transcript Lou Dobbs moneyline,aired June 15,2001.
DOBBS: Well, coming up here next, tonight's "CEOs on the Edge": a troubled merger at US Airways putting that executive team under lots of pressure. And tonight, powering America, upgrading the system, the latest battle between the White House and the Statehouse in California. Also, Sony owns up to shady advertising for last summer's "The Patriot." We'll tell you all about it, when MONEYLINE continues. (COMMERCIAL BREAK)
DOBBS: Now "CEOs on the Edge." Tonight, an executive team on the edge, a chairman and CEO. It's a bonus package tonight. They've backed themselves into a corner. The company is US Airways, which struck a merger agreement last year with United. But that deal is languishing and US Airways doesn't have a backup.
Peter Viles is here and has the story for us -- Pete.
PETER VILES, CNN CORRESPONDENT: Lou, the United offer is $60 a share in cash. US Airways shares closed tonight below $25 a share, which tells you Wall Street believes this deal is all but dead.
(BEGIN VIDEOTAPE)
VILES (voice-over): For the past 15 years, Stephen Wolf has had a safe strategy in the brutal airline wars: take a battered airline, whip it into shape, and then sell it. He sold Republic to Northwest, Flying Tigers to FedEx, United to its employees. And then the fourth deal, last May, US Airways to UAL.
STEPHEN WOLF, CHAIRMAN, US AIRWAYS: Today, we have the opportunity to fulfill our goal of becoming a world global-class ass carrier in one single stroke.
VILES: But Wall Street has never believed it will happen. US Airways has never traded close to the $60 a share UAL is offering. The street is betting Washington believes United is powerful enough without a foothold in the Northeast.
GLENN ENGEL, GOLDMAN SACHS: The deal has been out there for more than a year, and yet Justice has never said anything specifically about anything. So we know they're not happy, but we don't know exactly what it will take to make them happy to get this deal done. And that makes it seem as if the odds of this deal happening are diminishing.
VILES: Wolf has argued USAir cannot survive in its current form. In a statement to MONEYLINE, the airline said, quote: "There are only two platforms for an airline in the U.S. today: that of a large- network carrier and that of a nimble low-cost carrier. US Airways as a mid-size carrier is neither."
CEO Rakesh Gangwall, a 20-year airline veteran, is running an airline that's in a strategic holding pattern. He has said there is no plan b if the merger falls through.
RAY NEIDL, ABN AMRO: I think US Airways might have two choices if the UAL deal doesn't go through. One is new management comes in, tries to restructure the airline, reduce costs to make them competitive with the new competition, or secondly, the current management tries to stay in there and tries to work out another deal, possibly breaking up the airlines and selling it in pieces to different airlines. VILES: Meantime, US Airways is getting squeezed from all sides. It has relatively high labor costs, has not hedged aggressively against rising fuel costs, is suffering from the slowdown in business travel, and losing share to low-cost competitors like Jet Blue.
(END VIDEOTAPE)
VILES: Now, analysts, for the most part, do not fault Wolf for trying to sell the airline. If there is second-guessing, it's that he didn't try to sell it sooner, before the economy hit a brick wall, before fuel prices started rising and before Washington turned bearish on these airline mergers -- Lou.
DOBBS: More than just a few problems there.
VILES: More than a few.
DOBBS: Any prospects for resolution here?
VILES: Well, the deal either has to be done or come undone, and then they can try to find another deal.
DOBBS: They've held it out there for a year. What's another year?
VILES: It's got to fall apart or happen. And they've got to try to find another deal. Wall Street is betting they'd probably sell it in pieces.
DOBBS: OK, Pete, thanks -- Peter Viles.
