Hedge fund Pardus Capital Management LP, lobbying for a merger between Delta Air Lines Inc and UAL Corp, plans to pitch its proposal to other investors on Friday, sources close to the situation told Reuters.
The meeting marks the latest move by investors to pressure the management teams of U.S. airlines to restructure the volatile industry as surging oil prices and a slowing U.S. economy threaten a fledgling recovery.
AMR Corp (AMR.N: Quote, Profile, Research) faces pressure from shareholder FL Group (FL.IC: Quote, Profile, Research), which has urged the parent of American Airlines to consider spinning off its frequent flyer program and other assets.
Pardus, which holds about 2.5 percent of Delta's outstanding shares and about 4.8 percent in UAL, has recently emerged as a leading provocateur of U.S. airline consolidation.
On Tuesday, it sent a letter to Delta management, urging an all-stock merger between that company and UAL.
The activist fund argued that United's hubs on the West Coast, its presence in the Pacific and its slots at London's coveted Heathrow airport match well with Delta's routes to Europe, its New York presence and its position in Latin America.
The Friday meeting will provide a forum for Pardus and its adviser Gordon Bethune, the former chief executive of Continental Airlines Inc (CAL.N: Quote, Profile, Research), to present their analysis to investors, sources close to the situation said.
A spokeswoman for Merrill Lynch (MER.N: Quote, Profile, Research) confirmed that airline investors were meeting today. She said the meeting was broadly to discuss industry consolidation and was not devoted exclusively to Delta.
She said Merrill's airlines analyst Michael Linenberg would speak, but the firm's investment bankers were not taking part.
She denied that Merrill was hosting the meeting, as sources told Reuters.
The forum provides an opportunity for Pardus to rally support from other investors and could lead to increased pressure on Delta and UAL.
Pardus is the sixth-largest institutional shareholder in Delta, with a stake worth about $137 million, according to Reuters data. Its interest in UAL, where it is the seventh-largest institutional shareholder, is worth about $237 million.
With United as the second-largest U.S. carrier and Delta at third, a combination of the two may be a tough sell to U.S. antitrust regulators.
UAL shares were down 3 percent at $41.96 in noon trade on Nasdaq, while Delta was off 2.4 percent to $19.36 on the New York Stock Exchange.