PROSPECTS OF a full-scale bidding war for USAir has left airline analysts rushing to predict the likely fall-out for the industry on both sides of the Atlantic.
The speculation was sparked off by the surprise revelation from United Airlines that it has opened exploratory talks with USAir over a possible take-over. USAir has also confirmed an approach from American Airlines, raising expectations of a fight between the two airline giants for dominance within the US market.
Either of the bidders will also have to cut a deal with British Airways, which paid $400 million for a 24.6% stake in USAir in 1993 and holds options to invest another $450 million in the airline.
A sale would allow the British carrier to more than recoup its investment having written down almost half the value following continuing financial and labour problems at USAir.
BA hints that it hopes to emerge from any deal with a strengthened US alliance, although it admits that no clear strategy has yet emerged. "It opens up the whole game," says the airline.
While American is relatively free to offer such a tie-up, United would have to square a BA alliance with its existing transatlantic partnership with Lufthansa. Jurgen Weber, Lufthansa chairman, implies that the USAir talks are going on with the German airline's full support, however.
An acquisition by either American or United is almost certain to raise competition questions within the USA, giving the acquirer a dominant share of the domestic passenger market and access to USAir's valuable East Coast network.
Analysts speculate that the loser could be forced to look at other acquisitions, possibly of another medium-sized carrier such as Continental, potentially leading to a wave of restructuring throughout the industry.
Source: Flight International
