Merger Colated Statements

Status
Not open for further replies.

USA320Pilot

Veteran
May 18, 2003
8,175
1,539
www.usaviation.com
MODERATORS - PLEASE KEEP THIS A SEPARATE TOPIC

Today US Airways and America West confirmed the companies are in corporate transaction talks. Listed below are the official company statements:


US Airways

US Airways Group Inc. today confirmed that it is in discussions with America West Holdings Corp., regarding a “potential strategic transactionâ€. The company emphasized that there is no assurance that the discussions will lead to a definitive agreement. US Airways does not intend to make any further announcements until a definitive agreement is reached or discussions are terminated.


America West

In response to various inquiries and numerous speculative articles by the press, America West Airlines today confirmed that it is currently in discussions with US Airways regarding a “potential mergerâ€. The Company emphasized that there is no assurance that the discussions will lead to a definitive agreement. America West does not intend to make any further announcements until a definitive agreement is reached or discussions are terminated.

USA320Pilot comments: The press releases above are similar except US Airways called the potential deal a “potential strategic transaction†and America West called the deal a “potential mergerâ€. Why the difference?

I have reviewed virtually every article regarding the corporate transaction and have listed below most of the interesting points. The points below contain newspaper and airline comments, however, I have left out analyst and observer opinions.


April 19, 2005

David Bronner last night told The Associated Press that the talks were ongoing but said no deal was imminent. "A lot of things will happen in the U.S. airline industry in the next 12 to 18 months," Bronner said. "We'll do whatever we need to survive."

See Story

According to the Wall Street Journal report, if an agreement is reached, the initial plan would be to fly under the "US Airways" brand immediately but keep operations separate, linking the network through code-sharing, while fleets and personnel are integrated.

The merger scenario would require US Airways to find $350 million to $500 million in total new funding, and possibly to arrange an additional $250 million in loans. According to the Journal report, US Airways is approaching a number of sources, including private equity firms, other regional airlines and its creditors.
If US Airways succeeds, a holding company created by the merger would give stock in the new company to America West shareholders, US Airways creditors and new equity investors, The Journal reported, citing a person familiar with the discussions.

See Story

David Bronner told the Associated Press late last night that the airline had approached several carriers about a merger, but discussions with America West had progressed the farthest.

People close to the talks characterized them as well along and said that a conclusion could be reached within a few weeks. America West's chief executive, W. Douglas Parker, has been a loud proponents of the need for consolidation within the industry, while US Airways has been viewed by many analysts as ripe for a takeover once it emerges from bankruptcy.

Talk of the US Airways-America West discussions floated in aviation circles in the last few weeks. According to people close to the talks, America West executives met in Washington on Friday with staff members and advisers to the Air Transportation Stabilization Board

See Story

Talks "probably started in earnest a few months ago," but no deal is imminent, said Bronner, who also serves as CEO of the Retirement Systems of Alabama. "What (US) Airways is looking for, and this doesn't mean this will go through, but it's looking to be able to expand its network - meaning that it's very big in the East and has very little on the West Coast," Bronner said. "If we picked a different airline that we compete with on a daily basis ... that would be a much harder sell" (to regulators), Bronner said.

Bronner said the leadership at America West was another important factor propelling negotiations.

Executives who run the airline "are more than happy to go back to playing golf as opposed to running an airline that is extremely difficult," Bronner said, calling America West managers "extremely capable people ... that are well-respected in the industry." "It will continue on as a process," Bronner said. "There's a lot of things to be hammered out, a lot of meetings to be had, a lot of things that need to be improved ... then it will go to both boards and they'll see if they really want to do it or not."

See Story

US Airways, which is in bankruptcy protection, and cash-poor America West are in merger talks that have hit a critical stage as they search for an investor or investors willing to inject $500 million in equity into the combined enterprise. A source with direct knowledge of the talks confirmed that negotiations are now in an advanced stage, but said the major sticking point is the search for funding.

US Airways has discussed a merger with several rival carriers, Bronner told The AP, but negotiations with America West have progressed the furthest.

See Story


April 20, 2005

US Airways, already cutting back on some routes, has been under assault by Southwest in Philadelphia and Pittsburgh and other discounters in Charlotte, Washington and Boston. A merger would allow it to expand its stunted route network and grow to the West, where it offers very few flights. For its part, America West is hemmed in by Southwest at its hubs in Phoenix and Las Vegas, and needs places outside its Western U.S. territory to grow and use new airplanes it has on order.

One person familiar with the matter said US Airways has talked to several other airlines over the past two years about a potential merger. But the discussions with America West Holdings Corp., the airline's parent company, have gained momentum recently. In recent days, it had been expected that the two airlines could announce an agreement in principle to merge as soon as next week, but that timetable is in question.

If an agreement is reached, the initial plan would be to fly under the "US Airways" brand immediately but to keep the operations separate for a time, linking the network through code-sharing, while integration of fleet and personnel is phased in.

Talks could still break down, and there are some wild cards. If a deal is struck, America West and potential new equity backers would play a role in shaping the reorganization plan that would allow US Airways to emerge from bankruptcy this year, said one knowledgeable person.

Another possibility is that the bankruptcy judge overseeing US Airways could require a bidding process to determine if better offers could be had, said another knowledgeable person.

Even if a deal doesn't happen, US Airways, Arlington, Va., is positioned to emerge from bankruptcy as a stand-alone company later this year.

The merger scenario currently being discussed would require US Airways to find between $350 million and $500 million in total new funding, and possibly to arrange an additional $250 million in loans. US Airways is approaching a number of sources, including private equity firms, other regional airlines and its existing creditors. If it succeeds, a holding company created by the merger would give stock in the new company to America West shareholders, US Airways creditors and new equity investors, said one person familiar with the deal.

See Story

America West chief executive Douglas Parker believes airline consolidation is "inevitable," that the company would consider a merger and that he believes the regulatory environment is favorable given the industry's precarious financial condition. "One way for airlines to help themselves is to come together," Parker said.

See Story


April 21, 2005

The chief executive of America West Airline yesterday ticked off a list of reasons a deal involving his airline and US Airways would have better luck than past airline mergers.

Speaking to analysts, America West's chief, W. Douglas Parker, said his airline had already taken steps that would normally follow a deal, like cutting labor costs. While he refused to confirm that his airline was holding talks with US Airways, he said US Airways could weed out planes the two would not need in a combined fleet, something it can easily do since it is operating under bankruptcy protection.

Parker maintained that the government, which gave bailouts to both airlines, now wants airlines to solve problems without its help, meaning it might support a merger rather than reject it as anticompetitive, as federal agencies have done in the past. "There are a number of things that have changed to make whatever happens more successful than in the past," he said.

Parker said yesterday that much of the messiness of past mergers would be absent this time. Both America West and US Airways have attacked wage and benefit costs throughout this decade, reducing the need for further postmerger cuts. In addition, US Airways has already given up two dozen planes in bankruptcy. And with more than $1 billion owed on the two airlines' packages of federal loan guarantees, the government is less likely to fight a deal as it did a proposed merger of United Airlines and US Airways in 2000. Mr. Parker, long a proponent of industry consolidation, vowed that his airline would aggressively pursue opportunities. "We at America West do believe that consolidation in the industry is inevitable," he said.

It is still not clear how a deal would be financed. Mr. Parker ruled out spending any of the airline's $350 million in cash, which America West needs to run its operations.

Some analysts have questioned whether any arrangement could satisfy the myriad parties that would have to approve it, including G.E., the bankruptcy court, US Airways' creditors, aircraft companies like Airbus, and the federal loan board overseeing their $1 billion in loans. But one longtime restructuring adviser, who has helped fix several airlines, said he expected the two airlines could receive those parties' encouragement since it is in their best interests to see the pair succeed. Said the expert, who spoke on condition of anonymity, "They might all look at this and say, 'This is the way the industry is moving.' "

See Story

US Airways also explored a merger in the last year and a half with United Airlines, the former executive said, speaking on condition of anonymity. The conversations with United, bankrupt since 2002, "never completely died," he said, adding he was not sure if those talks had ended. Neither US Airways nor United would comment on whether new discussions between the pair had occurred since their merger deal fell apart in the summer of 2001.

US Airways Chief Executive Officer Bruce Lakefield, in a letter to employees yesterday, said only, "We have been in discussions with a number of interested parties over the last several months."

America West Chief Executive Officer Doug Parker, who declined yesterday to confirm any merger talks with US Airways, argued in a conference call with analysts that mergers are more feasible now for several reasons.

Labor costs are lower as a result of several bankruptcies and severe cutbacks in employee pay and benefits; a duplication of aircraft in any merger can be avoided by shedding planes in bankruptcy and handing them back to creditors; and federal regulators are more open to mergers than they were in 2000, when the U.S. Justice Department nixed a proposed union between United and US Airways.

What's more, Parker is convinced that the number of U.S. carriers will shrink in the coming years and he wants America West to participate. "We plan to look at potential transactions when and if they arise," he said. He proved that last year by bidding for a piece of ATA Airlines, which ultimately went to Southwest.
The US Airways name would likely survive any merger with America West, due to its cachet on the East Coast.

There is some speculation that Phoenix-based Mesa Air could provide the cash and actually help bring US Airways and America West together. Mesa flies as a contract carrier for both airlines, which provide it with a majority of its revenue. "It would shock me if [Mesa CEO] Jon Ornstein didn't find a way to craft himself some type of position in this deal," the former US Airways executive said.

See Story

The America West name would go away if the airline merged with US Airways, but plans call for the headquarters and management to be in Tempe, according to industry sources. They say that the America West brand probably would go away if the deal was struck but that the new airline would be run from Tempe.

A spokeswoman for Arizona Gov. Janet Napolitano's office said it was their understanding that America West would not relocate the headquarters.

See Story

America West Holding Corp. president and chief executive W. Douglas Parker said yesterday that the airline industry is ripe for consolidation after a period of sharp cuts in labor costs and that bankrupt carriers in particular make enticing merger targets.

"Consolidation of the airline industry is inevitable," Parker said in a conference call with Wall Street analysts. "America West may eventually play a role in that consolidation. We will look aggressively at potential transactions if and when they arrive." Parker said federal government regulators are likely becoming more willing to approve airline mergers. "Regulators are tired of hearing airlines say they need more help," he said. "One way for airlines to help themselves is to be able to consolidate." Parker would not comment specifically on the talks with US Airways. But in the conference call, he said labor costs had often presented major financial hurdles in previous airline merger attempts. He added that airlines under bankruptcy court protection were attractive takeover candidates because the leases on excess aircraft could be jettisoned, easing the financial burden of the acquiring airline.

During the investor call, Parker said that if America West entered into a merger with or made any type of equity investment in US Airways, it would not use its own capital. America West has about $345 million in cash, and Parker said the airline planned to increase its capital during the next three months. "Anything that America West is involved in would not involve using America West cash on hand for any kind of transaction," Parker said.

In a special telephone message to employees, Bruce R. Lakefield, US Airways president and chief executive, said the airline was focusing on its plan to emerge from bankruptcy protection and on its efforts to raise new capital through a "substantial equity investment." In the message, Lakefield acknowledged that the Arlington carrier was in discussions with a "number of interested parties" as it finalized its strategic plan to exit Chapter 11.

"There's no requirement in our mind to go through some consolidation," Parker said. "It's highly likely that where we end up is continuing on operating our standalone (airline) as well as we are and better than others are."

See Story

Still, talks between the two sides appear to be advanced, although any deal could be disrupted by this week's publicity, according to a source familiar with the talks who spoke to the Observer on condition of anonymity. America West presented the merger proposal last week to representatives of the Air Transportation Stabilization Board, the federal panel that guarantees loans to both carriers, the source said.

The companies had planned to announce the deal Monday, with an eye toward finishing the merger by the end of summer, the source said.

In an interview with The Associated Press, US Airways Chairman David Bronner hinted that America West executives would run the combined company.

See Story

America West Airlines wanted to brag about its financial results Wednesday, but investors, analysts, employees and others had only marriage on their minds. Parker and other top executives have spent a lot of time pursuing this deal, making frequent trips to the East Coast. With an industry shakeout inevitable given so many carriers in bankruptcy and no sign of relief from high oil prices, Parker said America West will be aggressive in considering potential deals so it doesn't miss a prime chance to grow. "We feel really good about how we've managed the cards we've been dealt," he said. "If there's a chance to get a few more cards and see if we can do better with those, I think we welcome that opportunity."

Parker said airline mergers are likely to be more successful today than in years past for several reasons.

For one, with so many airlines operating in bankruptcy, it's easy to get rid of planes by rejecting their leases under bankruptcy law. By taking planes out of the combined fleet, the merged airline starts off "right-sized as opposed to too big," he said. Also, large airlines have been forced to drastically cut labor and other expenses. Previously, the higher-cost airlines' expenses overwhelmed any savings a merger would bring in other areas.

See Story

Phoenix-based Mesa Air Group Inc. has a lot riding on a possible America West-US Airways merger and says it is willing to do what it takes to ensure a positive outcome. That could include providing critical financing needed to bring the deal to fruition and assuming a partnership role in a merged company. "We've had discussions with them (US Airways Group Inc.) on a whole series of issues, including investing," Mesa Chairman Jonathan Ornstein said.

Ornstein noted that Mesa invested $20 million in America West while it was in bankruptcy in the early '90s and made a $47 million profit. "This is not something we are unfamiliar with," he said.

Mesa operates 59 regional jets and 10 turboprops in the eastern United States under its code-sharing agreements with US Airways. Those agreements have not been affirmed by US Airways in its bankruptcy proceeding and could be rejected. That could force Mesa to ground planes and lay off about 700 pilots and 300 flight attendants. Mesa's routes also could be given to Air Wisconsin Airlines Corp., which has agreed to lend US Airways $125 million in exchange for rights to fly planes under the US Airways Express flag. "There is a lot at stake," Ornstein said. But he added Mesa could survive the loss of the US Airways code-sharing agreements. "We are the lowest-cost operator of regional jet equipment," Ornstein said. "There are other opportunities for our aircraft that we could pursue."

See Story


April 22, 2005

When asked to comment on recent reports regarding a potential merger of America West Holdings Corp. and US Airways Group Inc., (United CEO Glenn) Tilton said he understands the position of both companies in pursuing a deal. He said restructuring can only do so much, and growth through a transaction becomes a necessary element. "I applaud their view," he said. Such consolidation may include United at some point down the road, Tilton said. He said the company, based in Elk Grove Township, Ill., was "protecting its options" regarding its restructuring, including potential consolidation upon emergence from bankruptcy.

See Story

US Airways is attempting to avoid a potentially fatal financial squeeze play in a cutthroat market by merging with America West, Chairman David Bronner said Wednesday night. Bronner, US Airways chairman and CEO of the Retirement Systems of Alabama, the majority stockholder in the airline, said self-preservation amid severe competitive pressure prompted the merger discussions. "They're selling seats at a loss" in an attempt to force two or three carriers to fold, Bronner said of other major carriers. "Charging $89 to go from New York to San Francisco is just plain lunacy." The rock-bottom fares "can't go on very long where you don't have some casualties," Bronner said. "We're trying to avoid becoming one of them, and it's a full-time job."

"No airline can exist at these oil price levels, that is just as obvious as it can be," Bronner said. "What you have is oil hurting airlines at the bottom ... and coming down from the top is this crazy price war that's going on." For every $10 increase in the cost of a barrel of oil, an airline's expenses go up a quarter of a billion dollars, he said. "So that's all the difference in the world from a highly profitable organization to one that's bleeding everything it's got," he said.

See Story

America West Holdings Corp. began its talks with US Airways Group Inc. about a possible merger more than a year ago but was reluctant to move forward aggressively until US Airways reduced its labor costs significantly, a former US Airways executive said yesterday. "A deal never made sense until US Airways addressed its cost issue, which was the remaining labor concessions it needed," said the executive, who spoke on condition of anonymity because of the sensitivity of the talks.

America West is seeking an outside investor to help fund a US Airways acquisition. Without a cash infusion, America West does not plan to move forward with a deal because it does not want to negatively impact its own financial condition, said another source familiar with the negotiations. The airlines have held talks with Mesa Air Group Inc. and Retirement Systems of Alabama on possible investments, the former US Airways executive said. Retirement Systems became US Airways' controlling shareholder when it pumped in $240 million during the airline's first stint under bankruptcy protection in 2002. RSA is also US Airways' largest creditor.

The executive said America West is seen as a stronger airline than US Airways because it is profitable and has a stronger management team, although it is smaller than US Airways.

Meanwhile, America West chairman and chief executive W. Douglas Parker yesterday told members of the National Chamber of Commerce that consolidation is the key to addressing the problems of the airline industry. The fewer airlines, he said, the greater the ability of the remaining airlines to raise fares. "Our industry needs consolidation to fix itself, and the government needs to let it happen," Parker said.

Parker refused to address the US Airways deal specifically. He spoke of Justice Department officials' unwillingness to allow United Airlines parent UAL Corp. to acquire US Airways in 2001. At the time, the department said the deal was anti-competitive. Today, United, also operating under Chapter 11 protection, and US Airways are "the most troubled airlines in the U.S.," Parker said.

The industry needs to eliminate 6 to 7 percent of its seats, Parker said. A reduction of that size could boost revenue by 10 percent as airlines would have more pricing power, he added.

"If we can just get someone else to go away, we'll all be fine," Parker said.

Regards,

USA320Pilot
 
Status
Not open for further replies.