolidation but management has not set a timetable for the panel to reach any conclusions.
CNBC's Phil LeBeau says the goal of any possible merger would be to form a network with strong international routes. "So a coupling of Delta (strong to Latin America, the Caribbean, and some Europe) works well with say United, being strong to Asia and some of of Europe."
A Delta spokeswoman on Wednesday night had no direct comment on the pilots' meeting but said the carrier would not provide updates on the board committee's work.
Delta shares rose $1.75, or 14 percent, to close at $13.52 on Wednesday after UBS raised ratings and increased price targets on several U.S. airlines, including Delta.
Analyst Kevin Crissey wrote in a note to clients that UBS believes a major merger "is more likely than not" in the next six months with a Delta/Northwest Airlines Corp combination the "most likely" possibility.
Delta executives have said the company does not have to merge to be successful but soaring fuel prices and softening travel demand have spurred questions about the industry's overall financial health in 2008 and intensified merger speculation around a handful of big carriers.
The union reiterated that Delta pilots do not oppose consolidation under the right circumstances, but will not stand idly by if a deal is proposed they do not favor. "Any attempt at consolidation will fail without the active involvement and support of the pilots from the earliest formative stages of the effort," Moak said.
LeBeau adds that labor savings from any merger will be a benefit that airline executives will tout. However, with recent cutbacks due to bankruptcy or forced labor contracts, the unions will probably fight any potential alliances.
The pilots have retained legal and financial advisers to address potential mergers. The group has also reactivated its strike-preparedness committee in the event that it wants to increase its leverage over the process. The strike committee also supports picketing and lobbying efforts and played an important role in Delta's successful effort to fend off an merger bid last year by US Airways Group.
Delta shares rose to $14.20 in after-hours trading on the New York Stock Exchange.
-- Reuters wires