Delta’s Pilots Union Chief Criticizes US Airways’ Offer

By Marilyn Adams

The head of Delta Air Lines’ pilots union on Tuesday slammed the proposed $8 billion takeover of his employer by US Airways, saying it “appears to lack any substantial benefit” for Delta, its employees or customers.

In a strongly worded letter to Delta’s 6,000 pilots, union Chairman Lee Moak voiced skepticism about the stated benefits. The merger with Delta, which is in Chapter 11, would create the USA’s biggest airline. Delta management is against the proposal, saying Delta is worth more as an independent airline.

The Air Line Pilots Association is Delta’s only large labor union and is one of the airline’s unsecured creditors. A merger with Delta would require creditor approval.

Moak’s letter is in stark contrast to Wall Street’s positive early response to the bid, which was made a week ago. US Airways reiterated Tuesday that the merger would not require layoffs. US Airways spokeswoman Elise Eberwein said that the Tempe, Ariz.-based airline has recalled 700 furloughed employees since the merger with America West 14 months ago and has hired about 4,000 workers.

US Airways executives and Delta’s creditors are working to schedule a face-to-face meeting in early December to discuss the proposal. Delta plans to show the creditors its own plan of reorganization by Dec. 15. The creditors will have to weigh both proposals before deciding which would benefit them most.

Some of Moak’s criticisms echoed those expressed by Delta CFO Ed Bastian last week. Bastian said the claimed cost savings without layoffs “don’t add up.” But he said the merger’s single biggest risk would be delay: having to remain in bankruptcy up to a year longer than its planned 2007 exit.

A key contributor to the delayed bankruptcy exit: a Justice Department review of whether the proposed airline combination would hurt competition and violate antitrust law.

During that review, the economy could slide, jet fuel prices could spike again, or another terror incident could disrupt travel, making it difficult or impossible for Delta to get exit loans and survive alone if the merger is blocked, Delta management argues. Because US Airways proposes borrowing more than $7 billion from Citigroup for the deal, Bastian said the merged Delta would also exit bankruptcy with debt of $18 billion. Along with Delta’s creditors and the Justice Department, a merger would have to be approved by the Department of Transportation, US Airways shareholders and Delta’s bankruptcy judge.

It might also face scrutiny from a newly Democrat-controlled Congress. Jim Berard, top spokesman for the Democrats on the House Transportation and Infrastructure Committee, said Tuesday that if the merger goes forward, the committee may schedule hearings as it did when United Airlines sought to buy US Airways in 2000. (c) Copyright 2005 USA TODAY, a division of Gannett Co. Inc.