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AMR back, Delta in deal
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February 16, 1999: 2:52 p.m. ET
Sick-out over at AMR; Delta's buy of regional carrier industry's latest
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NEW YORK (CNNfn) - While American Airlines began its recovery from last week's pilots' sick-out in a dispute about salaries at an American "feeder" airline, rival Delta Air Lines Tuesday agreed to buy a regional "feeder" carrier of its own for $700 million in the industry's latest merger.
Most of American's 2,250 flights were back in the air Tuesday after the sick-out forced the carrier to cancel 6,600 flights last week, delaying hundreds of thousands of travelers ahead of the Presidents Day weekend.
"American's operations are virtually normal today as the pilots' sick list continues to shrink," spokesman Tim Smith said in a recorded message Tuesday.
Industry analysts said American would suffer a drop in bookings through most of the first quarter, but the nation's No. 2 airline would eventually recover from the estimated $65 million in revenue it lost because of flight cancellations.
"It was a short-term labor disruption," said analyst Kevin Murphy at Morgan Stanley Dean Witter. "In the long run it's unlikely to be a big problem."
Meanwhile, American and its pilots were negotiating over the integration of Reno Air, the regional carrier American's parent AMR Corp. (AMR) bought last year for $124 million.
American's pilots staged the sick-out because they're worried that integrating pilots at Reno, who earn about half as much as American pilots and fly similar planes, will lead to lower salaries and lost flying opportunities.
The two sides are due back before U.S. District Judge Joseph Kendall Wednesday for a hearing on how much the union will be fined after Kendall told it to set aside at least $10 million to compensate American for lost revenue.
Delta is also buying a regional carrier, the 72 percent of the parent of Atlantic Southeast Airlines it doesn't already own. But pilots at Delta and Atlantic Southeast said they won't oppose the purchase since pilots at the two carriers fly different aircraft.
"American and Reno is a very different situation," said Andy Deane, chief spokesman for Delta's 9,500 pilots, noting that Delta's pilots fly big jetliners and Atlantic Southeast's pilots typically fly planes with 70 seats or less.
Frank Ramsey, the head of the pilots union at Atlantic Southeast, said there could be "turf wars" with Delta pilots, but added: "There's room for all of us to win here and there's plenty of flying to go around."
Regarding a possible dispute like the one at American over Reno: "I don't see it," he told CNNfn.
Wall Street welcomed the deal and ASA stock rose 1-3/4 to 33-11/16 on Nasdaq. Delta stock fell 3/16 to 52-3/8 and AMR fell ¼ to 54-7/8 on the New York Stock Exchange.
The move by Delta (DAL) to buy the rest of Atlantic Southeast, which feeds flights to Delta in Atlanta and Dallas, is the latest example of a big airline acquiring a carrier that feeds it passengers from small cities and towns.
While federal regulators have expressed concern about consolidation in the industry, officials at Delta noted that American, Continental and USAir all own regional feeder carriers, adding they expected no objections to the Atlantic Southeast deal.
"This is smart on Delta management's part," said Ramsey, head of the pilot's union at Atlantic Southeast, noting the carriers would probably be a good fit.
"Atlantic Southeast has a reputation of being the most profitable regional airline in the world," said another pilot's union official at the headquarters of the Air Line Pilots Association near Washington.
-- by staff writer Steven Radwell 
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