Pilot Rep Lee Moak Backs Delta-NWA Merger

Lee Moak, chairman of the Air Line Pilots Association chapter at Delta, voices his support of the proposed merger before Congress.
By Ted Reed ,

CHARLOTTE, N.C. -- Once again Lee Moak finds himself smack in the middle of a prospective airline merger, but this time the labor leader is an advocate.

At a hearing Wednesday before the House aviation subcommittee, it was Moak, chairman of the Air Line Pilots Association chapter at

Delta

(DAL) - Get Report

, who argued most forcefully for a merger with

Northwest

(NWA)

-- despite opposition by three other labor leaders who shared a witness table with him.

"I believe this merger is going to be very successful," Moak said. "Not only are we going to make

it work, we must make it work, or we won't be at another hearing again." He reminded that today, "Lufthansa alone is worth more than all the legacy airlines put together."

"With oil at $120 a barrel, we are kidding ourselves if we think it is business as usual," Moak added, in an interview. "We need to have a strong company going forward if we are going to compete in a global marketplace. Eventually we have to all get on board and work together."

In late 2006 and early 2007, Moak emerged as a leader in the battle to fight off a hostile bid by

US Airways

(LCC)

to take over Delta. "That was a Wall Street transaction," he told the hearing. "They had no shame. They said 1,000 pilots would lose their jobs. ... That was the wrong merger at the wrong time."

Wednesday's session was the fourth congressional hearing in a month on the proposed merger, even though Congress has no defined role in shaping such deals.

Rather, the Department of Justice decides whether to challenge mergers on competitive grounds. The Transportation Department advises justice on airline merger proposals, and also must approve transfers of international route authorities.

One of the great mysteries of the airline business involves determining exactly what factors influence Justice Department merger decisions. The role of Congress in the process is an unknown. Additionally, predictions about potential rulings can be all over the map.

To be sure, the consensus is that Delta/Northwest will be approved. But there was no consensus at all when US Airways attempted its hostile takeover of Delta -- even though the merger would have allowed a single carrier to operate the only two major hubs in the Southeast, Atlanta and Charlotte.

The Delta/US Airways case is one in which Congress did influence the outcome.

A hearing before the Senate Commerce Committee in January 2007 was packed with uniformed Delta pilots. No one in attendance, outside of US Airways CEO Doug Parker and a Transportation Department official, voiced support for consolidation. And it became clear that while Wall Street supported the deal, Main Street was very much against it.

Within two weeks, the deal was dead, partially because Delta's creditors decided it would take too long for the battle to play out. Although Moak did not speak at the hearing, Delta pilots wielded influence as leaders of the "Keep Delta My Delta" campaign.

By contrast, union leaders who spoke at Wednesday's hearing, while articulate and passionate, did not appear to carry the day, at least as far as this merger is concerned.

At one point, Rep. John Mica (R., Fla.), former chairman of the House aviation subcommittee, called it "more than likely that this merger will be granted." And Rep. John Duncan (R., Tenn.), said he saw no reason to "stand in the way of this particular merger." But he noted: "I do worry a bit that if this merger goes forward, it might give an excuse to a couple of the other airlines to attempt a merger,

and then I would begin to worry."

Given Duncan's concern, combined with labor's strong position, it seems the process could be a lot more challenging if there is a subsequent merger attempt by

United

(UAUA)

and US Airways.

In particular, if that happens, it won't involve a Lee Moak, a union leader going against the grain to join management in a fight for something he believes is necessary.

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