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Wed, Dec 06, 2006

Parker: US Airways Will Give Up On Merger If Delta Doesn't Waver

"This Plan Makes Sense"

The staunch opposition by management at Delta Air Lines to last month's unsolicited merger proposal by US Airways may be paying off... as US Airways CEO Doug Parker said Tuesday if Delta can't be persuaded to support the merger, he'll give up on the bid.

"We have to get to a point where we are all working together on this, or it's not going to happen," Parker told USA Today. "This is all about convincing Delta's management that this plan makes sense."

So far, they haven't been swayed.

As Aero-News has reported, employees at Delta have joined with management in presenting a united front against the November 15 merger bid, saying it is too risky and that Delta should remain an independent carrier.

Delta Air Lines CEO Gerald Grinstein -- who, incidentally, came to Delta after his Western Airlines merged with the Atlanta-based carrier in 1987 -- said Delta "is making crucial progress toward becoming a strong, independent, stand-alone company" in a recent employee memo.

If Delta management had the most powerful say on the merger bid, it would likely already be dead... but since Delta is still in bankruptcy, the ultimate decision lies with the airline's creditors.

A statement by Delta's Chief Financial Officer, Ed Bastain, may cause them to consider sticking with Delta's plan, as well. Bastain says a merger would likely prolong Delta's stay in Chapter 11, while the proposal is reviewed by the Department of Justice for anti-trust concerns.

That delay would increase costs, Bastain notes... and increases Delta's vulnerability to an economic downturn, or rising fuel prices.

Parker maintains a merger between Delta and US Airways could be wrapped up by late June 2007... under a schedule he admits is "aggressive."

If history is an indicator, however, that is highly optimistic thinking. Last year's merger between US Airways and America West hasn't been fully realized yet, 15 months after the carriers agreed to combine forces. Both airlines are flying under separate reservations systems, and two sets of pilots and flight attendants.

This week, US Airways agreed to bring its pilots' pay scale up to the level of America West pilots... a move many believe is meant to calm fomenting labor strife ahead of the Delta merger.

FMI: www.usairways.com, www.delta.com

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