Justice Clears Delta-Western Merger at the Last Minute : O’Connor of Supreme Court Overturns 3-Judge Federal Panel Ruling That Had Blocked Deal Over Union Contracts

U.S. Supreme Court Justice Sandra Day O’Connor early today overturned a federal appeals court decision issued just hours earlier that would have blocked the completion of the merger of Delta Air Lines and Western Airlines.

O’Connor acted in response to a late-evening appeal from lawyers for Delta. She reportedly worked in her chambers past 2 a.m. (EST) on the case.

Late Tuesday afternoon, a three-judge panel in San Francisco voted unanimously to block the merger temporarily, in response to motions filed by the Air Transport Employees, who represent Western’s reservation agents, clerks and and ramp employees, and the Teamsters Union, which represents maintenance workers or others.

The Supreme Court justice’s ruling will permit flights scheduled to leave airports this morning under the Delta name can go ahead as scheduled.

However, several major operational aspects of the merger will now go ahead today, with Western formally vanishing as a separate company, its planes being painted with Delta colors and its employees being moved, among other actions.

Delta announced last September that it was purchasing Western for nearly $900 million. The merger was financially completed in December, and Western has been operated as a Delta subsidiary since then.

An arbitration hearing in the Teamsters’ case was held Tuesday, and the Air Transport Employees’ case is scheduled for hearing next Monday and Tuesday. Rulings could come anytime from a week to two months after the hearings.

It is unclear what affect O’Connor’s ruling will have on the arbitration.

All but 8% of Western’s employees are unionized, but Delta’s pilots are that carrier’s only union members.

At issue ever since the merger was announced has been whether Western’s unions would continue to represent Western employees after the integration of the two carriers. Delta has maintained that the Western unions will be “extinguished” after April 1, but the unions assert that their contracts should remain valid.

The unions are particularly emphatic on this point because employees gave Western millions of dollars of concessions in recent years when the airline was in financial difficulty.

As part of those agreements, the unions negotiated special successor clauses, which stipulated that the contract would continue in force in any merger or acquisition until union seniority lists are integrated with those of the surviving company.

The appeals court decision had stated that if Delta agrees to be bound by an arbitrator’s decision on whether the successors clauses are valid, then the injunction it issued Tuesday will be lifted.

Henry Weinstein reported from Los Angeles and Robert E. Dallos from New York.