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Delta pilots, officials join against US Airways bid

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ATLANTA — Hostile takeovers make strange bedfellows. Case in point: Delta management and its pilots union.

The two sides were at each other's throats earlier this year over Delta's ultimately successful effort to wring a second round of hefty pay cuts from pilots and win approval to terminate their pension.

But US Airways' $8.9 billion bid to buy Delta has put Delta management and its pilots union on the same side again in opposing the unsolicited offer.

The union's support of Delta's standalone plan could give management a boost with the company's creditors' committee in its bankruptcy case.

"We have a common threat from outside Delta Air Lines," the chairman of the pilots union's executive committee, Lee Moak, told The Associated Press on Wednesday.

The union is concerned about further job and benefit cuts if US Airways buys the Atlanta-based company. It also is worried about routes being dropped, and it believes higher ticket prices will result from the deal.

Moak told fellow pilots in a memo Tuesday that "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."

But can he?

"They do have a stake, but probably not enough to block it," Ray Neidl, an airline analyst with Calyon Securities in New York, said of the pilots union.

But, Neidl added, "You do want to have the cooperation of the employees" if you are US Airways.

The Delta chapter of the Air Line Pilots Association negotiated a $2.1 billion unsecured claim as part of its most recent agreement to accept pay cuts and to not stand in the way of pension termination. The union has a seat on the nine-member creditors committee. Representatives of the Pension Benefit Guaranty Corp., Coca-Cola and Boeing are among other members of the committee.

PBGC spokesman Jeffrey Speicher said the federal pension insurer is "not expressing a view" on the US Airways bid. Asked if the agency was confident in Delta's standalone plan, Speicher said, "I can't get into any kind of back and forth on what may or may not be."

Dana Bolden, a spokesman for Atlanta-based Coca-Cola, declined to comment on the US Airways bid. Coca-Cola also was a creditor in US Airways' first bankruptcy case, Bolden said.

Moak said Wednesday in a telephone interview that the pilots union is in contact with members of Delta's creditors committee. Delta, too, has been speaking to the creditors committee. The airline's chief told employees in a memo Tuesday that was released publicly Wednesday that "you can be sure we will never support a transaction that does not provide for the protection of Delta people."

Phil Gee, a spokesman for Tempe, Ariz.-based US Airways Group Inc., said Wednesday his company is not surprised by the stance of the Delta pilots union. "It's something that we anticipated and expected," Gee said.

When US Airways announced the offer, it reached out to its pilots union and the national ALPA office, Gee said, adding that when it is appropriate it also will reach out to Delta's pilots union.

"We haven't gotten on that path yet because we haven't met with the creditors committee yet," Gee said. "We don't want to tread in places that we're not supposed to tread yet."

US Airways chief Doug Parker wrote in a memo to his employees Wednesday that he knows he has some work to do to win over Delta employees. "This is absolutely not about us versus them — to the contrary, this is about working together," Parker wrote.

Delta Air Lines Inc. management and its pilots have come a long way in mending their differences.

Earlier this year, the union was threatening a strike over Delta's effort to reject the pilots contract and impose pay cuts.

In April, the two sides reached an agreement for $280 million in annual concessions, which was on top of $1 billion in annual concessions the pilots agreed to in a five-year deal in 2004. The pilots also agreed as part of the latest concessions deal not to fight Delta's effort to terminate their pension.

There was no strike. The pilots continued flying. And Delta went back to restructuring its business as part of its plan to emerge from bankruptcy in the first half of next year.

Then US Airways' takeover bid last week shook the street.

Moak insists he never took the recent union and Delta management disagreements personally, and he believes the two sides can work well together now.

They may have to if they are going to beat back the US Airways offer, which has gained traction among some Wall Street investors.

"As far as the pilots are concerned, we're interested in a long-term viable carrier," Moak said. "Right now, the Delta standalone plan provides that, and that's what we believe."

Neidl, the airline analyst, said the people that are ultimately going to determine the fate of Delta are the creditors and the government regulators. He also said Delta's pilots could change their mind and support the US Airways bid.

"What they are for today they could be on the opposite side tomorrow based on what they think is best for their situation," Neidl said.