Wed, Feb 27, 2008
Delay Leads To Lower Share Prices
We're now seeing one reason Delta
and Northwest felt some urgency to get a merger done once the
rumors started. Both airlines have seen their stock prices hit this
week after unions have hinted they'll balk at combining the
workforces.
"People are getting a little nervous about a potential merger,"
Calyon Securities analyst Ray Neidl told Reuters. "The longer this
thing drags out the less likely it's going to happen this
year."
The economic factors driving the merger include the perceived
need within the US airline industry to eliminate duplication in
routes and services to counter rising fuel prices. The way to save
money in a merger is to consolidate lightly-traveled routes, and
eliminate job positions, and there's no getting around it -- that
means fewer employees.
Reuters says Delta and Northwest have told employees they want
to grow the airline, not cut jobs. The unions aren't buying it.
Early reports that both groups of pilots had agreed to a new
seniority system for combining workforces proved premature... and
David Stempler, president of the Air Travelers Association, isn't
surprised. "Whoever thought that airline pilots would agree on
something as important as seniority integration in a short period
of time was quite mistaken," he said.
Now, the International Association of Machinists, which
represents over 12,000 bag handlers, customer service
representatives and reservation agents at Northwest, said a merger
will mean substantial job losses and service cuts. The union says
it will oppose any big airline mergers, including Northwest and
Delta.
Analysts say a merger needs to start soon, or it may not happen
at all this year.
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