Can you spare a few hundred million? By John Yantis, TribuneA merger between America West Airlines and US Airways won’t get off the ground unless the companies can find investors.
Analysts estimate as much as $500 million is needed to make the deal work, and America West CEO Doug Parker has maintained that none of the company’s $345 million will be used.In an effort to reorganize during its bankruptcy, US Airways has attracted only $250 million in new equity from affiliates of two regional carriers.
Analysts say the airlines have gone to General Electric Co., a large creditor to both carriers, and Texas Pacific Group, America West’s largest stockholder for help.
Under the scenario, one theory suggests a holding company would be created to run the new America West-US Airways entity while the operations merged. The holding company would be overseen by America West executives and the headquarters would remain in Tempe.
An operational headquarters would be likely be located in Pittsburgh, Philadelphia or Charlotte, N.C., the latter two being US Airways hubs. Eventually, the company would fly under the US Airways banner and the America West name would be dropped.
The two hope to have a deal completed by next week.
Texas Pacific Group and GE declined to comment about their involvement.
Texas-based Texas Pacific Group is led by its managing partner, David Bonderman, a respected financier whose reach crosses everything from technology to entertainment.
Perry Flint, managing editor of the Air Transport World magazine, a business publication for worldwide airline managers, says he sees few positives for America West should a merger take place. But, if Texas Pacific Group gets involved, all bets are off, he said.
"They just have a license to mint money and make successful things," he said. "David Bonderman just has a golden touch of recognizing value. If he’s behind this, he must see something the rest of us mortals don’t. He participated in the America West rescue (from bankruptcy). He saw something there. He participated in the Continental Airlines rescue. He saw something there. He’s the chairman of Ryanair, the most profitable airline in the world, and he’s involved in Tiger Airways in Asia. Maybe there’s something he sees that we don’t see and he’s willing to ride it out for a few years."
According to the latest annual report of America West Holdings, the airline’s parent company, two stockholders collectively control more than 50 percent of the total voting power in the parent. The stockholders, TPG Partners, L.P. and TPG Parallel I, L.P, are controlled by the same company, TPG Advisors.
Texas Pacific Group has "staked its claim on the buyout frontier with a reputation for roping in companies other investors wouldn’t touch with a ten-foot pole," according to Yahoo Finance.
"TPG, with over $20 billion under management, often takes control of the companies in which it invests. The firm is generally interested in resuscitating well-known consumer and luxe brands that have fallen on hard times. Investments have included stakes in technology (Seagate Technology, ON Semiconductor), consumer franchises/products (Burger King, Ducati), retailers (J. Crew, Petco), and entertainment (Metro-Goldwyn-Mayer)," the Yahoo profile said.
Aviation consultant Mike Boyd, of the Colorado-based Boyd Group, who has argued an all-out merger would simply bring a sick operation to America West, sees Bonderman as one of the players who will pull off a deal no one expects.
A few years ago Bonderman wanted to invest in Air Canada when it was in bankruptcy. Reports have said the airline may be involved in a potential America West-US Airways deal.
"You’ve got people there that have dealt with Bonderman," Boyd said of Air Canada "He may be the glue here."
Another player mentioned in a possible deal is Jonathan Ornstein, CEO of east Phoenix-based Mesa Air Group, which flies regional jets under contract for US Airways and America West.
"When these people get together, Bonderman, Parker, Ornstein, something magic is going to take place," Boyd said. "You’ve got alchemy there. These are beyond suitable and sophisticated investors. These are visionaries."
Besides Texas Pacific Group, GE has a lot at stake in any deal.
In September, GE Commercial Aviation Services completed a $111 million term loan against engines and spare parts with America West Airlines. A unit of GE Commercial Finance, GECAS provides fleet financing to more than 200 airlines in 60 countries. It also has a fleet of some 1,200 owned aircraft and manages nearly 300 for others.
According to the Wall Street Journal, GE recently told both airlines to keep talking. A bankruptcy court agreed to postpone an end-of-April deadline for US Air’s plan of reorganization while the merger talks continue.
With these 3 idiots involved nothing can go wrong.
Analysts estimate as much as $500 million is needed to make the deal work, and America West CEO Doug Parker has maintained that none of the company’s $345 million will be used.In an effort to reorganize during its bankruptcy, US Airways has attracted only $250 million in new equity from affiliates of two regional carriers.
Analysts say the airlines have gone to General Electric Co., a large creditor to both carriers, and Texas Pacific Group, America West’s largest stockholder for help.
Under the scenario, one theory suggests a holding company would be created to run the new America West-US Airways entity while the operations merged. The holding company would be overseen by America West executives and the headquarters would remain in Tempe.
An operational headquarters would be likely be located in Pittsburgh, Philadelphia or Charlotte, N.C., the latter two being US Airways hubs. Eventually, the company would fly under the US Airways banner and the America West name would be dropped.
The two hope to have a deal completed by next week.
Texas Pacific Group and GE declined to comment about their involvement.
Texas-based Texas Pacific Group is led by its managing partner, David Bonderman, a respected financier whose reach crosses everything from technology to entertainment.
Perry Flint, managing editor of the Air Transport World magazine, a business publication for worldwide airline managers, says he sees few positives for America West should a merger take place. But, if Texas Pacific Group gets involved, all bets are off, he said.
"They just have a license to mint money and make successful things," he said. "David Bonderman just has a golden touch of recognizing value. If he’s behind this, he must see something the rest of us mortals don’t. He participated in the America West rescue (from bankruptcy). He saw something there. He participated in the Continental Airlines rescue. He saw something there. He’s the chairman of Ryanair, the most profitable airline in the world, and he’s involved in Tiger Airways in Asia. Maybe there’s something he sees that we don’t see and he’s willing to ride it out for a few years."
According to the latest annual report of America West Holdings, the airline’s parent company, two stockholders collectively control more than 50 percent of the total voting power in the parent. The stockholders, TPG Partners, L.P. and TPG Parallel I, L.P, are controlled by the same company, TPG Advisors.
Texas Pacific Group has "staked its claim on the buyout frontier with a reputation for roping in companies other investors wouldn’t touch with a ten-foot pole," according to Yahoo Finance.
"TPG, with over $20 billion under management, often takes control of the companies in which it invests. The firm is generally interested in resuscitating well-known consumer and luxe brands that have fallen on hard times. Investments have included stakes in technology (Seagate Technology, ON Semiconductor), consumer franchises/products (Burger King, Ducati), retailers (J. Crew, Petco), and entertainment (Metro-Goldwyn-Mayer)," the Yahoo profile said.
Aviation consultant Mike Boyd, of the Colorado-based Boyd Group, who has argued an all-out merger would simply bring a sick operation to America West, sees Bonderman as one of the players who will pull off a deal no one expects.
A few years ago Bonderman wanted to invest in Air Canada when it was in bankruptcy. Reports have said the airline may be involved in a potential America West-US Airways deal.
"You’ve got people there that have dealt with Bonderman," Boyd said of Air Canada "He may be the glue here."
Another player mentioned in a possible deal is Jonathan Ornstein, CEO of east Phoenix-based Mesa Air Group, which flies regional jets under contract for US Airways and America West.
"When these people get together, Bonderman, Parker, Ornstein, something magic is going to take place," Boyd said. "You’ve got alchemy there. These are beyond suitable and sophisticated investors. These are visionaries."
Besides Texas Pacific Group, GE has a lot at stake in any deal.
In September, GE Commercial Aviation Services completed a $111 million term loan against engines and spare parts with America West Airlines. A unit of GE Commercial Finance, GECAS provides fleet financing to more than 200 airlines in 60 countries. It also has a fleet of some 1,200 owned aircraft and manages nearly 300 for others.
According to the Wall Street Journal, GE recently told both airlines to keep talking. A bankruptcy court agreed to postpone an end-of-April deadline for US Air’s plan of reorganization while the merger talks continue.
With these 3 idiots involved nothing can go wrong.
