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Thu, Jan 10, 2008

Delta Pilots Meet To Discuss Consolidation Options

Many Feel Merger Imminent; Strike Team Reactivated

More signs that Delta Air Lines may soon announce plans to merge with another carrier. On Wednesday, the executive council of the Delta branch of the Air Line Pilots Association convened to discuss the ALPA response should Delta chose to merge with another airline.

"Consolidation may indeed be at our door," said Lee Moak, chairman of the Delta branch of the Air Line Pilots Association, in a letter to members posted on the ALPA website. Moak added the union would not necessarily be opposed to such a move, but only if it helped the airline -- and its pilots' careers -- grow.

"His point is that any merger they want to do needs to involve the pilots. Any consolidation won't work unless the pilots are actively supporting it," said union representative Mark Saltzman to the Salt Lake Tribune. The airline employs nearly 4,000 people in Utah, including about 600 pilots.

As an example of ALPA's 'hope for the best, prepare for the worst' attitude towards merger rumors, the pilots union also reactivated its "strike preparedness committee," which had been deactivated since last April, when Delta emerged from Chapter 11 bankruptcy. Pilots also moved to retain legal counsel, that specializes in mergers.

ALPA has a member on the Delta board of directors, which in turn formed a committee last year to study merger options.

As ANN has reported extensively, merger rumors were fueled last November, when investment group Pardus Capital Management floated a trial balloon -- which was, in turn, picked up by several media outlets -- regarding a potential merger between Delta and struggling United Air Lines. Those reports were later downplayed by executives at both carriers... but many analysts and insiders feel the question of whether Delta will merge with another airline isn't a matter of "if," but "when."

Many also believe when Delta makes its move towards consolidation, it won't be with United... but rather Northwest Airlines, which has a route network more compatible with Atlanta-based Delta. New Delta CEO Richard Anderson -- who said last year a merger "could make sense," as long as Delta initiates the move -- is also the former CEO of Northwest, who presided over the carrier's entry into bankruptcy.

UBS analyst Kevin Crissey told the Tribune a deal with Northwest is "most likely" for Delta, and that he expects such a "major merger" to be announced in the next six months.

There are additional signs such a move is likely... and soon. In his letter to Delta pilots, Moak noted Delta's stock price has plummeted since April 2007, at one point falling as much as 45 percent. It has since rebounded somewhat; on Wednesday, the stock rose five percent in after-hours trading. Bear Stearns analyst Frank Boroch also raised his recommendation on Delta stock to "outperform."

Delta is "in the catbird seat for industry consolidation at a time when its valuation [looks] compelling," Boroch told investors.

FMI: www.delta.com, www.united.com

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