December 19, 2006
"Keep Delta My Delta"
Posted by Lisa Fairfax

As a semi-frequent flyer, I have been watching with some concern the consolidation talks floating around various airlines. The latest development in US Airways’ effort to takeover Delta is a plan submitted to the federal bankruptcy court by Delta’s management. The plan rejects US Airways $8.5 billion takeover offer in favor of keeping Delta independent by engaging in a five-year restructuring campaign that purports to generate profits by the beginning of the year and provide better value than a merged company. Because they have to approve any reorganization plan, ultimately Delta’s creditors will judge of the kind of entity that provides the best value.

What I find especially interesting in the Delta-US Airways saga is the efforts by employees to rebuff the takeover attempts. Delta employees have created buttons with the slogan “Keep Delta My Delta” to express their opposition to a merger with US Airways. And apparently there is a high demand for the buttons among both employees and customers. What is “My Delta?” Apparently not just a Delta that is independent, but Delta is also a company that employees believe responds to their concerns. Indeed, one of the primary reasons why employees object to the US Airways takeover is that they feel it would jeopardize Delta’s corporate culture. Not surprisingly, Delta has expressed its support for employees’ Keep Delta My Delta campaign. What is surprising is that employee’s favorable impression of Delta’s culture has survived even through its bankruptcy. And employees may be willing to preserve that culture even at the cost of foregoing better wages. Indeed, the CEO of US Airways not only claims that his merger plan will cut $1.65 billion in costs without cutting jobs, but that he intends to raise salaries of employees. Perhaps employees do not believe such a claim. And perhaps employees believe that Delta’s management can improve their wages in the long run. Employees campaign certainly reflects a strong belief in the strength and importance of their company’s culture.

Ultimately, however, employees concerns about culture may be pitted against creditors desire for better value. Of course there is debate regarding whether a standalone Delta is more valuable than one that merges with US Airways. Indeed, Delta’s unions appear to support management’s belief that an alliance with US Airways would not produce good value. One union representative noted that the union’s opposition to the merger meant that they were in the “unusual” position of being on common ground with Delta’s management. However, if such a merger does prove valuable, then Delta employee’s campaign spotlights an interesting issue regarding whether a company seeking to emerge from bankruptcy can oppose a deal that may provide some value to its creditors in order to preserve its corporate culture.

Takeovers | Bookmark

TrackBacks (0)

TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a00d8345157d569e200d834d09f0553ef

Links to weblogs that reference "Keep Delta My Delta":

Bloggers
Papers
Posts
Recent Comments
Popular Threads
Search The Glom
The Glom on Twitter
Archives by Topic
Archives by Date
November 2016
Sun Mon Tue Wed Thu Fri Sat
    1 2 3 4 5
6 7 8 9 10 11 12
13 14 15 16 17 18 19
20 21 22 23 24 25 26
27 28 29 30      
Miscellaneous Links