Pilots keep Delta's deal with Northwest in holding pattern

— -- Although the unionized pilots stand to gain stock and labor contract improvements valued at $2 billion if the carriers merge, talks between the two union groups have broken down, according to two sources close to the talks. The sources spoke on condition of anonymity because they are not authorized to speak publicly.

In an internal memo Tuesday to employees, Delta CEO Richard Anderson signaled that Delta won't pursue the merger unless the pilot dispute is resolved.

The memo said Delta has "not arrived at a potential transaction that meets all of our principles" and "will not complete a transaction" unless all of its conditions are met.

Those conditions, the memo said, include protecting its employees' job security and job seniority in the merged company. Delta also insists the combined carrier retain Delta's name and Atlanta headquarters, the memo said.

Representatives of the pilots' unions, who had been trying to forge ways to merge their members into one union, have not talked since last Thursday, the sources said. No new talks are scheduled.

The unions and management have negotiated new labor contract terms worth about $2 billion to their 12,000 members in higher pay, better benefits and stock in the merged carrier.

That would help the pilots regain wages and benefits they surrendered when both carriers reorganized in Chapter 11 bankruptcy the past three years.

But talks between the two pilots' groups — both part of the Air Line Pilots Association — stumbled late last week over the issue of job seniority. That's a crucial point, because pilots' seniority rankings determine what planes they fly, career advancement and pay.

Northwest pilot negotiators worry that under terms offered by their union counterparts at Delta, more Delta pilots would be poised to advance to better-paying jobs flying the largest jets, and many Northwest pilots with comparable experience would be blocked from advancement.

Greg Rizzuto, spokesman for the Northwest branch of ALPA, said last week that "a short-term economic benefit is not worth sacrificing the possibility of advancement."

The two unions also can't agree on a way to resolve the dispute. Union leaders at Northwest want an outside arbitrator to settle the matter, but Delta union leaders do not, sources said.

Both airlines' boards were poised to vote on the merger last Wednesday. Delta had developed elaborate plans for announcing a merger agreement and a subsequent campaign to promote the proposal to federal regulators and Congress through the news media and lobbyists. But those preparations have been put on hold indefinitely, according to a third source involved in the plans.