Early Christmas at Indy Air!

davetheflyer

New Member
This week two important things happened in the ACA-Mesa war.

First, the US DOJ has decided to investigate the anti-trust implications of the merger. In so doing, UAL is also coming under investigation at a time when it is re-applying for a federal loan from the ATSB. This brings the number of agencies investigating Mesa to three.

Second, the judge in the ACA v. Mesa lawsuit believed that due to the amount of anti-competitive smoke in the air, there must be a conspiratorial fire. Judgement for the plaintiff: Mesa is prohibited (at least temporarily) from attempting to replace our board of directors.

Anyone who wants to see the entire ruling can find it here.

ACA stock fell on the news, but there is speculation that it might be due to Ornstein selling off Mesa's shares and throwing in the towel.





Associated Press
Glenn F. Tilton, chief executive of United Airlines.




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Reuters
UPDATE - Mesa bid for Atlantic Coast seems more tenuous
Friday December 19, 4:44 pm ET


(Updates deal value and stock prices, adds analyst comment graphs 8, 9)
NEW YORK, Dec 19 (Reuters) - Atlantic Coast Airlines (NasdaqNM:ACAI - News) shares fell sharply on Friday on growing concerns antitrust issues might force Mesa Air Group (NasdaqNM:MESA - News) to scrap its unsolicited takeover bid for the regional airline.

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Atlantic Coast shares fell $1.56, or 14.9 percent, to close at $8.89 on the Nasdaq market, while Mesa rose 78 cents, or 6.4 percent to $12.90.

The decline in Atlantic Coast shares followed two announcements late Thursday that were viewed as potentially serious setbacks for Mesa's $525 million takeover bid.

First, U.S. District Court Judge Rosemary Collyer temporarily blocked the Phoenix-based airline's effort to solicit shareholder support to replace Atlantic Coast's board with its own nominees.

Then, Atlantic Coast revealed the U.S. Department of Justice had opened an antitrust investigation into Mesa's bid and a pre-deal regional service agreement between Mesa and UAL Corp. (OTC BB:UALAQ.OB - News), the parent company of United Airlines.

Mesa said Friday it was surprised by Judge Collyer's decision and was considering all of its options, which include whether to appeal the injunction or even continue with its takeover effort.

Analysts, meanwhile, speculated whether the DOJ probe and court decision would lead UAL or Mesa to abandon the deal.

"We believe if Mesa pursues the solicitation (for support to remove the board) it will eventually succeed, but a prolonged delay could cause United to decide to move ahead without Atlantic Coast," said Glenn Engel, an analyst at Goldman Sachs.

"United's bankruptcy reorganization plan would clearly look better with Atlantic Coast returning to the fold, but United would also like to set a course sooner rather than later," he said.

EYEING UAL

The UAL agreement would permit Mesa to provide regional service for United should the merger go through.

Earlier this year, Atlantic Coast and UAL were unable to renegotiate an agreement to cover regional routes for United Airlines. After those talks broke down, Atlantic Coast said it would launch a low-cost airline called Independence Air out of Washington's Dulles Airport.

But after unveiling its unsolicited bid for Atlantic Air, Mesa announced it had reached its own regional route agreement with UAL, contingent on the merger being completed. That deal is now drawing the scrutiny of both DOJ and District of Columbia antitrust regulators.

A UAL official acknowledged the airline had been contacted by the DOJ regarding its antitrust probe.

"We will cooperate fully in any investigation," said Jeff Green, a United spokesman. "United was not participating in Mesa's offer to acquire Atlantic Air."

Judge Collyer concluded Atlantic Coast did not have legal standing to claim Mesa's takeover plans violated antitrust laws that ban anti-competitive mergers.

But the judge ruled Atlantic Coast did have a good chance of proving the deal between United and Mesa was an illegal restraint of trade because it would have thwarted a potential new competitor -- the proposed Independence Air service.

"The record supports the conclusion that United wanted to retain Atlantic Coast as (an express commuter) carrier at Dulles to retain its feeder operation, but also wanted to avoid competition from Independence Air," Collyer wrote. (Additional reporting by Peter Kaplan and John Crawley in Washington, D.C. and Julie MacIntosh in New York)

http://biz.yahoo.com/rc/031219/airlines_atlanticcoast_stock_3.html





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U.S. Begins Investigation of United Airlines
By MICHELINE MAYNARD

Published: December 19, 2003


s United Airlines went back to a federal loan board for a second time yesterday, seeking approval for $1.6 billion in loan guarantees, the Justice Department opened an antitrust investigation into United's role in encouraging a hostile takeover bid for a regional carrier it uses on the East Coast.

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The investigation, disclosed late yesterday, cast a cloud over United's application for the federal aid. The Air Transportation Stabilization Board's decision last year to reject United's first request for assistance forced the airline to file for bankruptcy protection.

The Justice Department inquiry focuses on a spat that has created yet another hurdle for United, the nation's second-biggest air carrier, after American Airlines, as it attempts to restructure.

Last summer, Atlantic Coast Airlines, which operates as United Express and Delta Connection, announced that it would form a low-fare carrier, to be called Independence Air, which would fly out of Dulles International Airport near Washington.

Atlantic Coast Airlines has a contract to carry United passengers until 2010 but decided to start a separate operation to take advantage of the mushrooming demand by passengers for low-fare flights, and out of fear that a bankruptcy judge would order it to renegotiate its contracts with United at much lower fees, or void the contracts altogether.

Mesa Airlines, meanwhile, made a hostile takeover bid for Atlantic Coast and signed an deal with United to operate its United Express flights if the bid succeeded.

In its notice of the action, the Justice Department asked Atlantic Coast to turn over all documents related to Mesa and United by Jan. 9, the airline said. A spokeswoman for the department would not comment. Mesa and United also did not comment.

United executives have said that resolving the battle between Atlantic Coast and Mesa is one hurdle they must clear to emerge from bankruptcy protection. Getting the federal loan guarantees is an even bigger hurdle.

United executives expressed confidence yesterday that their second bid for loan guarantees would be approved, based on a business plan that was much more conservative than the rosy forecast they presented to the government last year.

But competing airline executives and industry analysts predicted that United's reapplication would be the subject of an intense political battle.United submitted its revised application to the Air Transportation Stabilization Board, which was formed after the September 2001 terrorist attacks.

Since its formation, the board has guaranteed loans to American Trans Air, America West Airlines and US Airways. United, which made its first request in June 2002, was by far the biggest airline to seek its help, and the only one among the six major United States carriers to do so.

But last December, the loan board rejected United's initial application, saying that its business plan was unrealistic given the sharp decline in air travel after the stock market peaked, the economy slumped and the terrorist attacks discouraged many travelers. The board's decision to reject United's first application came after aggressive lobbying against United by a number of competitors, led by Continental Airlines.

United filed for Chapter 11 protection shortly after the board rejected its request. Since then, United has moved to become more competitive. Notably, it obtained $2.56 billion a year in wage and benefit concessions from its labor unions, after asking a bankruptcy court judge to void their contracts.

It has identified $5 billion in cost savings through 2005, and it has announced plans for a low-fare carrier, called Ted, which will begin service on a few routes in February.

Glenn F. Tilton, chief executive of United's parent, the UAL Corporation, has also worked to build relationships with his own employees and with officials in Washington, where he has enlisted House Speaker J. Dennis Hastert as his main ally. Mr. Hastert, Republican of Illinois, has used his influence in recent months to promote United's case. United is based in Elk Grove Village, Ill., near Chicago.

Earlier this week, United won commitments from J. P. Morgan Chase and Citigroup for $2 billion in financing, which it would get once it secures the federal loan guarantees and emerges from bankruptcy protection. The banks would provide $400 million in loans, on top of the $1.6 billion in guarantees sought from the government.

"United's restructuring plan was designed to create a competitive, profitable company and to address the concerns raised by the A.T.S.B. last year," Mr. Tilton said.

He said the new business plan that the company presented to the loan board "reflects a substantially stronger company." United has not made the details public.

http://www.nytimes.com/2003/12/19/business/19air.html?ex=1072414800&en=e1d3e00e9b29af78&ei=5062&partner=GOOGLE
============
Mesa Air May Sell Atlantic Coast Shares

By Sara Kehaulani Goo
Washington Post Staff Writer
Saturday, December 20, 2003; Page E01


Mesa Air Group Inc. warned investors yesterday that it might sell its shares of Atlantic Coast Airlines Holdings Inc. after a federal judge put on hold Mesa's hostile bid to take over the Dulles-based regional carrier.



The announcement, released yesterday, led some analysts to believe that Mesa will walk away from its effort. Atlantic Coast's stock tumbled 14.9 percent on the news, closing at $8.89 on heavy volume. Mesa's stock rose 6.4 percent, to $12.90. Mesa has offered 0.9 shares of its stock for each share of Atlantic Coast.

The outcome of the struggle could dramatically affect air service at Dulles International Airport, a United hub.

Mesa chief executive Jonathan Ornstein launched the hostile bid in October, saying he would continue to operate Atlantic Coast as a United Airlines regional affiliate out of Dulles. Atlantic Coast strongly opposes the takeover, and has said it plans to launch a Dulles-based independent airline next year, to be called Independence Air, that would compete with United rather than continue to operate United Express flights.

Mesa began acquiring Atlantic Coast shares this past summer after the carrier announced plans for Independence Air. As of Dec. 8, Mesa owned 1.6 million shares, or 3.5 percent of Atlantic Coast, according to a Securities and Exchange Commission document.

Analysts said new hurdles facing Mesa make it more likely that the Phoenix-based carrier, which also operates as a United Express carrier in some parts of the country, will drop its acquisition plans.

Atlantic Coast filed a federal lawsuit this fall alleging that Mesa was secretly working with United to block Atlantic Coast's plans to launch a competing airline, which Mesa and United deny. On Thursday, however, a federal judge in Washington issued a preliminary injunction that prevents Mesa from moving ahead until the case goes to trial. Mesa wanted Atlantic Coast shareholders to vote on whether to remove the company's board of directors and replace it with Mesa nominees.

Also on Thursday, the Justice Department's antitrust division and authorities in the District and Virginia announced investigations into Atlantic Coast's charges.

Before this week's setbacks, Mesa "had been vocal that they were in this for the long haul," said transportation analyst Betsy Snyder of Standard & Poor's Corp. "Now, it looks like this isn't the case anymore."

Another factor that may discourage Mesa's bid is United's reapplication this week for $1.6 billion in federal loan guarantees, a crucial step to the nation's second-largest carrier's hopes for exiting bankruptcy.

That put United in the position of asking for financial assistance from a government that also is looking into whether the airline engaged in illegal practices that would help its financial situation.

"Mesa has brought United to a place it doesn't want to be, which is a party [in] a court case," said Doug Abbey, an airline consultant who follows regional carriers. He added that the court decision and investigations probably would cost Mesa too much time and money.

Mesa executives did not return several calls yesterday. An Atlantic Coast spokesman declined to comment on Mesa's plans.

Mesa said yesterday it is considering its options, including whether to appeal the court decision.

Mesa said yesterday that while the federal judge sided with Mesa on several issues, "as a result of yesterday's ruling, the company may sell its Atlantic Coast shareholdings."

Researcher Richard Drezen and staff writer Amy Joyce contributed to this report.
 

cointyro

New Member
[ QUOTE ]
ACA stock fell on the news

[/ QUOTE ] That's because most people believe the best thing that could happen for the shareholders of ACA is a Mesa takeover and therefore status quo as a regional provider. Indy Air is extraordinarily risky and the share price reflects that. While I wish davetheflyer the absolute best, I fear that ACA may go BK like the others if it doesn't keep the current business model... hopefully I'm wrong.
 

davetheflyer

New Member
I think that you are partially right. Some of the stock price reflected the stockholder view of the plan. The stock market does hate uncertainty and IA is risky. I think that a lot of those stockholders had already bailed out before the Mesa offer though.

I think that what was seen last week was a lot of the speculators dropping the stock because the Mesa offer was shot down.

The JetBlue business plan is basically what we are following. We have a respectable fleet and infrastructure in place and a lot of $$ in the bank. It's going to be a wild ride, but I have faith in the plan.
 
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