This is sad, sad, sad.
US Airways sale is on
Board chairman says offers for any assets would be welcomed
Friday, January 09, 2004
By Dan Fitzpatrick, Pittsburgh Post-Gazette
Saying he wants to prevent US Airways from "bleeding to death over time," airline chairman David Bronner yesterday said he is considering the sale of airline assets and emphasized that "everything is on the table."
Such assets could include its coveted Washington-New York-Boston shuttle, hard-to-get takeoff and landing slots at airports in those three cities, the US Airways Express commuter operations, and gates and slots at any of its three hubs -- Pittsburgh, Philadelphia and Charlotte, N.C.
As for Pittsburgh, it's not clear what the airline may try to sell -- or whether there would be any buyers. Under an agreement struck this week, the airline controls only 10 gates at Pittsburgh International, as well as an array of operational facilities and equipment.
Even if all that were offered, observers doubt many airlines, most of which are still in weak financial shape, would be interested in bidding to establish a major presence in a region that's the nation's 22nd largest and fading.
"I don't think Pittsburgh has much value," said Ray Neidl, a New York airline analyst. " I don't think any of [US Airways'] hubs have much value. The only things that have value are the shuttle and the gates and slots in LaGuardia and Boston."
To assist with its review of assets, US Airways has hired New York investment bank Morgan Stanley to evaluate all the options and place them before the US Airways board in February.
The goal is to determine which assets "are worth more to someone else than they are to us," Bronner said. "We may have assets we really don't need."
Bronner, who first hinted at such a full-scale appraisal in an interview last month with the Pittsburgh Post-Gazette, said his goals are to grow the airline, protect stockholders and ensure that the company's losses and high operating costs do not jeopardize $900 million in government-backed loans.
But one option that has drawn increasing speculation -- the possibility the airline may seek to liquidate -- drew a quick dismissal from Bronner, also chairman of the Alabama pension fund that owns a controlling 37 percent stake in the airline.
"Nobody has ever mentioned that," he said. "I certainly have not. You don't liquidate things. If you look at groups of assets, some are material" to their owners and some are not. It is in that vein, he said, that US Airways needs to ask if really needs everything it has.
What happened this week in Pittsburgh, with the airline's decision to re-sign long-term leases for only 10 of its 50 gates, is an example of the decision-making necessary throughout the Arlington, Va.-based carrier, Bronner said.
Allegheny County Chief Executive Dan Onorato said he was not surprised by news of a possible asset sale, noting that he has been saying for some time that the issue is no longer whether US Airways keeps its Pittsburgh hub but whether it survives.
He and the Allegheny County Airport Authority are developing plans to react to two different scenarios -- one if US Airways retains its hub, and the other if the airline drops the hub.
If US Airways decides to sell the 10 gates under long-term leases at Pittsburgh International, it still would have to get the consent of the Airport Authority.
The airline could sell any of its own equipment at the airport, such as computers, machinery or specialized items without authority approval. Or, it could sell the rights to its three-year leases on maintenance hangars, cargo, mail sorting, deicing, and food service facilities, although it is unclear how much value they would have to another carrier.
Airport Authority Executive Director Kent George said his agency would be willing to consider the sale of the gate leases to another carrier "as long as the party it is being assigned to is beneficial to the community and the region."
However, it is unlikely that many airlines would be interested in what US Airways has to sell at Pittsburgh, mainly because the airport already has gate space available to any carrier that wants it.
Of US Airways' assets, the most valuable exist at LaGuardia, where it has 20 gates, and Washington's Reagan National Airport. Both airports are slot controlled, meaning they have restricted landing and takeoff rights, and US Airways controls a number of those slots at both airports.
William Warlick, an airline industry analyst for Fitch Ratings, said he's not sure any of the major carriers are in the position to acquire US Airways assets. He said the most likely bidders would be low-cost carriers or outsiders seeking to break into the U.S. market.
While Charlotte might be attractive as a gateway to Florida and a stopping point for international flights, it's a smaller market, adding that if US Airways decided to cut back there drastically, it would be signaling it no longer wanted to be in business. As for Philadelphia, it's not likely many carriers would desire to go there in a big way because low-cost titan Southwest Airlines plans to begin operations there in May.
Analyst Michael Boyd estimated that the Boston-Washington-New York shuttle, which was a money maker for US Airways in the mid-to-late '90s when business travel was booming along the Eastern Seaboard, might be worth as much as $250 million. But even the shuttle has been losing money due to a post-9/11 slump in business travel and mounting competition from American Airlines, Continental, Delta and even Amtrak.
"Nothing that US Airways has makes any money right now," said another airline analyst, Darryl Jenkins. "None of this is good. If I were a US Airways employee right now, I would not be going out and spending money I did not have."
Leaders of the pilots, flight attendants and machinists reacted coolly to yesterday's news of a possible asset sale, saying Bronner's plans do not change their feeling that the unions, having granted $1 billion in wage-and-benefit concessions in the past 18 months, have no more to give.
But local airline analyst Bill Lauer urged the unions to take yesterday's news seriously.
Bronner "is much more capable of looking at this situation cold-bloodedly," he said. "They may very well be fixed on a course toward liquidation."
Bronner said he was trying to work out a "solution" between management and the unions that ensures that the company is able to cut costs and meet the covenants of $900 million in government-backed loans it received while reemerging from bankruptcy in 2003.
One such covenant requires that the company keep its cash and cash equivalents above $1 billion, a figure that soon could be in jeopardy because the airline is burning through an estimated $1 million in cash a day.
US Airways sale is on
Board chairman says offers for any assets would be welcomed
Friday, January 09, 2004
By Dan Fitzpatrick, Pittsburgh Post-Gazette
Saying he wants to prevent US Airways from "bleeding to death over time," airline chairman David Bronner yesterday said he is considering the sale of airline assets and emphasized that "everything is on the table."
Such assets could include its coveted Washington-New York-Boston shuttle, hard-to-get takeoff and landing slots at airports in those three cities, the US Airways Express commuter operations, and gates and slots at any of its three hubs -- Pittsburgh, Philadelphia and Charlotte, N.C.
As for Pittsburgh, it's not clear what the airline may try to sell -- or whether there would be any buyers. Under an agreement struck this week, the airline controls only 10 gates at Pittsburgh International, as well as an array of operational facilities and equipment.
Even if all that were offered, observers doubt many airlines, most of which are still in weak financial shape, would be interested in bidding to establish a major presence in a region that's the nation's 22nd largest and fading.
"I don't think Pittsburgh has much value," said Ray Neidl, a New York airline analyst. " I don't think any of [US Airways'] hubs have much value. The only things that have value are the shuttle and the gates and slots in LaGuardia and Boston."
To assist with its review of assets, US Airways has hired New York investment bank Morgan Stanley to evaluate all the options and place them before the US Airways board in February.
The goal is to determine which assets "are worth more to someone else than they are to us," Bronner said. "We may have assets we really don't need."
Bronner, who first hinted at such a full-scale appraisal in an interview last month with the Pittsburgh Post-Gazette, said his goals are to grow the airline, protect stockholders and ensure that the company's losses and high operating costs do not jeopardize $900 million in government-backed loans.
But one option that has drawn increasing speculation -- the possibility the airline may seek to liquidate -- drew a quick dismissal from Bronner, also chairman of the Alabama pension fund that owns a controlling 37 percent stake in the airline.
"Nobody has ever mentioned that," he said. "I certainly have not. You don't liquidate things. If you look at groups of assets, some are material" to their owners and some are not. It is in that vein, he said, that US Airways needs to ask if really needs everything it has.
What happened this week in Pittsburgh, with the airline's decision to re-sign long-term leases for only 10 of its 50 gates, is an example of the decision-making necessary throughout the Arlington, Va.-based carrier, Bronner said.
Allegheny County Chief Executive Dan Onorato said he was not surprised by news of a possible asset sale, noting that he has been saying for some time that the issue is no longer whether US Airways keeps its Pittsburgh hub but whether it survives.
He and the Allegheny County Airport Authority are developing plans to react to two different scenarios -- one if US Airways retains its hub, and the other if the airline drops the hub.
If US Airways decides to sell the 10 gates under long-term leases at Pittsburgh International, it still would have to get the consent of the Airport Authority.
The airline could sell any of its own equipment at the airport, such as computers, machinery or specialized items without authority approval. Or, it could sell the rights to its three-year leases on maintenance hangars, cargo, mail sorting, deicing, and food service facilities, although it is unclear how much value they would have to another carrier.
Airport Authority Executive Director Kent George said his agency would be willing to consider the sale of the gate leases to another carrier "as long as the party it is being assigned to is beneficial to the community and the region."
However, it is unlikely that many airlines would be interested in what US Airways has to sell at Pittsburgh, mainly because the airport already has gate space available to any carrier that wants it.
Of US Airways' assets, the most valuable exist at LaGuardia, where it has 20 gates, and Washington's Reagan National Airport. Both airports are slot controlled, meaning they have restricted landing and takeoff rights, and US Airways controls a number of those slots at both airports.
William Warlick, an airline industry analyst for Fitch Ratings, said he's not sure any of the major carriers are in the position to acquire US Airways assets. He said the most likely bidders would be low-cost carriers or outsiders seeking to break into the U.S. market.
While Charlotte might be attractive as a gateway to Florida and a stopping point for international flights, it's a smaller market, adding that if US Airways decided to cut back there drastically, it would be signaling it no longer wanted to be in business. As for Philadelphia, it's not likely many carriers would desire to go there in a big way because low-cost titan Southwest Airlines plans to begin operations there in May.
Analyst Michael Boyd estimated that the Boston-Washington-New York shuttle, which was a money maker for US Airways in the mid-to-late '90s when business travel was booming along the Eastern Seaboard, might be worth as much as $250 million. But even the shuttle has been losing money due to a post-9/11 slump in business travel and mounting competition from American Airlines, Continental, Delta and even Amtrak.
"Nothing that US Airways has makes any money right now," said another airline analyst, Darryl Jenkins. "None of this is good. If I were a US Airways employee right now, I would not be going out and spending money I did not have."
Leaders of the pilots, flight attendants and machinists reacted coolly to yesterday's news of a possible asset sale, saying Bronner's plans do not change their feeling that the unions, having granted $1 billion in wage-and-benefit concessions in the past 18 months, have no more to give.
But local airline analyst Bill Lauer urged the unions to take yesterday's news seriously.
Bronner "is much more capable of looking at this situation cold-bloodedly," he said. "They may very well be fixed on a course toward liquidation."
Bronner said he was trying to work out a "solution" between management and the unions that ensures that the company is able to cut costs and meet the covenants of $900 million in government-backed loans it received while reemerging from bankruptcy in 2003.
One such covenant requires that the company keep its cash and cash equivalents above $1 billion, a figure that soon could be in jeopardy because the airline is burning through an estimated $1 million in cash a day.
