Wsj: Us/awa Seek Allies For Merger

EyeInTheSky

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Dec 2, 2003
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US Airways, America West Seek
Allies to Help Fund a Merger

As Much as $500 Million
Is Needed to Cinch Deal;
GE Extends Talk Deadline
By SUSAN CAREY
Staff Reporter of THE WALL STREET JOURNAL
May 2, 2005

US Airways Group Inc. and America West Holdings Corp., which remain in serious merger talks, are searching among other airlines and investment firms for the money needed to cinch the deal.

People familiar with the discussions have said the two must raise a total of as much as $500 million to fund US Airways' exit from Chapter 11 and marriage to America West.

General Electric Co., the largest creditor to both carriers, gave them the green light Friday to keep talking. GE had asked US Airways, under terms of a financial-aid package announced late last year, to file a plan of reorganization with the U.S. Bankruptcy Court in Alexandria, Va., by the end of April. Friday, GE and US Airways, the nation's seventh-largest airline by traffic, said that deadline, already postponed three times, had been extended again for an undisclosed period in light of the merger talks.

US Airways, of Arlington, Va., and America West, of Tempe, Ariz., have been in discussions for more than a month on a potential merger that US Airways sees as the linchpin to its successful emergence from its second visit to bankruptcy court in two years. The combination would knit together US Airways' extensive East Coast operations with America West's West Coast flights under US Airways' brand. America West is the No. 8 U.S. carrier. Both airlines have confirmed they are talking, but declined to comment further.

Both carriers are struggling with high fuel costs and tight fare pricing, although America West surprised Wall Street by posting a small profit for the first quarter. On Friday, US Airways said its net loss widened to $191 million, or $3.48 a share, from $177 million, or $3.28 a share, a year earlier. Revenue declined 4.3% to $1.63 billion from $1.7 billion.

US Airways already has attracted $125 million in debtor-in-possession financing from an affiliate of closely held Air Wisconsin Airlines, a regional carrier that recently lost its contract to fly for UAL Corp.'s United Airlines. In an effort to get those planes back to work, Air Wisconsin put money into US Airways, an investment that was expected to translate into 19% to 26% of the stock in a reorganized, stand-alone US Airways. Even if new equity investors come into US Airways, Air Wisconsin's stake can fall no lower than 19%, according to its agreement with US Airways. Air Wisconsin declined to comment.

US Airways also recently signed an agreement in which another regional operator, Republic Airways Holdings Inc., would invest $125 million in US Airways when it steps out of Chapter 11. Controlled by Wexford Capital LLC, Republic says its potential investment is an option that it doesn't have to take up if it doesn't like US Airways' business plan.

Republic has said it won't invest unless US Airways can line up $100 million more from other sources. Talks with Wexford and Republic are expected to be held this week, according to one party familiar with the matter. Wexford didn't return a call seeking comment.

Write to Susan Carey at [email protected]
 
It would not surprise me to see Lufthansa, Mesa, and RSA provide the US Airways' exit financing and merger capital. Then US Airways and America West would merge followed by a strategic transaction with Air Canada, which would then create the new Star Alliance North American anchor.

Regards,

USA320Pilot
 
USA320Pilot said:
It would not surprise me to see Lufthansa, Mesa, and RSA provide the US Airways' exit financing and merger capital. Then US Airways and America West would merge followed by a strategic transaction with Air Canada, which would then create the new Star Alliance North American anchor.

Regards,

USA320Pilot
[post="265998"][/post]​
Anchor. Interesting choice of words. Unfortunately U seems to be an anchor which outweighs the rest of the ship.
 
USA320Pilot said:
It would not surprise me to see Lufthansa, Mesa, and RSA provide the US Airways' exit financing and merger capital. Then US Airways and America West would merge followed by a strategic transaction with Air Canada, which would then create the new Star Alliance North American anchor.

Regards,

USA320Pilot
[post="265998"][/post]​

I don't think you are going to see RSA invest any more of its fund money into US Airways.. Dr Bone is busy trying to get out of the airline business!!

LH would have to be a minority partner.. Remember they still have to deal with foreign ownership rules as does Air Canada.

500 mil cash is quite a bit of money to invest in two airlines that are losing money.. Although AmWest did make a profit in the quarter it was not on operations. Operations lost money.. Keep your eye on the ball.

US CASM still in the 10 cent area including Fuel.. Lets not be blind to this fact. JetBlue and Southwest still in the 6.6 to 7.5 CASM range including fuel.. US has a long way to go to catch up to that.
 
justaumechanic said:
US CASM still in the 10 cent area including Fuel.. Lets not be blind to this fact. JetBlue and Southwest still in the 6.6 to 7.5 CASM range including fuel.. US has a long way to go to catch up to that.
[post="266001"][/post]​

Actually, 10.89 cents to be exact. To get close to WN's CASM would require another 3 cent reduction in CASM, meaning about $396 million in further cost savings per quarter - that's nearly $1.6 billion a year.

To be fair, a better comparison would be to AirTran/AmWest - network carriers offering F/C, etc. That only requires another 2 cent reduction in CASM (roughly) or $232 million in cost reductions per quarter (call it another $925 million in cost reductions per year).

Of course, that leaves out the Express component with a CASM of nearly 16 cents in the first quarter and responsible for $58 million of the $191 million loss (28% of the loss but only 15% of ASM's).

Jim
 
USA320Pilot said:
It would not surprise me to see Lufthansa, Mesa, and RSA provide the US Airways' exit financing and merger capital. Then US Airways and America West would merge followed by a strategic transaction with Air Canada, which would then create the new Star Alliance North American anchor.

Regards,

USA320Pilot
[post="265998"][/post]​
In your dreams LH will finance US/HP to be the Star Alliance U.S. 'anchor'.

Star needs an airline with the reach and hubs of UA. The alliance might add HP, but it will not use US/HP to replace UA. Because US/HP can't.
 
Please, what lender with any Business sense would invest in U with its current management in place? I just hope that if any merger or transaction happens, ALL U MANAGEMENT IS SHOWN THE DOOR ! ! !
 
Putting together UA and CO would make for a much more effective Star anchor than a US/HP/AC cluster****.
 
avek00 said:
Putting together UA and CO would make for a much more effective Star anchor than a US/HP/AC cluster****.
[post="266020"][/post]​



I ask, how long even using BK protection can a business keep showing big negative figures and keep on keep on? How many times before it's over. From this perch it's long over due to just evaporate. Talk of mergers might as well be about the flim flam man saving the day, makes as much sense. This old dog needs put down so everyone can move on while the fat cats move on too and spread their cancer elsewhere. Think about it, they eviscerated this dog and still their costs are too high, to get cost down further it must be non existent….can you say___reality.
 
calibrator said:
I ask, how long even using BK protection can a business keep showing big negative figures and keep on keep on? How many times before it's over. From this perch it's long over due to just evaporate. Talk of mergers might as well be about the flim flam man saving the day, makes as much sense. This old dog needs put down so everyone can move on while the fat cats move on too and spread their cancer elsewhere. Think about it, they eviscerated this dog and still their costs are too high, to get cost down further it must be non existent….can you say___reality.
[post="266026"][/post]​



the reality may be the new lcc that will be formed via hp-ac-us merger/strategic transaction.


one lean, mean, customer pleasing, money-making machine...

the largest lcc w/ first class ....in the world!

managed by dp and his team in tempe.

let us see what happens...could be a very interesting week or two...


good luck to all!
 
Does anyone notice that the ultimate money guys, GECAS, chose to get involved with US/HP rather than that other BK darling United Airlines??

Also amusing that our beloved A320 pilot has already spun this proposal into a 'Star-NorthAmerican-AirCanada-anchor-RSA-UCT-wannaflythebigjets' boondoggle.
 
calibrator said:
I ask, how long even using BK protection can a business keep showing big negative figures and keep on keep on? How many times before it's over. From this perch it's long over due to just evaporate.
[post="266026"][/post]​

No, its not even close to being over. This airline business is now not about making money, its about cash flow. Hence GECAS's interest in keeping it flowing.

DENVER, CO
 
USA320Pilot said:
It would not surprise me to see Lufthansa, Mesa, and RSA provide the US Airways' exit financing and merger capital. Then US Airways and America West would merge followed by a strategic transaction with Air Canada,
[post="265998"][/post]​

You might not be too far off the mark as its a near certainty that foreign ownership laws will be changed. Nothing, any longer, would suprise me.

DENVER, CO
 
whatkindoffreshhell said:
Does anyone notice that the ultimate money guys, GECAS, chose to get involved with US/HP rather than that other BK darling United Airlines??
[post="266029"][/post]​

Assuming that GECAS is "involved" outside of basically owning US, they are doing only due to their huge exposure to US and HP. Their exposure to UA is probably less, and they also probably don't feel it's quite as "at risk" as their US exposure.
 
Let's see...

Lufthansa has been talking to UA and expressing interest in lending their support in some form to their partner for several years. Most recently there was speculation of them being involved in UA's exit financing.

Air Canada received help from UA at one time in the form of A340 aircraft.

Lufthansa and UA are the "Founding Fathers" of the Star Alliance and have had a very good relationship since its inception.

Let me guess... Now suddenly they will "spurn" UA for a combination of 2 LCC's with little presence in the Midwest and no Pacific presence at all. OK, I get it. :rolleyes:

I'm not saying that LH and AC won't be involved with US&HP. Anything is possible. But the idea that this will become the new "anchor" for the Star Alliance is a stretch at best.
-------------------------------------------------

I also find it humorous (and typical) that a certain US Pilot criticized UA at the mention of LH ownership in UA, saying that UA was so out of options they had to look abroad for help, and how this proved how desperate UA was, yadda, yadda, yadda...
But the thought of LH & AC financing a deal with HP and US is the best thing since sliced bread and will form the new anchor. :blink: Just another example of the spin and hypocracy. :rolleyes:

I do agree with the poster who pointed out that "anchor" was an interesting choice of words for anything involving US Air. :lol: :lol: :lol:
 

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