The sigh of relief on Thursday, May 15 tied to a modest drop in oil prices was short lived, as crude oil prices spiked on Friday, May 16 to close at a record $126.29 per barrel on the New York Mercantile Exchange. While the broader market may have somewhat overreacted to the modest price drop Thursday, ticking up nearly 100 points, the Dow Jones Industrial Average's reaction to the spike Friday was tempered as it lost a mere 5.86 points to close at 12,986.80.
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For airline stocks, the reaction to the news was anything but tempered. Northwest Airlines Corp. sunk 7.63% to $8.47 while its pending merger partner Delta Air Lines Inc. fell 4.46% to $7.50. Delta union chairman Lee Moak in a letter to membership Wednesday, May 14 said 78% of its 4,590 voting pilots agreed to contract changes to facilitate a deal, which give pilots a 3.5% stake in the merged company in exchange for work rule changes that will allow Delta to place its code and brand name on Northwest flights. The deal does not include Northwest pilots, who so far have not been able to reach an agreement with their counterparts at Delta on how to integrate seniority lists.
UAL Corp., parent of United Airlines, slid 3.96% to close at $13.81. Pilots at US Airways Group Inc., which reportedly is holding merger talks with UAL,
came out against the merger, saying in a statement, that the group "will not sit back and allow airline environmental changes without protecting the interests of all our pilots." Stephen Bradford, president of the US Airline Pilots Association, said the group will not support any dealmaking until management ties up the loose ends of the 2005 merger of US Air with America West Holdings Inc. The latest roadblock to the deal did not seem to be of concern to US Airways shareholders as its stock rose 2.36% to close at $7.88 per share. -
Michael Rudnick
