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发表于 2010-4-22 05:52 PM
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US Airways breaks off merger talks with United
By Christopher Hinton & Shawn Langlois, MarketWatch
NEW YORK (MarketWatch) -- US Airways Group Inc. said Thursday it has broken off merger talks with United Airlines parent UAL Corp., raising the likelihood of a United combination with Continental Airlines.
"After an extensive review and careful consideration, our board of directors has decided to discontinue those discussions," said Chairman and Chief Executive Doug Parker acknowledging publicly for the first time that the airlines had been in talks.
"It remains our belief that consolidation makes sense in an industry as fragmented as ours," he said.
Shares of US Airways (LCC 6.45, -0.02, -0.31%) fell 4.3% to finish at $6.47, though the stock is still more than 48% above its full-year low.
Most of the sector was already in the red Thursday on disappointing first-quarter results from Continental (CAL 21.90, +0.47, +2.19%) and American parent AMR Corp. (AMR 7.60, +0.02, +0.26%) .
Continental shares fell less than 1% to close at $21.43, regaining some value from its intraday low of $19.90. Shares of UAL (UAUA 22.10, +0.39, +1.80%) added 1.3% to $21.71.
Airline M&A
Shares of US Airways are down 4% after the airline breaks off merger talks with United, raising the potential for a United and Continental tie-up. MarketWatch's Christopher Hinton reports.
Reports of potential blockbuster mergers in recent weeks, including word of negotiations between UAL and Continental Airlines (CAL 21.90, +0.47, +2.19%) , helped the NYSE Arca Airline Index (XAL 37.70, -0.20, -0.53%) strike a two-year high last week. Read full story about airline stocks.
Wall Street analysts have been bullish over a Continental-United Airlines combination, saying their complimentary route structures would create the most value in terms of revenue growth and lowering costs.
Some analysts even speculated rumors two weeks ago of talks between US Airways and United were meant to draw Continental back to the bargaining table.
Continental has stressed it will not walk into a merger unless it was certain it could extract benefits from the deal. Two years ago it abandoned talks with United saying it was too risky given the troubled economic times.
The most risky variable in airline mergers is often labor, but the union representing pilots at United has already given a merger with Continental a tentative blessing, noting there's relatively little route overlap between the carriers.
"These factors would contribute to the protection of pilot careers, lead to long-term security for both airlines' pilot groups and produce a stronger overall enterprise," said Wendy Morse, Chairman of United Master Executive Council with the Air Line Pilots Association.
Meanwhile the two airlines continue to work closely together as Star Alliance partners to align its operations in key markets.
If United and Continental do tie the knot, it will likely be a stock swap as both carriers are short on cash. But it will also create the world's largest airline and reduce the number of U.S. legacy carriers to four, and raise questions as to whether US Airways would try to find a new partner in American Airlines.
That may not happen anytime soon. AMR Chairman and Chief Executive Gerard Arpey said two weeks ago that though mergers would be good for the industry, it might not be the right move for American. A sentiment he repeated Wednesday on a post-earnings call with analysts.
"I think that we have a strong network today...because I think our footprint is in the most important business markets in the United States already," Arpey said.
For US Airways, the carrier struck a hopeful note.
"Whether we participate or not, consolidation that leads to a more efficient industry better able to withstand economic volatility, global competition and the cyclical nature of our industry is a positive outcome," said US Airways CEO Parker.
US Airways reports its first-quarter results on Tuesday.
Christopher Hinton is a reporter for MarketWatch based in New York.
Shawn Langlois is a reporter for MarketWatch in San Francisco. |
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