Delta Air Lines Inc.'s pilots union said the company "may soon be involved" in a merger and convened its executive council Wednesday and today to consider options for the airline.
"Consolidation may indeed be at our door," Lee Moak, chairman of the Delta branch of the Air Line Pilots Association, wrote in a letter to members on the union's Web site Wednesday.
The union may support a transaction as long as it helps the airline expand, Moak said. The pilots have reactivated their "strike preparedness committee," which was shut down after Delta exited bankruptcy in April, and hired legal counsel that specializes in mergers and acquisitions, he said.
Delta, which has a hub in Salt Lake City, said Nov. 14 that it formed a board committee to study merger options after Pardus Capital Management LP wrote to urge the Atlanta-based company to combine with UAL Corp.'s United Airlines. The hedge fund, an investor in both carriers, said combining would save money to counter surging jet-fuel prices, which rose 53 percent last year.
Betsy Talton, a Delta spokeswoman, declined to provide an update on the panel's progress or respond to the union's letter.
A deal with Northwest Airlines Corp. is "most likely" for Delta, UBS analyst Kevin Crissey wrote in a research note Wednesday. Crissey, based in New York, said he expects a "major merger" to be announced in the next six months.
Bear Stearns analyst Frank Boroch said Delta is "in the catbird seat for industry consolidation at a time when its relative and absolute valuation look compelling."
Delta Chief Executive Officer Richard Anderson said in October that a merger "could make sense," as long as the carrier is the acquirer.
Moak said in a telephone interview Wednesday that "as we entered into the new year with oil at $100 a barrel and all the financial buzz about consolidation, it's appropriate to communicate to our pilots that we are ready."
The union leaders are studying options and don't plan to recommend or reject any specific scenarios in advance of any proposal by Delta. The pilots are the carrier's only major unionized employee group.
"The job of choosing a merger partner is for Delta management alone," Moak said. While pilots opposed a hostile takeover bid by US Airways Group Inc. that was scrapped a year ago, "you never say never," he said.
The union's strike committee could be used to organize support for "the right consolidation," Moak said in the letter. The committee will open a center near Delta's base at Atlanta's Hartsfield-Jackson International Airport.
"Any consolidated company must provide meaningful protections and added value for the Delta pilots," Moak wrote. "Without those critical components in place, we will not support a consolidation attempt, and the attempt, like virtually every other airline consolidation attempt over the past two decades, will fail."