Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: TUESDAY, October 3, 1995 TAG: 9510030082
SECTION: BUSINESS PAGE: B8 EDITION: METRO
SOURCE: ASSOCIATED PRESS
DATELINE: NEW YORK LENGTH: Medium
Any deal to buy Arlington, Va.-based USAir would come as the carrier struggles to regain its footing after years of losses and a streak of crashes that undermined passengers' confidence.
USAir said in a news release that it had held preliminary discussions with both carriers concerning possible alliances, including an acquisition of USAir.
United's parent, UAL Corp., said its discussions were preliminary and it would study the idea about a month before deciding whether to make an offer for USAir. A spokesman for AMR Corp., parent of American, said it wouldn't comment.
UAL said the potential advantages of combined routes and operations were intriguing. In a conference call with analysts and reporters, chief financial officer Doug Hacker said United's strengths internationally and on the West Coast would combine well with USAir's focus on the East Coast.
``It would seem USAir's operations could contribute to the overall profitability of the company,'' Hacker said. ``If at the end of the day we conclude it doesn't work, we'll just say so.''
Takeovers among major U.S. airlines have been rare since a flurry of mergers in the 1980s. Any major carrier in recent years that may have been tempted to buy a rival would have been thwarted by a lack of cash, depressed stock prices and little collateral to back loans.
In recent months, the industry has seen a recovery as rising traffic and few additions to airline fleets have helped boost fares and profits.
Purchasing USAir, the nation's sixth-largest airline in terms of traffic, would significantly increase the size of either United or American, currently Nos. 1 and 2, respectively.
USAir itself has staged a mild comeback this summer after the deadly crashes of a year ago and steep fare discounts raised questions among some analysts about whether it would be the next airline to enter bankruptcy court.
Hacker said financing a deal would be part of UAL's study, but that it was committed to maintaining majority employee ownership. Just more than a year ago, United sold a majority stake to employees as a way to reduce costs and start the short-range United Shuttle, modeled on Southwest Airlines.
United went public with the talks at the early stage because the company had started informing its union leaders, Hacker said. The implication was that the news would leak out, and UAL wanted to make it clear that the talks were preliminary.
AMR was less forthcoming. ``As it has said on previous occasions, AMR Corp. is involved in various discussions with many different airlines on a frequent and ongoing basis. The company does not and will not comment on those discussions,'' its statement said.
British Airways, a significant investor in USAir, said it would have no comment until today. Calls to Berkshire Hathaway, billionaire Warren Buffett's investment company and a big stakeholder in USAir, weren't returned.
USAir said it is too soon to determine whether anything will come of the talks or whether it should continue to restructure as an independent airline.
Putting together relatively low-cost UAL with USAir, which has some of the highest costs in the industry, would pose significant problems of its own, said Ray Neidl, industry analyst at Furman Selz.
``I don't think American would do it under any circumstances. [AMR chief Robert] Crandall does not buy airlines,'' Neidl said.
USAir's stock finished at $11.62 1/2, up 12.5 cents Monday, on the New York Stock Exchange. News of the talks was released after the market closed.
by CNB