Merger Talks Gain Between Us Air And America West

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DJN: WSJ(5/9) Merger Talks Gain Between US Air And America West
(Dow Jones 05/09 00:00:42)

(From THE WALL STREET JOURNAL)
By Susan Carey and Melanie Trottman

Merger negotiations between US Airways Group Inc. and America West Holdings Corp. picked up momentum last week, according to people familiar with the matter, with the carriers hoping to hammer out a deal ahead of America West's annual meeting May 17.

Several potential investors in a merger are studying a proposed business plan that foresees the combined company operating under the US Airways brand and focusing attention on Midwestern markets while introducing flights to Hawaii.

"There are abundant sources of equity for the deal," said one person close to the talks. Those investors could include hedge funds, other airlines and Retirement Systems of Alabama, a pension fund that is US Airways' largest shareholder. Pension-fund officials have declined to comment.

People involved with the talks assume that Doug Parker, America West's chairman and chief executive, would head the combined company. Questions about which executives from the respective airlines would take what roles in the merged entity haven't been sorted out, said one person. A decision about where the combined carrier would be headquartered also remains under discussion. US Airways is based in Arlington, Va., and America West is in Tempe, Ariz.

 

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note also from the same wsj article:


The companies are debating tricky valuation issues and how many board seats potential investors would receive. There also are multiple parties that would have a say in the transaction, including the federal government; General Electric Co., the largest creditor of both carriers; other investors and creditors; and America West shareholders, including a private-equity firm that has a majority voting stake in that company. GE has signaled its eagerness to reduce its overall exposure by taking back about 60 leased aircraft and some GE-made engines from the combined fleet, said one person familiar with the matter.

 

[MrAeroMan]

I hope it's not true about RSA being involved. TPG is much better at stuff like this and increases it's chances of surviving.
Hopefully Doug Parker would just unload most of UAIR's executive staff especially Al Crellin.

 

[MarkMyWords]

I wonder where we would be today if TPG had succeeded in investing during bankruptcy 1 versus RSA.

 

[Hope777]

To be honest, I hope it does not work out. USAir has messed up TWO good airlines already and ruined the lives of Tens of Thousands Employees. I just hope for the sake of the AWA Employees, this DOES NOT HAPPEN ! ! !

 

[RowUnderDCA]

Well, I kind of think that the bad karma of Allegheny has dissapated by now. U is NOT in the driver's seat of this merger. They were in the last two. I'm quite sure that the Piedmont merger was all about getting rid of a competitor that would have destroyed U and avoiding takeover by Icahn; NOT making an airline that made sense.

I'm guessing that the PSA merger had equally unsound basis for making an airline. Something like coming up with a route system that justified the name USAir.

This is different. U CANT make this deal happen. And its executives WONT be making the decisions.

It just seems different. I'd also expect that it will be painful for labor, unless, the financiers can come up with a equipment transformation/ renewal procedure that avoids mass layoffs.

 

[us0004us]

for tpg, maybe, the landscape is more appealing now , than it was in bk1...for the new entity to be succesful.

also this could be a win/win for awa and us employees

as long as doug parker gets the deadwood and waste out of the usairways

management

 

[MarkMyWords]

hope

I have to agree with Row and US0004. TPG is no Ed Colodny/Schofield. This entire transaction will be different. When you read a lot of the articles that are out there, and hear the comments by many of the analysts, TPG sees something of great value in the merged company. With the guidance of Mr Parker and the TPG, we may finally get the house cleaning (CCY) we have been looking for.

Personally, I am taking a wait and see approach. Once all the players are finalized and some of the grey areas are gone, then I will yeah or nay it.

 

[JayBrian]

I hope the European service out of PHL is not cut or sold off as rumored in some message board posts.

 

[Hope777]

I lean both ways on this. U will not survive as it is today. But will a AWA/U survive? Chances are much better it will. BUT, current U MANAGEMENT MUST GO to ensure that this works.

 

[alberteross]

I hope the European service out of PHL is not cut or sold off as rumored in some message board posts.

[post="267694"][/post]​

You and every other U employee

 

[DCAflyer]

I wonder where we would be today if TPG had succeeded in investing during bankruptcy 1 versus RSA.

[post="267682"][/post]​

In a word, solvent!

The possibly-pending merger would have been a done deal by the end of 2003, thus reducing administrative expenses. I have long held that U and AWA would end up together as it makes the most sense in terms of route structure and fleet cohesion. But without TPG at the helm of both, it just took longer. RSA really screwed things up on so many levels by not knowing what it was doing or how to run an airline, or any service industry for that matter.

I think, but we will never know, that had this happend in Chapter 11 part I, Siegel would have ended up running the combined company from Arlington... so his not fighting for TPG, and his losing integrity at the hands of Bronner, really was a career killer for him.

What the combined U/AWA will see is a new low-cost powerhouse ariline.... administrative costs will be reduced with one headquarters staff and one executive staff... an executive staff I might add who will stop tripping over dimes to save nickels. Since there is very little route overlap now (hub to hub only) we will see little if any reduced flying. That's what makes this so attractive to the employees.

I would suspect that the domestic U/UAL codeshare will be dramatically scaled back, if not terminated altoghether, but that the STAR alliance affiliation will remain intact since the STAR carriers will be loathe to kick U out when UAL is still in trouble. Along those lines and for that reason, UAL stands the greatest chance of any US carrier of suffering because a shored-up U/AWA means that the STAR carriers will hold less dependence on UAL and LH might feel less of a need to invest in a floundering US airline. We might see a built-up quasi-domestic codeshare with AC.

It is intresting that we are hearing reports that the New U will focus on the midwest, since neither carrier currently places an emphasis there. Could there be a plan being devised for a possible eventual failure of UAL? This is a very curious detail to me.

-DCAflyer

 

[RowUnderDCA]

The Wall Street Journal doesn't know where the "midwest" is, other than west of New Jersey.

 

[DCAflyer]

The Wall Street Journal doesn't know where the "midwest" is, other than west of New Jersey.

[post="267724"][/post]​

LMAO... that's a very good point!

 

[MrAeroMan]

I'm not so sure they'd be solvent. I think that even TPG had missed the target when forcasting airlines as did everyone else. I think they have been breathing a collective sigh of relief that RSA was the one that has taken the hit on the investment and not TPG. Now, with them back sniffing around it says they have looked at this worst case scenario and given all that they are still sniffing. Either they like the aroma or they've got a bad cold. TPG is much smarter than RSA in this arena. RSA was always in way over their heads and they were thinking a growing ecomomy would carry the airline over the hump. They never took into effect the other bad vitals that were under the covers. Now if Parker will just dump most of the executives at CCY, speak clearly and directly to the employees instead of perched high above them on their platinum pedestal, be truthful and honest then it might work. With TPG onboard it gives the whole deal much more legitimacy but if it's RSA you might as well start packing now.