Delta MEC roadblocks to USair takeover

[Heavy Set]

I asked a Delta friend of mine to try to explain what Moak meant when he said ALPA had roadbocks to any merger or takeover. He stated Dalpa had, in a court approved Pilot Written Agreement (PWA), several items that had to be followed, like minimum block hours for the Delta pilot group, limits on regional jets and seats on those jets if Delta furloughed anyone (76 seat would have to be reduced to 70 seats immediately), etc. I then posed the question about a merging carrier bringing out an 1113 to trash that agreement, and he stated the PWA restricts the use of 1113s, only allowing it if DIP financing can not be aquired. Obviously, if an airline tried to buy or merge with Delta, it would have DIP financing to go through with the process.(USair has over $8 billion from Citicorp) That is probably why Moak stated the USair lawyers initially stated the PWA was full of "technicallities," and now stated it has "items not anticipated", which in lawyer speak means, "oops, we didn't see that coming." Maybe that is why Kirby, the USair President, recently said they would abide by the Delta pilot PWA. Also, that may be why Northwest just threw in their hat in the ring, since they think they could abide by these rules, keeping the minimum block hours without dismantling the Delta hub network. Northwest just announced their intent when signing up that boutique bank, and they would not spend money if they thought USair had this "in the bag." Also, Delta has around $4 billion in cash on hand, which would help any suitor pay off the initial part of any transaction with the banks. I guess you could call that an almost "self financing" buyout.

 

[GOTAFLY]

I don't understand how you believe delta has 4 billion dollers in the bank? Its all money that was loaned to them. How many billions did Delta loss again? Why are they bankrupt? Delta has lost more than any US Airline, even the old USAirways! So I laugh when I hear any legacy carrier's have mony in the bank.

 

[Freight Dog]

That's funny...

Any contract that has the clause saying that the management shall not use 1113(c) in bankruptcy to abrogate the contract is about as worthless as a no-furlough clause.

What a waste of paper to even include that...

 

[ultrarunner]

You got that right Freight.

 

[BigMotorToter]

Writing a contract that doesn't allow 1113's is like me signing a contract with my brother that he sign's too of which it says it's o.k. to murder someone.

Contracts don't overrule the law.

The TWA MEC tried telling every ALPA carrier back in 2001 about the new weapon of choice of Airline management "The 1113". TWA was the first to have this jammed down our throat. We gave a power point presentation in Herndon at the Executive meeting. This was before 911, so nobody gave a $hit. All we got was a "good luck with AA" and a pat on the back.

What we wanted was to have the power of ALPA to lobby congress, and have this "1113" code of bankruptcy changed so it couldn't be used to abrogate our contracts.

Sadly, because of the fractured nature of ALPA, and the real lack of unity of all ALPA pilot groups, we are now witnessing the results of the apathy that was displayed back in 2001.

We warned you.

Good luck.

 

[FDJ2]

That's funny...

Any contract that has the clause saying that the management shall not use 1113(c) in bankruptcy to abrogate the contract is about as worthless as a no-furlough clause.

quote]

You seem to know quite a bit, name a single airline contract that had a post petition clause that prevented another 1113c petition that has been thrown out by a court in an 1113c motion.

I'm not saying it could never happen, I'd just like to know if it has ever happened.

 

[johnsonrod]

I still think the DOJ will say no in the end if it were to come to that. 155 overlapping routes is just way too many. There are too many competitive hurdles to jump and we all know that a hostile takeover just won't work in this type of business. No way...

Why can't Parker focus on the mess he already created?

 

[Freight Dog]

We had that specific clause at Aloha, and the Company filed 1113(c) to throw out our contract.

 

[FDJ2]

We had that specific clause at Aloha, and the Company filed 1113(c) to throw out our contract.

What post petition language did you have and did the judge throw out the contract?

 

[General Lee]

I guess Lee Moak doesn't know what he is talking about and you do....

Writing a contract that doesn't allow 1113's is like me signing a contract with my brother that he sign's too of which it says it's o.k. to murder someone.

Contracts don't overrule the law.

The TWA MEC tried telling every ALPA carrier back in 2001 about the new weapon of choice of Airline management "The 1113". TWA was the first to have this jammed down our throat. We gave a power point presentation in Herndon at the Executive meeting. This was before 911, so nobody gave a $hit. All we got was a "good luck with AA" and a pat on the back.

What we wanted was to have the power of ALPA to lobby congress, and have this "1113" code of bankruptcy changed so it couldn't be used to abrogate our contracts.

Sadly, because of the fractured nature of ALPA, and the real lack of unity of all ALPA pilot groups, we are now witnessing the results of the apathy that was displayed back in 2001.

We warned you.

Good luck.

By Ted Reed
TheStreet.com Staff Reporter
12/6/20065:20 PM EST
Click here for more stories by Ted Reed


Updated from 3:47 p.m. EST


Pilots at Delta Air Lines (DALRQ - commentary - Cramer's Take) have stipulations in their contract that would prevent a merger with US Airways (LCC - commentary - Cramer's Take - Rating) from taking place, the chairman of the pilots union said Wednesday.
The labor pact, which has been approved by the bankruptcy court, "is a controlling agreement in this merger, and it has several provisions that prevent [US] Airways from merging with Delta," said Lee Moak, in an interview.
The contract sets a minimum for block hours flown by Delta pilots, strictly controls the use of regional jets and gives Delta pilots a say over code-share agreements.
Last month, US Airways mounted an $8 billion hostile takeover bid for Delta. The acquisition offer came barely a year after a 2005 merger in which America West Airlines took over the former US Airways and assumed its name. Delta sought bankruptcy protection in September last year.
Moak spoke by phone from Crystal City, Va., site of the one-time headquarters of the former US Airways. That facility has since been shut down, idling several hundred workers.
"This is the definition of synergies," he said. "We will keep your name but close down your facilities, terminate, furlough and use attrition to get rid of your employees, and somehow that's best for the airline industry." He said several thousand Delta employees, including some pilots, would lose their jobs in a merger with US Airways.
Roadblock for US Air
Page 2




Moak said he had questioned US Airways executives about their knowledge of pilot contract provisions. "They said they were 'technicalities,' at first, and now it's 'items not anticipated,'" he said. "They really have underestimated the labor component of this merger."
US Airways spokesman Phil Gee said the airline has no plans to reduce the number of Delta pilots. "We didn't furlough one pilot, or any other represented employee, with the America West-US Airways merger, and we have stated from the get-go that we believe the same will hold true [in this case] ," he said.
Pilots are in a position to influence the outcome of the merger effort not only because of their contract but also because they are members of the Delta creditors committee and hold $2.1 billion worth of unsecured debt. That's about a one-eighth share of the total, Moak said. The creditors must approve whatever plan of reorganization is to emerge from the bankruptcy court.
The Delta pilots' contract was negotiated under difficult conditions in court, Moak said. While salaries and benefits were reduced, the pilots gained iron-clad assurances that their remaining jobs would be protected. Delta has about 6,500 pilots, down from roughly 10,000 in 2001.
One contract provision sets a floor for block hours flown by Delta pilots. Another says that if a single Delta pilot is furloughed, the airline must not operate regional jets with more than 70 seats. The provision could impact not only Delta's 76-seat regional jets but also 90-seat planes flown by US Airways.
Roadblock for US Air
Page 3




A third provision gives pilots a say over code-share agreements. "We will not approve any code shares with US Airways or America West," Moak said. In the US Airways and America West merger, the route systems have been combined through code shares until the airlines can secure a single operating certificate.
Separately, Doug Parker, US Airways' chairman and chief executive, said in a statement that his company remains "fully committed" to the proposal to merge with Delta.
He said that if a deal can be reached, it "will create a strong, healthy airline, able to compete long into the future in any industry scenario, benefiting our employees, customers, and the communities we serve, as well as providing Delta's creditors with the opportunity to receive far greater recoveries than what they will receive under any Delta stand-alone plan."
Parker also indicated that he wants Delta's board and creditors' committee to begin due diligence on US Airways' offer. "Only then can they be in a position to truly assess this opportunity," he said. "I am confident that they will do so. We are absolutely determined to take necessary steps to move the process forward."
Delta has said in the past that it wants to remain an independent carrier and that it's aiming to emerge from Chapter 11 in the first half of next year



Bye Bye--General Lee

 

[Freight Dog]

What post petition language did you have and did the judge throw out the contract?

This was a part of pre-petition concessions (our second concessions package) which was agreed to literally days if not hours before the filing. While I don't have it in front of me, our contract SPECIFICALLY stated that the Company SHALL NOT file 1113(c) in bankruptcy. In our case, the big thing they wanted was distressed termination of our A-plan, plus a laundry list of other items pertaining to our work rules. We wanted to freeze it and keep our work rules. They filed an 1113 (c) to throw out our contract.

Here's something that most ALPA groups from bankrupt carriers learned the hard way. While you're in bankruptcy, the company can hose you every which way they can, and they'll have judge's blessings because you are a pawn. You will get thrown under the train. If there is a provision in your contract that they don't like - they'll come to you and ask you to remove it. If you won't, they'll file 1113(c) to reject your contract REGARDLESS whether or not you have their promise not to, which at this point is all it is - a promise. Remember, you're in bankruptcy. You'll threaten striking. In the meanwhile, you'll either agree to their terms, or you'll have the judge throw out your contract, and then force you to work. Look at Mesaba's decision, look at NWA flight attendants' decision. The precedent has been set.

If that happens, unless every last Delta pilot is willing to walk off your job in terms of mass resignations, (remember your strike threat was blocked by the judge, and you're ordered to work) and never look back, you will do the management dance.

The part where you may get lucky is that in this particular instance, neither you nor your management want this merger. That could be your saving grace. But remember this... despite of what's in your contract, unless you're out of bankruptcy, you won't have much say in it if they want to change it.

 

[General Lee]

This was a part of pre-petition concessions (our second concessions package) which was agreed to literally days if not hours before the filing. While I don't have it in front of me, our contract SPECIFICALLY stated that the Company SHALL NOT file 1113(c) in bankruptcy. In our case, the big thing they wanted was distressed termination of our A-plan, plus a laundry list of other items pertaining to our work rules. We wanted to freeze it and keep our work rules. They filed an 1113 (c) to throw out our contract.

Here's something that most ALPA groups from bankrupt carriers learned the hard way. While you're in bankruptcy, the company can hose you every which way they can, and they'll have judge's blessings because you are a pawn. You will get thrown under the train. If there is a provision in your contract that they don't like - they'll come to you and ask you to remove it. If you won't, they'll file 1113(c) to reject your contract REGARDLESS whether or not you have their promise not to, which at this point is all it is - a promise. Remember, you're in bankruptcy. You'll threaten striking. In the meanwhile, you'll either agree to their terms, or you'll have the judge throw out your contract, and then force you to work. Look at Mesaba's decision, look at NWA flight attendants' decision. The precedent has been set.

If that happens, unless every last Delta pilot is willing to walk off your job in terms of mass resignations, (remember your strike threat was blocked by the judge, and you're ordered to work) and never look back, you will do the management dance.

The part where you may get lucky is that in this particular instance, neither you nor your management want this merger. That could be your saving grace. But remember this... despite of what's in your contract, unless you're out of bankruptcy, you won't have much say in it if they want to change it.

So, Moak is lying to the press? Or, he just doesn't know what he is talking about.....


Bye Bye--General Lee

 

[Freight Dog]

I don't think Moak is lying to the press. I wonder though, has Moak been down this road with another airline? Read my last paragraph. Your luck lies in the fact that your management and you agree that you don't want this merger. That's your saving grace. All this media opposition is just posturing. Should it come to the wire, your contract will have nothing to do with it. It will be the judge's decision, and so far, it's always gone the management's way.

Also, you are part of the UNSECURED creditors committee, which in the grand scheme of things doesn't mean that much in itself. They owe you money. Big deal. Hey, we went down this same road from Dec 2004 until February 2006.

Until you officially exit the bankruptcy, things can and likely will take drastic and unexpected turns. All I'm saying is don't be too quick to say that your contract is ironclad. Remember your no-furlough clause? That was BEFORE you went Chapter 11.

I just hope you guys don't get unpleasantly surprised like most of us did before you along the same road.

 

[((7))]

"So, Moak is lying to the press? Or, he just doesn't know what he is talking about....."

Lying.....Would not be the first time.

 

[General Lee]

I don't think Moak is lying to the press. I wonder though, has Moak been down this road with another airline? Read my last paragraph. Your luck lies in the fact that your management and you agree that you don't want this merger. That's your saving grace. All this media opposition is just posturing. Should it come to the wire, your contract will have nothing to do with it. It will be the judge's decision, and so far, it's always gone the management's way.

Also, you are part of the UNSECURED creditors committee, which in the grand scheme of things doesn't mean that much in itself. They owe you money. Big deal. Hey, we went down this same road from Dec 2004 until February 2006.

Until you officially exit the bankruptcy, things can and likely will take drastic and unexpected turns. All I'm saying is don't be too quick to say that your contract is ironclad. Remember your no-furlough clause? That was BEFORE you went Chapter 11.

I just hope you guys don't get unpleasantly surprised like most of us did before you along the same road.

So, Kirby is lying too?

AP
US Airways Would Keep Delta Labor Deal
Thursday December 7, 11:18 am ET
By James Amend, AP Business Writer US Airways Says Delta Deal Would Preserve Pilots' Contract; Predicts 6-Month Takeover Process

NEW YORK (AP) -- US Airways said Thursday the airline has every intention of seeing its $8.6 billion buyout of Delta Air Lines through, despite strong objections yesterday from the takeover target's pilots and questions about whether regulators would permit the merger.
Delta Air Lines' pilots union said Wednesday it plans to rally on Dec. 13 to show its opposition to the hostile bid, and will lobby members of Congress to block the deal. The union's governing body passed a resolution Tuesday night opposing the buyout, saying it would violate their contract.
US Airways Chief Operating Officer J. Scott Kirby told analysts at Calyon Securities' industry conference in New York that the takeover would see Delta's pilot contract though, although he did not elaborate further.
Kirby also said he wants Delta to consider the buyout as it formulates its post-bankruptcy business plan.
"We're asking for a parallel process," said Kirby, who estimated a deal could be done in six months if due diligence was begun today.
Delta's 6,000 pilots also expressed concern that the new company would leave Atlanta. Kirby declined to answer questions about where the new company might be headquartered, but did say the takeover would move more traffic to Atlanta and eliminate less profitable flights at some connecting cities elsewhere in the southeast.
Kirby also expressed confidence that regulators would permit the combination. Kirby cited the growth of low-cost carriers, the effects of the Sept. 11 terrorist attacks on the industry, airline bankruptcies, and the efficiencies demonstrated by its merger with America West.
US Airways estimates the Delta deal represents $1.65 billion in network and cost synergies.
"We feel very good about our ability to pass antitrust scrutiny," Kirby said.
Kirby noted that Wall Street has already endorsed deal, as evidenced by a 20 percent surge in US Airways stock and a 50 percent gain in the value of Delta's bonds since the takeover was announced Nov. 15.
Tempe, Ariz.-based US Airways is the nation's sixth-largest carrier; Delta is the nation's third-largest. Together, their combination would create the largest carrier in the United States in terms of revenue. Shares of US Airways Group Inc. fell 73 cents to $59.70 in morning trading on the New York Stock Exchange.


Bye Bye--General Lee

 

[General Lee]

I don't think Moak is lying to the press. I wonder though, has Moak been down this road with another airline? Read my last paragraph. Your luck lies in the fact that your management and you agree that you don't want this merger. That's your saving grace. All this media opposition is just posturing. Should it come to the wire, your contract will have nothing to do with it. It will be the judge's decision, and so far, it's always gone the management's way.

Also, you are part of the UNSECURED creditors committee, which in the grand scheme of things doesn't mean that much in itself. They owe you money. Big deal. Hey, we went down this same road from Dec 2004 until February 2006.

Until you officially exit the bankruptcy, things can and likely will take drastic and unexpected turns. All I'm saying is don't be too quick to say that your contract is ironclad. Remember your no-furlough clause? That was BEFORE you went Chapter 11.

I just hope you guys don't get unpleasantly surprised like most of us did before you along the same road.

I understand you have good intentions here, and I hope we don't go through the same things you did. Really, I do appreciate your responses, and we can only hope this ends peacefully. I don't see the DOJ allowing this, nor do I think the unsecured creditors (Dalpa included) will vote for this. We shall see I guess.


Bye Bye--General Lee