United
States Securities and Exchange Commission
Washington,
D.C. 20549
Notice
of
Exempt Solicitation
1.
Name
of Registrant:
Delta
Air
Lines, Inc.
2.
Name
of person relying on exemption:
International
Association of Machinists and Aerospace Workers
3.
Address of person relying on Exemption:
9000
Machinists Place
Upper
Marlboro, MD 20772
4.
Written Materials:
Attached
are written materials, consisting of a letter to certain shareholders of Delta
Air Lines, Inc., submitted pursuant to Rule 14a-6(g) promulgated under the
Securities Exchange Act of 1934.
May
29,
2008
Dear
Delta Air Lines, Inc. Shareholder:
On
behalf
of the International Association of Machinists and Aerospace Workers (IAMAW),
I
am writing to voice my concern about the proposed merger between Delta Air
Lines, Inc. (Delta) and Northwest Airlines Corp. (Northwest) . The IAMAW is
on
record as opposing this merger.
In
addition to my concern with the treatment of employees in the proposed merger,
I
also believe that this transaction destroys shareholder value by combining
two
vastly different entities with few expected synergies. The checkered history
of
airline mergers since deregulation has shown us that they inevitably result
in
disgruntled customers, turmoil within the workforce, and diminished returns.
The
proposed transaction would have a huge financial impact on the combined airline
resulting in massive liabilities that could have a significant drag on the
combined entity’s future performance. Both Delta and Northwest emerged from
bankruptcy protection in 2007 with restructured debt. Now, the airlines are
proposing to take on new, vastly larger debt obligations. Among
the financial hurdles that the combined airline would face is a crushing
long-term debt burden of $15 billion.1
Additionally, the proposed merged company would have a serious lack of liquidity
with a working capital deficiency of $1.03 billion.2
Moreover, pension deficits would amount to an unfunded pension liability of
over
$7 billion.3
With
all
these financial obstacles, the managements of both airlines have proposed very
few synergies resulting from this combination. The
proposed merger would provide minimal cost savings compared with the magnitude
of the transaction.
For
example, management has publicly promised that there would be no hub closures
and no reduction in capacity planned, resulting in costly duplication of route
networks and other operational processes. Also, the combined fleets would
feature 19 different aircraft versions,4
significantly increasing operational challenges with such a mixed fleet.
1
Delta
Air Lines and Northwest Airlines 10-Q filings for the quarter ended March
31,
2008, Securities and Exchange Commission.
2
Delta
Air Lines and Northwest Airlines 10-Q filings for the quarter ended March
31,
2008, Securities and Exchange Commission.
3
Delta
Air Lines and Northwest Airlines Form 5500 filings with the Department
of Labor,
April 2007 and July 2007, respectively.
4
Updated
fleet listings per www.airfleets.net.
The
stock
market has demonstrated dissatisfaction with the proposed merger. Delta
stock has lost 45% of its value since the merger was
announced,
based
on the May 21st closing stock price. On the same day, Delta stock hit its lowest
price since emerging from bankruptcy, $5.69 per share. Delta’s 52 week high was
$21.80.
Northwest
stock has similarly experienced a fast decline, losing 44% of its value since
the merger announcement,
based
on the May 21st closing price. On the same day, Northwest stock hit its lowest
price since emerging from bankruptcy, $6.26 per share. Northwest’s 52 week high
was $26.50.
The
proposed merger would create huge operational integration obstacles and require
upwards of $1 billion in implementation costs.5
Any
positive synergies are often destroyed by integration problems such as
information technology and labor relations issues. Management
would be forced to shift its focus from running an airline to merger
integration, thus damaging shareholder value.
Three
years after its merger with America West was announced, US Airways is still
not
fully integrated, with much internal strife remaining and no end to its pilots’
dispute in sight.
To
date,
Delta and Northwest have failed to provide shareholders with a convincing
argument that consolidation would increase shareholder value. For this reason,
as well as for the concerns I have mentioned above, I urge shareholders of
Delta
and Northwest to protect their interests and speak out to oppose this proposed
merger.
Sincerely,
R.
Thomas
Buffenbarger
International
President
International
Association of Machinists and Aerospace Workers
This
is not a proxy solicitation and no proxy cards will be
accepted.
5“NWA
Merger Agreement Keeps Delta in Atlanta.” Atlanta Journal-Constitution, April
15, 2008.