Roadblock for US Air
By Ted Reed
TheStreet.com Staff Reporter
12/6/2006 3:47 PM EST
Pilots at Delta Air Lines (DALRQ - commentary - Cramer's Take) have stipulations in their contract that would prevent a merger with US Airways (LCC - commentary - Cramer's Take - Rating) from taking place, the chairman of the pilots union said Wednesday.
The labor pact, which has been approved by the bankruptcy court, "is a controlling agreement in this merger, and it has several provisions that prevent [US] Airways from merging with Delta," said Lee Moak, in an interview. The contract sets a minimum for block hours flown by Delta pilots, strictly controls the use of regional jets and gives Delta pilots a say over code-share agreements.
Last month, US Airways mounted an $8 billion hostile takeover bid for Delta. The acquisition offer came barely a year after a 2005 merger in which America West Airlines took over the former US Airways and assumed its name. Delta sought bankruptcy protection in September last year.
Moak spoke by phone from Crystal City, Va., site of the one-time headquarters of the former US Airways. That facility has since been shut down, idling several hundred workers.
"This is the definition of synergies," he said. "We will keep your name but close down your facilities, terminate, furlough and use attrition to get rid of your employees, and somehow that's best for the airline industry." He said several thousand Delta employees, including some pilots, would lose their jobs in a merger with US Airways.
Moak said he had questioned US Airways executives about their knowledge of pilot contract provisions. "They said they were 'technicalities,' at first, and now it's 'items not anticipated,'" he said. "They really have underestimated the labor component of this merger."
US Airways spokesman Phil Gee said the airline has no plans to reduce the number of Delta pilots. "We didn't furlough one pilot, or any other represented employee, with the America West-US Airways merger, and we have stated from the get-go that we believe the same will hold true [in this case] ," he said.
Pilots are in a position to influence the outcome of the merger effort not only because of their contract but also because they are members of the Delta creditors committee and hold $2.1 billion worth of unsecured debt. That's about a one-eighth share of the total, Moak said. The creditors must approve whatever plan of reorganization is to emerge from the bankruptcy court.
The Delta pilots' contract was negotiated under difficult conditions in court, Moak said. While salaries and benefits were reduced, the pilots gained ironclad assurances that their remaining jobs would be protected. Delta has about 6,500 pilots, down from roughly 10,000 in 2001.
One contract provision sets a floor for block hours flown by Delta pilots. Another says that if a single Delta pilot is furloughed, the airline must not operate regional jets with more than 70 seats. The provision could impact not only Delta's 76-seat regional jets but also 90-seat planes flown by US Airways.
A third provision gives pilots a say over code-share agreements. "We will not approve any code shares with US Airways or America West," Moak said. In the US Airways and America West merger, the route systems have been combined through code shares until the airlines can secure a single operating certificate
If they plan on taking "the best" of the three contracts, how does that affect scope clauses in relation to the stupid contracts with Mesa and Republic? Maybe with the merge they could flight to scope at least all of the Embraers back in... pretty sad that they unions sold out enough to let the same plane (170/175) with a few less seats be operated by a contractor as mainline will be (190)... all those planes could have brought all of our co-workers back.