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Hedge Funds Can't Fix the Airlines

To be sure, both airlines have proclaimed that they're interested in merger partners. On paper, the two seem to fill each other's gaps: Delta needs access to Asia and the Midwest, while United needs access to the Northeast and Southeast.

But all carriers have gaps that others could fill. The truth is that, 29 years after deregulation, each of the six legacy carriers remains, to an extent, a regional operator, still playing the hand it was dealt when the industry was born in the 1920s.

"A lot of mergers make sense on paper, but few of them make sense operationally," says consultant Mike Boyd. "Hedge funs have the most honorable of all objectives: to make money for themselves. But they want short-term gains, and airlines are a long-term business."

Certainly Delta pilots, who would help determine whether a deal takes place, are not enthusiastic about this one.

"What we have to determine, as an airline and as an industry, is whether we are going to let a third-tier hedge fund take the lead in deciding what the industry is going to look like in the future," said Lee Moak, chairman of the Delta chapter of the Air Line Pilots Association, in an interview.

There is only one possible conclusion, Moak said. "We are going to decide, we are going to take our time doing it, and we are not going to be driven by hedge fund managers to make strategic decisions on an inappropriate and unreasonable timeline."

If there were to be an attempt to merge Delta and United, the regulatory issues would be daunting. Both carriers have long histories in states whose legislators would be displeased by the potential loss of their headquarters. Both are currently profitable, so it is not a merger to be easily justified by the "failing airline" rationale, even if fuel prices are high.

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