Fortune Interview with RSA's David Bronner



[P][FONT face=Times New Roman][FONT size=3][STRONG]Pension Plan Gambler - CEO David Bronner of Retirement Systems of Alabama takes a chance on US Airways.[/STRONG] [/FONT][/FONT][/P]
[P][FONT face=Times New Roman size=3]NEW YORK (Fortune) - Monday, November 11 - Pension funds don''t generally run around trying to take over major airlines. The two are as opposite as trains and planes--one geared to be slow and on time, the other considered much riskier. Most pension funds, though, aren''t run by David Bronner, the iconoclastic manager of the $25 billion Retirement Systems of Alabama. Bronner has made a career--and lots of money for retirees--out of unorthodox bets on golf courses and TV stations. But when we learned in late September that he had outbid Texas Pacific Group by offering $240 million for nearly 40% of bankrupt US Airways, we decided to find out what his angle is this time[/FONT][/P]
[P][FONT face=Times New Roman][FONT size=3][STRONG]Fortune:[/STRONG] Why get into the airline business now?[/FONT][/FONT][/P]
[P][FONT face=Times New Roman][FONT size=3][STRONG]Bronner: [/STRONG]They promised I could fly one of the planes[/FONT][/FONT][/P]
[P][FONT face=Times New Roman][FONT size=3][STRONG]Fortune:[/STRONG] Does your plan go beyond that?[/FONT][/FONT][/P]
[P][FONT face=Times New Roman][FONT size=3][STRONG]Bronner: [/STRONG]We''re trying to be the [STRONG]largest equity player[/STRONG] in a restructured airline that happens to be the largest carrier east of the Mississippi. We''ve been loaning money to airlines since the ''70s. In this instance we saw a deal structured by some very [STRONG]shrewd investment bankers[/STRONG]. Under a totally restructured company, we could have 37% of the stock.[/FONT][/FONT][/P]
[P][FONT face=Times New Roman][FONT size=3][STRONG]Fortune:[/STRONG] But aren''t airlines too risky for a pension fund?[/FONT][/FONT][/P]
[P][FONT face=Times New Roman][FONT size=3][STRONG]Bronner: [/STRONG]That''s typically correct. But we''ve now got this government package to help airlines. [STRONG]If this thing comes out of bankruptcy[/STRONG] under the guidelines of a good business plan, [STRONG]we should have the strongest airline in the country[/STRONG].[/FONT][/FONT][/P]
[P][FONT face=Times New Roman][FONT size=3][STRONG]Fortune:[/STRONG] Are you as optimistic about the rest of the industry?[/FONT][/FONT][/P]
[P][FONT face=Times New Roman][FONT size=3][STRONG]Bronner: [/STRONG]No. It''s clear we''re going to see another downturn, if nothing else because of Iraq. But a restructured airline that gets its compensation and its costs under control and has a seven-year window [STRONG]won''t have an immediate crisis[/STRONG]. That''s totally different from what the others face.[/FONT][/FONT][/P]
[P][FONT face=Times New Roman][FONT size=3][STRONG]Fortune:[/STRONG] Then it pays to go bankrupt?[/FONT][/FONT][/P]
[P][FONT face=Times New Roman][FONT size=3][STRONG]Bronner: [/STRONG]I guess.[/FONT][/FONT][/P]
[P][FONT face=Times New Roman][FONT size=3][STRONG]Fortune:[/STRONG] What''s your investment philosophy?[/FONT][/FONT][/P]
[P][FONT face=Times New Roman][FONT size=3][STRONG]Bronner: [/STRONG]We generally want to go into industries when no one else wants them. Of course, we have to determine if the business will still be there later in life. For an airline, we ask, Can it compete with the low-cost carriers? You know, not everybody can spend all day flying across country and stopping like a bus. If I have a lot of time on my hands or I''m bringing my mother-in-law to see me, I can understand a long flight. But if you''re on business or going to a funeral, you have to fly a major carrier. [STRONG]It''s an industry that is not going out of business. People aren''t going to stop flying.[/STRONG][/FONT][/FONT][/P]
[P][FONT face=Times New Roman][FONT size=3][STRONG]Fortune:[/STRONG] Are you going to be an active owner?[/FONT][/FONT][/P]
[P][FONT face=Times New Roman][FONT size=3][STRONG]Bronner: [/STRONG]We''re not active at all. We don''t have time to get involved in day-to-day operations. My job is to find investments that will make a good rate of return.[/FONT][/FONT][/P]
[P][FONT face=Times New Roman][FONT size=3][STRONG]Fortune:[/STRONG] So you won''t be replacing the pretzels with peanuts?[/FONT][/FONT][/P]
[P][FONT face=Times New Roman][FONT size=3][STRONG]Bronner: [/STRONG]US Airways is always pretzels. I was looking for peanuts, but some guy told me they don''t do that anymore. Might be a good idea.[/FONT][/FONT][/P]
[P][FONT face=Times New Roman][FONT size=3][STRONG]Fortune:[/STRONG] Will you get free visits to the cockpit?[/FONT][/FONT][/P]
[P][FONT face=Times New Roman][FONT size=3][STRONG]Bronner:[/STRONG] I prefer not to.[/FONT][/FONT][/P]