United Drops US Air bid
Jul 2, 2001 | 7:39 am
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United Drops US Air bid
Hi everyone,
just found this on CNN
(http://www.cnn.com/cnnfn/2001/07/02/deals/united_usair/)
United drops US Air bid
Regulators' opposition scuttles effort to forge nation's largest carrier
July 2, 2001: 7:10 a.m. ET
NEW YORK (CNNfn) - The parent company of United Airlines is dropping plans to buy US Airways Group Inc. for $4.3 billion, scuttling what would have been the biggest merger in the airline industry, a source familiar with the situation told CNNfn.
The move by UAL Corp. (UAL: Research, Estimates) comes as no surprise to most observers. The deal has faced opposition by Justice Department antitrust regulators, and Secretary of Transportation Norman Mineta had gone on record questioning whether the merger would win approval.
Critics in Congress and elsewhere noted that the merger of the nation's No. 1 and No. 6 airlines would have meant that the three biggest U.S. carriers would have controlled about 75 percent of domestic air traffic, leading to higher fares and decreased service.
United executives had continued to insist until recently that the deal would be good for its customers, employees and shareholders.
The price of US Airways (U: Research, Estimates) stock has dropped far below the $60-a-share cash purchase price set when the deal was announced in May of last year, a sign that investors also doubted the deal would be completed.
The collapse of the deal is a setback for United, the world's biggest air carrier, which now stands to lose that ranking to AMR Corp.'s (AMR: Research, Estimates) American Airlines once American integrates recently purchased Trans World Airways into its system.
It also leaves an uncertain future for US Airways, whose executives have said it may not be able to survive as an independent carrier. In January, when AMR announced its deal for bankrupt TWA, it also entered the UAL-US Airways deal, agreeing to purchase a share of the US Airways assets.
Under the deal, AMR would have operated US Airways' profitable Northeast shuttle, the prize of its system, jointly with United, while owning 49 percent of DC Air, the start-up airline that United and US Airways unveiled with the deal in a bid to assuage regulators' concerns.
The Wall Street Journal reported Monday that AMR is still interested in buying US Air assets. But AMR CEO Donald Carty told USA Today last month his interest in the assets had waned given the current downturn in the airline industry. AMR warned last month it expects to lose $100 million or more in the second quarter.
"The acquisition of US Airways or any assets of US Airways involves more capital, and therefore we have some ambivalence about spending capital in this kind of environment," Carty was quoted as saying.
Click here for a look at airline stocks
The collapse of the deal could remove the pressure on other major carriers such as No. 3 Delta Air Lines (DAL: up $0.43 to $44.08, Research, Estimates), No. 4 Northwest Airlines (NWAC: up $1.68 to $25.25, Research, Estimates) and No. 5 Continental Airlines (CAL: up $2.40 to $49.25, Research, Estimates) to find merger partners.
Any deal involving those carriers would have been difficult, given an agreement that gave Northwest the right to block any purchase of Continental, but also prevented Northwest from acquiring Continental itself.
US Airways stock gained 63 cents to $24.30 Friday, while shares of UAL closed up $1.21 to $35.15 and AMR rose 93 cents to $36.13.
--------------------------------------------------------------------------------
CNNfn correspondent Fred Katayama contributed to this report
Cheers, Zac
just found this on CNN
(http://www.cnn.com/cnnfn/2001/07/02/deals/united_usair/)
United drops US Air bid
Regulators' opposition scuttles effort to forge nation's largest carrier
July 2, 2001: 7:10 a.m. ET
NEW YORK (CNNfn) - The parent company of United Airlines is dropping plans to buy US Airways Group Inc. for $4.3 billion, scuttling what would have been the biggest merger in the airline industry, a source familiar with the situation told CNNfn.
The move by UAL Corp. (UAL: Research, Estimates) comes as no surprise to most observers. The deal has faced opposition by Justice Department antitrust regulators, and Secretary of Transportation Norman Mineta had gone on record questioning whether the merger would win approval.
Critics in Congress and elsewhere noted that the merger of the nation's No. 1 and No. 6 airlines would have meant that the three biggest U.S. carriers would have controlled about 75 percent of domestic air traffic, leading to higher fares and decreased service.
United executives had continued to insist until recently that the deal would be good for its customers, employees and shareholders.
The price of US Airways (U: Research, Estimates) stock has dropped far below the $60-a-share cash purchase price set when the deal was announced in May of last year, a sign that investors also doubted the deal would be completed.
The collapse of the deal is a setback for United, the world's biggest air carrier, which now stands to lose that ranking to AMR Corp.'s (AMR: Research, Estimates) American Airlines once American integrates recently purchased Trans World Airways into its system.
It also leaves an uncertain future for US Airways, whose executives have said it may not be able to survive as an independent carrier. In January, when AMR announced its deal for bankrupt TWA, it also entered the UAL-US Airways deal, agreeing to purchase a share of the US Airways assets.
Under the deal, AMR would have operated US Airways' profitable Northeast shuttle, the prize of its system, jointly with United, while owning 49 percent of DC Air, the start-up airline that United and US Airways unveiled with the deal in a bid to assuage regulators' concerns.
The Wall Street Journal reported Monday that AMR is still interested in buying US Air assets. But AMR CEO Donald Carty told USA Today last month his interest in the assets had waned given the current downturn in the airline industry. AMR warned last month it expects to lose $100 million or more in the second quarter.
"The acquisition of US Airways or any assets of US Airways involves more capital, and therefore we have some ambivalence about spending capital in this kind of environment," Carty was quoted as saying.
Click here for a look at airline stocks
The collapse of the deal could remove the pressure on other major carriers such as No. 3 Delta Air Lines (DAL: up $0.43 to $44.08, Research, Estimates), No. 4 Northwest Airlines (NWAC: up $1.68 to $25.25, Research, Estimates) and No. 5 Continental Airlines (CAL: up $2.40 to $49.25, Research, Estimates) to find merger partners.
Any deal involving those carriers would have been difficult, given an agreement that gave Northwest the right to block any purchase of Continental, but also prevented Northwest from acquiring Continental itself.
US Airways stock gained 63 cents to $24.30 Friday, while shares of UAL closed up $1.21 to $35.15 and AMR rose 93 cents to $36.13.
--------------------------------------------------------------------------------
CNNfn correspondent Fred Katayama contributed to this report
Cheers, Zac
Jul 2, 2001 | 7:44 am
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