Intresting AWAC/U merger article


Uber User
Dec 9, 2001
Total Time
Published: June 29, 2005
The new airline that would be formed by the proposed merger of US Airways and America West will be primarily controlled by outside investors, including the federal government, a regulatory filing showed yesterday.

US Airways, the seventh-largest domestic carrier, and America West, the eighth largest, announced plans to merge last month, in a deal valued by the pair at $1.5 billion.

The deal is subject to approval by a federal bankruptcy court because US Airways is operating under Chapter 11 protection, its second bankruptcy in three years. The Air Transportation Stabilization Board, the federal board that oversees $1 billion in guaranteed loans granted to both airlines after the September 2001 attacks, will also rule on the merger.

A federal judge has set Friday as the deadline for the submission of competing bids, and is set to rule on the merger next Thursday. Staff members at the stabilization board are in the final stages of considering the deal, but the board has not said when it may rule.

The Justice Department closed its investigation yesterday. It said last week that it had not found any antitrust implications, since the airlines' route systems do not overlap. America West's routes are concentrated west of the Rockies, while US Airways serves the East Coast.

The two airlines plan to operate under the US Airways name, but W. Douglas Parker, the chief executive of America West, will head the airline. The new US Airways headquarters will be in Phoenix, where America West is based.

Outside investors, who are putting up a combined $500 million in equity, will control 49 percent of the airline, up from the 41 percent that the two airlines previously allocated to their investors, according to a proxy statement issued by America West to its shareholders.

The combined airline's biggest shareholder will be the Wellington Management Company, an investment firm in Boston that is investing $149 million and will receive 14.8 percent of the new airline. Wellington is also the largest shareholder in Northwest Airlines and Continental Airlines, and is the second-largest investor in the AMR Corporation, the parent of American Airlines.

Air Wisconsin, a regional carrier, will be the second-biggest holder in the new airline, with 13.6 percent. The federal loan board comes next, with 11.2 percent. America West said that the federal Pension Benefit Guaranty Corporation is expected to own at least 5 percent, but that its percentage had not been determined.

Smaller stakes will go to two hedge funds: PAR Investment Partners, another Boston firm, and Peninsula Investment Partners, based in Charlottesville, Va.

Shareholders of America West would hold 38 percent of the combined company, while US Airways creditors would receive about 12 percent, the regulatory filing said.

Out of the US Airways share, the Air Line Pilots Association, which represents pilots at both airlines, will receive a stake in the new airline, but the airlines' other unions are not set to receive equity, according to the regulatory filing.

The Retirement Systems of Alabama, the pension fund that had been the biggest investor in US Airways after it emerged from its first bankruptcy in April 2003, will not invest in the combined airline. The chief executive of the fund, David G. Bronner, had served as the chairman of US Airways.