Believe They Would Pay For Merger's Purported Savings

US Airways Group's (USAG) unsolicited $8 billion takeover bid for bankrupt Delta is meeting strong resistance from Delta's employee unions.

Employee representatives are skeptical the merger can go forward without layoffs. One of the ways USAG says the merger will save money is to eliminate routes and planes in markets where the two airlines currently overlap in competition.

Bill Morey, a member of the Delta Board Council representing some 40,000 employees told CNN, "Delta people feel that we have worked so hard and sacrificed so much to get Delta to the point where we are about to emerge from bankruptcy. Now we have someone coming in that's trying to usurp all that."

The airline's pilots are also speaking out. Air Line Pilots Association (ALPA) chairman Lee Moak has taken a strong stand against USAG's bid. ALPA is Delta's largest labor union. It also is one of the airline's creditors holding the note on a fair portion of the its unsecured credit.

In a strongly worded letter to ALPA's 6,000 Delta pilots Moak said, "On the surface, (it) appears to lack any substantial benefit for Delta, its employees, our communities, or our customers. Should this merger be as misguided and as poor an idea as I currently believe it to be, then I will deploy every available resource to stop it."

USAG maintains its merger plans don't include job cuts. Company representatives pointed to the 700 recalled pilots since US Airways merged with America West to form USAG just over a year ago.

Delta's management and labor seem to be singing the same tune for a change. Management is voicing some of the same concerns as airline employees. Management is also concerned however about the time factor.

Delta CFO Ed Bastian last week said cost savings without layoffs doesn't add up. He also says USAG's proposal to borrow $7 billion from Citigroup to finance the deal means Delta would exit bankruptcy owing $18 billion. But, he said, the biggest problem is delay. A required Justice Department review of the proposed merger would likely mean another year in bankruptcy for Delta.

Delta's plan to emerge from bankruptcy next year is contingent on its ability to secure credit. A change in the economy, fuel prices or other disruption of travel during any delay would make the airline too risky to get the needed credit.

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