UNITED AIRLINES chairman Gerald Greenwald suggests that "significant doubts" among the group's employee owners contributed to the decision to drop its pursuit of a merger with USAir.
United finally announced on 13 November that it would no longer press ahead with its talks. American Airlines, which has also been carrying out due diligence, has declined to comment on the United decision, but chairman Robert Crandall had told employees that he would wait for United to make the first move.
Despite United's tactical withdrawal, analysts still expect to see a wave of consolidation as airlines digest the latest round of talks and strategies thrown up by the USAir dialogue. "This is just the opening salvo," comments one analyst.
Greenwald says that the USAir talks are still covered by a confidentiality agreement, commenting only that the merger failed to satisfy "...all of the criteria set for a potential transaction" despite the potential for "significant revenue benefits".
The basic conditions included the financial target of staying on course for an investment-grade credit rating. Rating agency Standard & Poor's had put United on credit watch, given the $7.9 billion debt that USAir would add to the group's existing $16 billion.
Greenwald says that the United board also laid down requirements that any deal would need the backing of United's employee owners and would not dilute their 55% stake in the company. In a message to workers, Greenwald admits that "significant doubts" among the United employees had helped kill a potential deal.
USAir, which is on course to post a profit for the year, says that it is prepared to go it alone. "Our talks with United, while important, were but one of several long-term strategic alternatives being examined," says USAir chairman Seth Schofield, although he concedes that change within the industry is "inevitable".
Continued cost-cutting and upcoming contract negotiations are among the airline's more immediate priorities, he says. USAir is also pressing ahead, with its links with British Airways, including the launch of an initiative, to offer joint engineering services across the Americas. The new Airline Technical Services operation, which will offer third-party maintenance, will be based at Pittsburgh.
Source: Flight International
