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United, Continental Pilots Want Better Contracts

Stocks in this article: CAL UAUA DAL

HOUSTON TheStreet) -- Pilot leaders at Continental (CAL) and United (UAUA) say they are receptive to a merger between the two airlines, but they expect contract improvements to accompany it.

"We have been negotiating a new contract for three years," said Jay Pierce, chairman of the Continental chapter of the Air Line Pilots Association, in an interview. "We look at this as a vehicle to rectify that situation. "

United and Continental said Monday that they plan to merge to create the world's largest airline, which will be based in Chicago and see its largest hub in Houston.

Continental and United

Continental has offered its pilots a contract resembling the deal reached by Delta (DAL) pilots immediately following the 2008 merger with Northwest. "That's a good template, a good place to start," Pierce said, noting that Delta pilots received $700 million in salary increases and $500 million in equity.

However, he said that for half of Continental's pilots, the Delta contract represents a pay cut. Widebody pilots would get a raise to Delta levels, but 737 pilots would take a pay cut.

Wendy Morse, chairman of the United ALPA chapter, also called the Delta contract "a good place to start" during a conference call with reporters on Monday. It is not surprising that her view resembles Pierce's. The two have talked several times a day since merger talks between the carriers began around April 9th.

Asked whether she is happy about the merger, Morse responded: "Time will tell whether we're happy or not. This is a wonderful opportunity for the airline to move forward and not backwards. But it won't move forward without us."

She stressed that the Delta process, in which negotiating a pilot contract was an important early step, provides a good model to effect a merger. It definitely benefits United pilots, who have been working under a contract negotiated during the carrier's three-year bankruptcy.

Still, Morse -- like Pierce -- does not see the Delta contract as the best possible outcome. In particular, she noted that Continental pilots have stronger protections against outsourcing flying to smaller airlines, which fly smaller airplanes under the mainline carrier's name. While the Continental contract prevents the airline from using regional aircraft with more than 50 seats, while the United limit is 70 seats.

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