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 Investors hopeful that a merger between Delta Air Lines Inc. and Northwest Airlines Corp. can be resuscitated can take at least a little comfort in the lack of new developments over the weekend.
A potential deal between the airlines, which was left for dead by many in mid-March after the airlines' pilots were unable to come up with a plan to handle post-merger integration, was rekindled Friday by reports that Northwest wishes to pursue a transaction absent the blessing of its pilots union. The overture comes as shares of both airlines have been pushed to post-bankruptcy lows attributable both to sky-high oil prices and shareholder impatience over a lack of deal news. Pilot reaction to the reports was muted. Delta representatives declined comment, while Northwest pilots issued a bland statement saying they would "reserve judgment and support until the economic and contractual elements of an agreement have been negotiated." Though it remains far from certain Delta would consider a deal without its pilots -- management has promised labor it would not do anything that put pilot seniority at risk -- the lack of outcry from pilots is interesting. If Northwest's mention that they move on with or without aviators is a trial balloon, as many in the industry believe, management had to be pleased that the pilots didn't immediately take up arms against the suggestion. The message from pilots that they are willing to take a wait-and-see approach could be viewed as an implicit endorsement of new talks between the airlines, even if it is not a guarantee that the groups would eventually support whatever decision management makes. It could open the door to some sort of a compromise, such as operating the two airlines under one holding company for a period to allow pilots additional time to complete their work. The silence could also show that pilots understand the pressure being applied to management by shareholders drowning in losses on airline stocks. Activist hedge fund Pardus Capital Management, owner of shares of Delta and other airlines, for example, on Monday said it had suspended investor withdrawals in the face of slumping values on some of its investments. It appears more and more likely that these investors might force management's hand. Credit Suisse Group analyst Daniel McKenzie in a report last week echoed the opinion of many institutional investors when he wrote that "it is management's job to set expectations and lead," and not wait on labor. He predicted that "disgruntled shareholders" would ultimately pressure Delta management "to move ahead with the merger or face consequences." Clearly, there are parties beyond labor that must be addressed. With that the case, the unions would be wise to keep an open mind when it comes to deal talk. - Lou Whiteman See story about Northwest's suggestion to reopen talks from Dealscape CategoriesComments
From: Lou Whiteman,
Airbusdriver, I don’t envy Anderson’s position. It appears he must face either the wrath of shareholders, or the wrath of his pilots. Given that the board and shareholders are the ones in a position to fire him, I can’t rule out Anderson proceeding with a deal, especially if fuel remains at its current levels. I have enjoyed a lot of great flights on your airline and appreciate your insights. I would be happy to continue this conversation if you would like. Lou
Posted on:
April 3, 2008 11:10 AM
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It's hard to believe that Richard Anderson at Delta would do a deal that his employees are opposed to. A merger without a pilot seniority deal in hand would mean an arbitrated seniority list. The Delta pilot's have stated that they are opposed to arbitration - most likely because they know their position wouldn't be supported by a third party. Anything is possible but its hard to believe that this changes anything.