skykid
On Point
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Siegel suggests merger may be another option for US Airways
Saturday, January 10, 2004
By Dan Fitzpatrick, Pittsburgh Post-Gazette
Chief Executive Officer David Siegel yesterday hinted to employees that a merger also may be an option as US Airways contemplates a sale of some assets to raise much-needed cash.
In an employee message defending the company's decision to "explore strategic alternatives" with help from New York investment bank Morgan Stanley, Siegel said, "If there are some strategic partnerships that would enhance our financial standing, we must consider those as well'' as asset sales.
Siegel "has to be talking only about a merger or acquisition," said Bill Lauer, a local airline analyst and stockholder. "That is just another way of saying they want to sell the company."
Speculation was rife yesterday about what companies might be interested in some or all of the airline. Many analysts believe that American Airlines would covet the Washington-New York-Boston shuttle, having offered $300 million for it in 1997 only to lose out to US Airways.
Observers also think British entrepreneur Richard Branson, chairman of Virgin Atlantic Airways, may be interested in pieces of US Airways. Branson hopes to launch a new low-fare airline in the United States this year and told trade publication Air Transport World this week that he is evaluating the acquisition of an existing carrier.
Branson said that he is in discussions with an undisclosed airline about "carving off chunks of that operation." Branson reportedly is looking at Boston and Washington, D.C., as launching points -- US Airways has 14 gates at Reagan Washington National Airport and 17 gates at Boston's Logan Airport, along with 20 at New York's LaGuardia.
Branson "would love to have the gates at Boston," said New York airline analyst Ray Neidl, who covers US Airways. "He will not take the company, but he would love to have some of the strategic assets."
The Virgin executive who is leading the U.S. operation for Branson could not be reached yesterday.
One logical merger partner might be Chicago-based United Airlines, since the two carriers struck a union previously, only to see it shot down by antitrust regulators. But United is currently mired in bankruptcy court, and others carriers weakened by slumping air travel also may not be in a position to buy.
US Airways " is probably looking for a merger partner," Neidl said, "but I would not count on it happening. Why merge with them when you can pick up assets for cheap'' if the airline decides to liquidate.
Even while laying out the options yesterday to employees, Siegel expressed hope that US Airways can "successfully compete in the marketplace and grow the airline."
He also said he has not ruled out working with airline's unions, despite a recent postponement of his 2004 cost-cutting recovery plan due to union resistance to "work rule and productivity changes."
"I still remain hopeful," he said, "that we can engage our labor leaders in constructive dialogue on the business changes necessary to better serve our customers."
If US Airways follows through on plans to grow the airline, it may be more difficult to finance the purchase of new jets after ratings agency Standard & Poor's further lowered the airline's junk-bond bond rating yesterday, to B- from B. The New York rating agency cited rising competition from low-cost airlines and a potential default this year on $900 million in federal loan guarantees.
A sale of the company's assets, confirmed Thursday by US Airways chairman David Bronner, would be one way for the airline to meet its loan covenants, which include a stipulation that unrestricted cash stay above $1 billion through the second quarter of 2004. At the end of 2003, Siegel said yesterday, the company had an unrestricted cash balance of $1.29 billion.
"We cannot fritter that away," he said, "and we cannot fool ourselves into thinking we can simply spend that money, hope the world gets better and not take necessary steps to remain competitive."
I'm generally a cheerleader for all the existing US airlines doing well. I must say I hope whatever Branson does over here fails miserably.
Saturday, January 10, 2004
By Dan Fitzpatrick, Pittsburgh Post-Gazette
Chief Executive Officer David Siegel yesterday hinted to employees that a merger also may be an option as US Airways contemplates a sale of some assets to raise much-needed cash.
In an employee message defending the company's decision to "explore strategic alternatives" with help from New York investment bank Morgan Stanley, Siegel said, "If there are some strategic partnerships that would enhance our financial standing, we must consider those as well'' as asset sales.
Siegel "has to be talking only about a merger or acquisition," said Bill Lauer, a local airline analyst and stockholder. "That is just another way of saying they want to sell the company."
Speculation was rife yesterday about what companies might be interested in some or all of the airline. Many analysts believe that American Airlines would covet the Washington-New York-Boston shuttle, having offered $300 million for it in 1997 only to lose out to US Airways.
Observers also think British entrepreneur Richard Branson, chairman of Virgin Atlantic Airways, may be interested in pieces of US Airways. Branson hopes to launch a new low-fare airline in the United States this year and told trade publication Air Transport World this week that he is evaluating the acquisition of an existing carrier.
Branson said that he is in discussions with an undisclosed airline about "carving off chunks of that operation." Branson reportedly is looking at Boston and Washington, D.C., as launching points -- US Airways has 14 gates at Reagan Washington National Airport and 17 gates at Boston's Logan Airport, along with 20 at New York's LaGuardia.
Branson "would love to have the gates at Boston," said New York airline analyst Ray Neidl, who covers US Airways. "He will not take the company, but he would love to have some of the strategic assets."
The Virgin executive who is leading the U.S. operation for Branson could not be reached yesterday.
One logical merger partner might be Chicago-based United Airlines, since the two carriers struck a union previously, only to see it shot down by antitrust regulators. But United is currently mired in bankruptcy court, and others carriers weakened by slumping air travel also may not be in a position to buy.
US Airways " is probably looking for a merger partner," Neidl said, "but I would not count on it happening. Why merge with them when you can pick up assets for cheap'' if the airline decides to liquidate.
Even while laying out the options yesterday to employees, Siegel expressed hope that US Airways can "successfully compete in the marketplace and grow the airline."
He also said he has not ruled out working with airline's unions, despite a recent postponement of his 2004 cost-cutting recovery plan due to union resistance to "work rule and productivity changes."
"I still remain hopeful," he said, "that we can engage our labor leaders in constructive dialogue on the business changes necessary to better serve our customers."
If US Airways follows through on plans to grow the airline, it may be more difficult to finance the purchase of new jets after ratings agency Standard & Poor's further lowered the airline's junk-bond bond rating yesterday, to B- from B. The New York rating agency cited rising competition from low-cost airlines and a potential default this year on $900 million in federal loan guarantees.
A sale of the company's assets, confirmed Thursday by US Airways chairman David Bronner, would be one way for the airline to meet its loan covenants, which include a stipulation that unrestricted cash stay above $1 billion through the second quarter of 2004. At the end of 2003, Siegel said yesterday, the company had an unrestricted cash balance of $1.29 billion.
"We cannot fritter that away," he said, "and we cannot fool ourselves into thinking we can simply spend that money, hope the world gets better and not take necessary steps to remain competitive."
I'm generally a cheerleader for all the existing US airlines doing well. I must say I hope whatever Branson does over here fails miserably.
