United drops US Airways plans.htm
United drops US Airways plans UNITED TOLD US Airways at a meeting of the UAL board of directors last week that it wished to discuss terminating their agreement before Aug. 1, the first day either side can alter the deal, the Journal said, citing sources familiar with the discussion.
If United ended the agreement, it would have to pay US Airways a breakup fee of $50 million.
Representatives for both airlines Sunday declined to comment to The Associated Press on the reports, which also appeared in varying degrees in The Washington Post and The Charlotte (N.C.) Observer over the weekend. Both papers also cited sources familiar with the discussions.
The source told the Journal that United, the nation’s second-largest airline, had become convinced in recent days that its merger would never win the Justice Department’s approval.
“It doesn’t seem like there’s any hope of getting it done,” one person said.
AMERICAN ALSO IN ON DEAL
To ease anti-competitive concerns and ensure government approval, United agreed in January to sell some US Airways assets to American Airlines, including half of US Airways’ Washington-New York-Boston shuttle.
There also had been speculation of more selloffs coming. At one point, United considered dumping its proposal for DC Air, the airline to be headed by Black Entertainment Television founder Robert L. Johnson, which United proposed creating to try to appease antitrust regulators.
But Justice Department lawyers appeared to remain concerned about the concentration of market power in Washington and other markets, prompting Transportation Secretary Norman Mineta last month to say he expected the government to reject the proposed merger.
A weakening economy is also apparently hurting UAL. Sources told the Journal that the airline was unwilling to engage in a costly, complicated merger in the worsening economic climate.
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United reported a worse-than-expected first-quarter loss of $313 million on revenues of $4.42 billion and has already said it expects a double-digit decline in revenue for the second quarter.
The deal values US Airways at about $60 a share, more than double its current stock price of $24.30. Shares of UAL closed Friday at $35.15, down $1.21, or 3.6 percent.
© 2001 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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