Appeals To Other Airline Investors For Support

Though officially disavowed by executives at both airlines, investment company Pardus Capital Management hasn't given up on swaying other hedge funds to support a merger between Delta Air Lines and United Airlines.

The Wall Street Journal reports Pardus appealed last week to investors in Boston to garner support for the merger; two weeks ago, Pardus took its message to roughly 75 airline investors in New York. And that message is, a merger between the two carriers makes sense... and not just because Pardus has stock in both airlines.

As ANN reported, many believe Pardus floated a trial balloon about the merger November 14... when an unnamed source told The Associated Press a merger between the two airlines was imminent. The source described a combined United-Delta airline carrying forth under the United name, with headquarters in Chicago and an operations center in Atlanta. The source said both sides expressed a "sense of urgency" to the talks.

Executives at both airlines eventually dispelled the rumors... saying later that day the source cited by the AP was, in essence, full of it.

"There have been no talks with United regarding any type of consolidation transaction and there are no such ongoing discussions," Delta CEO Richard Anderson told The Los Angeles Times, echoing similar statements from United.

Pardus has at least one influential backer... former Continental CEO Gordon Bethune, who advised the hedge fund in seeking a Delta/United merger. This week, Bethune reiterated his belief Pardus' "logic is pretty damn impeccable," saying a lack of consolidation among the nation's airlines has led to the industry's cyclical 'feast or famine' nature.

Bethune argues Pardus is attempting to tell both airlines, "Stop talking. Get off your butts. Do something."

It would appear Pardus will need all the support it can muster to sway the airlines. With over $3 billion in assets, the hedge fund doesn't hold enough financial clout to bully either airline -- more specifically, each carrier's cautious investors -- into a hostile takeover scenario.

It's unclear just how successful Pardus' efforts will prove to be. The hedge fund admits it doesn't plan to assemble a formal coalition of investors to force the issue, relying instead on building a quiet consensus.

Pardus holds seven million shares in Delta, or about 2.4 percent of all shares in the reorganized airline. It owns 5.6 million shares in United, a 4.6 percent stake in that airline.

FMI: www.delta.com, www.united.com