EyeInTheSky
Veteran
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]
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]
