Union Blood Boils Over Rumored Airline Deal

Madalina Iacob, 04.09.10, 05:35 PM EDT
Flight attendants and pilots find fault with potential US Air/United tie-up. Analysts think the latter might have a better fit with Continental.

Shares of United Airlins parent UAL and US Airways spiked earlier this week after reports that the pair were in merger talks, but some groups impacted by the deal aren't flying so high and are voicing their displeasure.

The potential deal drawn the ire of pilot and flight attendant unions, which is likely to make any potential tie-up a long and complicated process like the two-year saga leading up to the marriage of Delta Air Lines ( DAL - news - people ) and Northwest.

The “track record of management at each of our airlines is abysmal,” according to a joint press release Friday from a union that represnts 21,000 flight attendants at UAL ( UAUA - news - people ) and US Airways ( LCC - news - people ). “For nearly five years US Airways CEO Doug Parker has failed to negotiate a joint flight attendant contract, continuing to operate the airlines separately with disparate treatment of flight attendants at each former airline. Parker has left merger issues unresolved all this time, which hardly qualifies him to consider the possibility of another merger," the statement continues.

Meanwhile, pilots at United Airlines have expressed concerns about the integration costs that would come with the deal, noting that US Air and America West have yet to achieve operational integration more than four and a half years after their combination.

Airline stocks were mixed Friday with the NYSE Arca Airline Index down .2% at $38.53. The index vaulted to a two-year high Thursday when investors reacted to the reports that US Air and United were in talks. US Air fell 3.1% to $7.32, while UAL shares lost gained 1.3% to $20.50. Continental Airlines ( CAL - news - people ) , which has been mentioned as a potential party-crasher on any US Air/United deal, rallied 1.4% to $21.53.

Consolidation "would be a significant positive for combining carriers and the broader industry,” Barclays Capital analysts said in a note, arguing that a merger between United and either US Air or Continental could generate cost savings of $250 million to $400 million per year, even after labor dislocation costs.