David Field WASHINGTON DC
US antitrust regulators have once more forced United Airlines and US Airways to delay their combination. The merger was first proposed nearly a year ago.
United is no longer optimistic that the deal will close in the second quarter, Jake Brace, the airline's senior vice-president for finance, told analysts. The combination, valued at $11.6 billion, including assumption of debt, was unveiled in late May 2000 when the two carriers said they planned to consummate the transaction by the end of the year.
They had since agreed twice to postpone that goal, and Brace's statement represents a third delay. "We have a very complicated transaction. Taking [antitrust] regulators through it is just taking a long time," he said.
Its complexity was increased in January when United added American Airlines to the transaction in a revision that lets American take over parts of US Airways, share its northeast shuttle operation, and invest in a spin off dubbed DC Air in Washington DC.
United invited American to join it in carving up US Airways after antitrust regulators made it known that the original plan for United to absorb US Airways and set up DC Air at Washington's Reagan National Airport did not satisfy their competitive concerns. A Securities and Exchange Commission filing by United also suggested that regulators were taking added time to scrutinise the transaction.
Brace said that United had no current plans to renegotiate its offer to buy US Airways at $60 a share. However, he did say that United is working with its financial advisors "to make sure that we don't enter into a transaction that puts us unduly at risk". Brace would not speculate on when the deal might be closed. "There is no news on timing or on the likelihood of success," he told analysts. US Airways president Rakesh Gangwal insists though that the airline "has no Plan B" to renegotiate the United merger.
The doubts about the United/ US Airways deal came as both carriers reported first quarter losses. United's loss was $313 million, while that of US Airways was $171 million.
These results followed a dismal string of first-quarter deficits posted by Northwest Airlines ($123 million), Delta Air Lines ($122 million) and American ($43 million). Only two airlines stood out, Continental Airlines posting a tiny $9 million profit and Southwest leading the pack with $121 million in the year's first three months
United warns that prospects for the rest of the year are not very bright. It is forecasting a performance "considerably worse year over year", weakened revenues, a second quarter loss and a possible loss for the full year.
US Airways' Gangwal was also gloomy about the near-term. Even though the airline had reduced its costs in the last year, "that doesn't mean that a stand-alone US Airways will be a successful carrier. We are ever so slowly being squeezed out of the marketplace," he said. "The competitive environment underscores the necessity of US Airways becoming part of a larger network."
Source: Airline Business
