PointJunkie
Jul 1, 01, 2:09 pm
From today's Charlotte Observer
http://www.charlotte.com/observer/natwor/docs/usair0701.htm
US Airways MErger
United will scrap deal, sources say
Price, U.S. approval are factors; next move up to Stephen Wolf
By TED REED
United Airlines intends to drop out of its deal to buy US Airways because it can't make an Aug. 1 deadline and doesn't want to pay the negotiated price, sources say.
United has little expectation that it will receive the required approval of the U.S. Justice Department in time to meet the date, say sources familiar with the transaction.
United hasn't necessarily lost interest in US Airways. But it has clearly lost interest in paying the $60 per share price for the airline that it agreed to in May 2000, the sources say.
Since then, the airline industry has been severely affected by the economic slowdown. United parent UAL Corp. lost $305 million in the first quarter and says it expects a second-quarter loss. Meanwhile, US Airways' stock closed at $24.30 on Friday, near a 52-week low.
If it withdrew from the deal, United would be forced to pay US Airways a $50 million breakup fee, under terms of the deal.
United, the country's second largest airline, would have acquired US Airways, the sixth largest, in a deal currently valued at $12.3 billion, including $4.3 billion in cash for the shares.
The deal would have made Charlotte, now US Airways' largest hub, United's Southeastern hub. Most of US Airways' 47,000 employees, including 8,800 in Charlotte, would join United.
Neither airline would comment Saturday. The Observer reported in June that Justice Department approval by the August deadline looked doubtful, and that United might look to restructure the deal at a lower price. The Washington Post reported United's intent to withdraw from the deal on Saturday.
It is unclear what course US Airways would follow if another United bid did not materialize.
Rick Dubinsky, chairman of the United chapter of the Air Line Pilots Association, said the next step would be up to US Airways Chairman Stephen Wolf. Wolf has said US Airways cannot survive in its present form, since it is neither a low-cost carrier nor a global carrier with an international network.
"I think the ball is in Stephen Wolf's court," Dubinsky said. "He made a bunch of predictions, and now it's time to see if it was all bluff and bluster."
If the deal falls through, Wolf and President Rakesh Gangwal could seek to manage the airline more actively, said Roy Freundlich, spokesman for the US Airways ALPA chapter.
"The management team was in the middle of a five-point plan to bring this airline along as a stand-alone carrier," he said. "They abandoned that plan to pursue the merger, and they have to get back on it."
http://www.charlotte.com/observer/natwor/docs/usair0701.htm
US Airways MErger
United will scrap deal, sources say
Price, U.S. approval are factors; next move up to Stephen Wolf
By TED REED
United Airlines intends to drop out of its deal to buy US Airways because it can't make an Aug. 1 deadline and doesn't want to pay the negotiated price, sources say.
United has little expectation that it will receive the required approval of the U.S. Justice Department in time to meet the date, say sources familiar with the transaction.
United hasn't necessarily lost interest in US Airways. But it has clearly lost interest in paying the $60 per share price for the airline that it agreed to in May 2000, the sources say.
Since then, the airline industry has been severely affected by the economic slowdown. United parent UAL Corp. lost $305 million in the first quarter and says it expects a second-quarter loss. Meanwhile, US Airways' stock closed at $24.30 on Friday, near a 52-week low.
If it withdrew from the deal, United would be forced to pay US Airways a $50 million breakup fee, under terms of the deal.
United, the country's second largest airline, would have acquired US Airways, the sixth largest, in a deal currently valued at $12.3 billion, including $4.3 billion in cash for the shares.
The deal would have made Charlotte, now US Airways' largest hub, United's Southeastern hub. Most of US Airways' 47,000 employees, including 8,800 in Charlotte, would join United.
Neither airline would comment Saturday. The Observer reported in June that Justice Department approval by the August deadline looked doubtful, and that United might look to restructure the deal at a lower price. The Washington Post reported United's intent to withdraw from the deal on Saturday.
It is unclear what course US Airways would follow if another United bid did not materialize.
Rick Dubinsky, chairman of the United chapter of the Air Line Pilots Association, said the next step would be up to US Airways Chairman Stephen Wolf. Wolf has said US Airways cannot survive in its present form, since it is neither a low-cost carrier nor a global carrier with an international network.
"I think the ball is in Stephen Wolf's court," Dubinsky said. "He made a bunch of predictions, and now it's time to see if it was all bluff and bluster."
If the deal falls through, Wolf and President Rakesh Gangwal could seek to manage the airline more actively, said Roy Freundlich, spokesman for the US Airways ALPA chapter.
"The management team was in the middle of a five-point plan to bring this airline along as a stand-alone carrier," he said. "They abandoned that plan to pursue the merger, and they have to get back on it."