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Pilots union critical of rumored Delta-United deal

Officials for airlines deny merger talks

POSTED: February 2, 2008 5:02 a.m.

ATLANTA -- The head of Delta's pilots union said in a letter to members Tuesday that the carrier shouldn't be forced into a merger with United by a "renegade" hedge fund he believes is only interested in short-term financial gain.

The letter from Lee Moak, chairman of the union's executive committee, served as an effort to sharpen the union's position at a time when high fuel prices and some investors are putting pressure on airlines to consolidate to reduce costs.

It also was a rebuke of Pardus Capital Management LP, the hedge fund that is urging Atlanta-based Delta Air Lines Inc. to combine with United Airlines, a unit of Chicago-based UAL Corp.

"Pardus' demand for a merger between Delta and United is a poisonous vision built upon an artificial timeline and focused primarily on a financial transaction," Moak wrote.

While Delta's pilots union has said it is not opposed to a merger involving Delta, it wants to have a role in the process and to ensure that the pilots have a meaningful stake in the new company if a deal is reached.

The pilots union can't stop a merger on its own, but it has a nonvoting seat on Delta's board and influence with management and other employees. It was a vocal critic of US Airways Group Inc.'s hostile bid to buy Delta. The bid by the Tempe, Ariz.-based carrier, which came while Delta was in bankruptcy, was defeated in January. Delta emerged from bankruptcy in April.

"We are not opposed to consolidation per se, and given the right set of circumstances, a merger proposal could draw our support," Moak wrote.

The letter did not elaborate on what those circumstances would be, except to say that the union's support for a merger "will be contingent on our involvement from the earliest stages of the proposal."

Last Wednesday, an official with knowledge of the situation told The Associated Press that United and Delta have been discussing a combination that would keep the United name and the corporate headquarters in Chicago. Delta and United later denied they had had any merger talks. The official, who spoke on condition of anonymity, has stood by the comments.

Pardus, which holds about 2.5 percent of Delta's outstanding shares and about 4.8 percent in United, has been urging Delta's top management to make a deal with another airline in view of rising fuel prices and what it said are the increased risks of going it alone.

Gordon Bethune, an adviser to Pardus and a former chief executive of Houston-based Continental Airlines Inc., could not be reached for comment Tuesday. Representatives said he was not available. A spokesman for Pardus declined to comment on the Delta pilots union letter.



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