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News > Deals
AMR souring on US Air
June 21, 2001: 8:46 a.m. ET

American Airlines CEO reportedly 'ambivalent' on deal for US Air assets
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NEW YORK (CNNfn) - The head of AMR Corp. said the world's largest airline company is less eager to buy some of the assets of US Airways Group Inc. than it was when it agreed to the deal in January, according to a published report Thursday.

Donald Carty, CEO of the company that owns both American Airlines and Trans World Airlines, is quoted in USA Today as saying the downturn in the airline industry makes it less attractive to join the UAL Corp. (UAL: up $0.53 to $32.25, Research, Estimates) deal to buy US Airways (U: down $0.05 to $24.30, Research, Estimates) .

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"We've become a little more ambivalent because of the financial duress the industry is under," the paper quotes Carty as saying. "The acquisition of US Airways or any assets of US Airways involves more capital, and therefore we have some ambivalence about spending capital in this kind of environment."

AMR (AMR: Research, Estimates) and most other major airlines lost money in the first quarter, and AMR warned Monday that it will post a loss in the second quarter as well. The major airlines have said a fall-off in top-paying business customers will hurt results going forward. AMR also faces a possible strike by its flight attendants July 1, and it is likely to have higher labor costs in new labor agreements with its flight attendants and pilots.

Still, as recently as the company's May 16 shareholders meeting, Carty was saying AMR's deals for some of US Airways' assets would be good for the company, although he said at that time he thought it was unlikely regulators would grant approval of the UAL-US Airways combination necessary for AMR to participate in the transaction.

"That prospect (for approval) looks less certain every day, but I think it is fair to say that we are positioned well for either outcome," he said at that time. "If United's deal does go through, we are going to add additional important assets. If it does not, it in no way diminishes the tremendous value of the TWA transaction."

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Under the US Air agreement, announced at the same time AMR announced its purchase of TWA, American would spend $1.2 billion to join United Airlines in joint operation of the US Airways East Coast shuttle, as well as $82 million for a 49 percent stake in DC Air, the start-up airline that would be created from the assets of US Airways as a way of satisfying regulators concerns.

Carty told USA Today that on Aug. 1 any of the airlines involved in the deal can walk away and avoid large penalties. United executives have said they are still seeking and expecting approval of the $4.3 billion deal, but that approval is not expected until the third quarter, which starts next month, a month before the Aug. 1 deadline.

Officials of AMR and UAL were not available for comment on the USA Today story early Thursday, and a spokesman for US Airways said it would not comment on the article.

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Shares of AMR slipped 1 cent to $34.39 Wednesday, while UAL shares gained 53 cents to $32.25, and US Airways shares lost 5 cents to $24.30. US Airways shares are trading at less than half of the $60 value UAL has agreed to pay in the original deal, suggesting investors also are doubtful of the chances of its completion. graphic

  RELATED STORIES

AMR warns of massive 2Q loss - June 18, 2001

United-US Airways deal still circling - May 28, 2001

AMR CEO sees turbulant times ahead - May 16, 2001

TWA to be bought by American - Jan. 10, 2001

  RELATED SITES

AMR Corp.

United Airlines

US Airways


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