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Delta Union Battle Bores Investors

ATLANTA ( TheStreet) -- After some initial euphoria, Wall Street decided it doesn't really care whether Delta (DAL - Get Report) flight attendants join a union.

On Wednesday, Delta shares surged around 2:15 p.m. as results of the election began to become known. Between 2:10 p.m. and 2:50 p.m., the shares rose 5% to $14.44. Then they fell back, closing at $14.14, up just 2% for the day.

Late Thursday morning, Delta shares were trading at $13.89, down 30 cents, even though most airline shares were up modestly.

Delta's union battles will likely continue. Hours after the results were announced, the Association of Flight Attendants charged that the carrier intimidated workers in violation of federal labor law and said it wants a re-run. The first step is to request an investigation by the National Mediation Board. Also, Delta's 16,500 fleet service agents will soon vote on whether to join International Association of Machinists.

In the meantime, as far as Delta's stock price, analysts are saying the flight attendant election results are a positive, but only in an ephemeral way. The results will not affect Delta costs and no one has changed Delta's target price.

"Although Delta's non-union flight attendants are more productive than Northwest's, they are also paid more and have no union dues," wrote Soleil Securities analyst Jim Higgins in a post-election report. "We are not convinced that unionization of the group would have led to higher costs for Delta, but nonetheless prefer yesterday's outcome from an investment standpoint."

CRT Capital Group analyst Mike Derchin called the election results "a big win for Delta and a positive for shareholders."

"We believe the market assumed that Delta was going to go union -- the odds were stacked against management," Derchin wrote in a report. He added that the election result "gives Delta more flexibility to run the airline and fosters greater productivity [but] wage rates were likely to go up in either case, so we do not see us making any adjustments to our earnings model."

Delta itself sees no impact on costs. "We don't believe the outcome of union elections would materially change our cost projections," said spokeswoman Gina Laughlin. "We've already accounted for the cost of harmonizing workgroups, which includes a projected increase to former Northwest frontline employee wages to meet generally higher Delta pay rates."

Both Higgins and Derchin have buys on Delta shares. Even before the election results were known, Higgins had a price target of $18 and Derchin had a target of $19. Those targets have not changed.

-- Written by Ted Reed in Charlotte, N.C.

>To contact the writer of this article, click here: Ted Reed

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