America West Holdings Corporation and US Airways Group, Inc. to
Merge * New airline to provide customers full-service offerings and
consumer-friendly pricing structure of a low-cost low-fare carrier
PHOENIX, May 19 /PRNewswire-FirstCall/ -- America West Holdings
Corporation (NYSE:AWA) and US Airways Group, Inc. (OTC:UAIRQ)
(BULLETIN BOARD: UAIRQ) today announced an agreement to merge and
create the first full-service nationwide airline, with the
consumer-friendly pricing structure of a low-fare carrier.
Operating as the first national low-cost (LCC) hub-and-spoke
network carrier, customers can look forward to simplified pricing,
international scope, access to low-fare service to over 200 cities
across the U.S., Canada, Mexico, the Caribbean and Europe, and
amenities that include a robust frequent flyer program, airport
clubs, assigned seating and First Class cabin service. (Logo:
http://www.newscom.com/cgi-bin/prnh/20050223/LAW097LOGO) America
West Holdings Corporation Chairman, President and CEO Doug Parker
said: "Building upon two complementary networks with similar
fleets, closely-aligned labor contracts and two outstanding teams
of people, this merger creates the first nationwide full service
low-cost airline. Through this combination, we are seizing the
opportunity to strengthen our business rather than waiting for the
industry environment to improve. A combined US Airways/America West
places the new airline in a position of strength and future growth
that neither of us could have achieved on our own." US Airways
President and CEO Bruce Lakefield said: "US Airways has a strong
franchise and great employees that will be enhanced by America
West's strengths and success in the low-fare, low-cost marketplace.
That we have secured such an impressive slate of equity investors
and partner support in a period of such industry uncertainty is a
strong indication of the prospects and enthusiasm for this
transaction. It has been my objective to ensure the long-term
viability of US Airways and the security of our outstanding
employees; this merger with America West will accomplish that
objective." Subject to approval by the U.S. Bankruptcy Court
overseeing US Airways' pending Chapter 11 case and transaction
closing, which is anticipated to occur this fall, the merged
airlines will operate under the US Airways brand under the
leadership of CEO Doug Parker. The merged airline's 13-member board
will be comprised of one member from each of three new equity
investment companies, six members from the current America West
board, including Parker as chairman, and four members from the
current US Airways board, including Lakefield as vice-chairman. The
combined airline's headquarters will be consolidated into America
West's headquarters in Tempe, Ariz. For regulatory purposes, both
airlines will operate under separate operating certificates for a
transition period of two to three years, keeping flight crew,
maintenance and safety procedures for each airline separate. To
ensure that the substantial consumer benefits are realized quickly,
however, the airlines will work together to coordinate schedules,
frequent flyer programs and other marketing programs as soon as
practical. Lakefield continued: "We believe that the airline
created from the merger of US Airways and America West will bring
more choices for customers, as we expand the low-fare pricing
structure of America West to dozens of new cities, while also
offering passenger-service amenities, such as an attractive
frequent flyer program, assigned seating and a First Class cabin."
Customers With the creation of the first full-service nationwide
airline, customers will enjoy simplified pricing across an expanded
east/west network along with access to international destinations.
Both airlines' frequent flyer programs will ultimately be combined
once the merger is complete. Members of both programs will retain
all of their miles and elite status designation and will receive
similar benefits in the merged airline's frequent flyer program.
Other customer amenities will include access to airport clubs,
assigned seating and First Class upgrades. Financing The merger is
expected to create one of the industry's most financially stable
players, with over $10 billion in annual revenues and a strong
balance sheet that includes approximately $2 billion in total cash
at closing with which to weather the current industry environment
and fund further growth strategies. The airline's strong cash
balance is expected to be created through a combination of current
cash on hand at US Airways/America West, $350 million of new equity
commitments (which may be supplemented with additional
commitments), and proceeds from a contemplated $150 million rights
offering. In addition, the merged airline will receive cash
infusions of over $1.1 billion, principally from partners and
suppliers (approximately $675 million), asset-based financings or
sales of surplus aircraft (approximately $250 million) and release
of certain cash reserves (approximately $200-300 million). The $350
million of new equity is expected to be provided by four separate
investor groups. The new investors are: ACE Aviation Holdings Inc.,
($75 million commitment) a Canadian holding company that owns Air
Canada, Canada's largest airline with over $7.5 billion in annual
revenues; PAR Investment Partners, L.P., ($100 million commitment)
a Boston-based investment firm; Peninsula Investment Partners,
L.P., ($50 million commitment) a Virginia-based investment firm;
and Eastshore Holdings LLC, ($125 million commitment and agreement
to provide regional airline services), which is owned by Air
Wisconsin Airlines Corporation and its shareholders. The merged
company also plans to conduct a rights offering that could provide
an additional $150 million of equity financing. Approximately $675
million of additional cash financing is being secured through a
combination of refunding of certain deposits, debt refinancing
(which reduces collateralization) and signing bonuses from
companies interested in long-term business relationships with the
merged airline. The companies have signed commitments or firm
proposals for more than $425 million in additional cash liquidity
from strategic partners and vendors, including over $300 million in
a signing bonus and a loan from prospective affinity credit card
providers for the merged company. Negotiations with credit card
companies are still in progress. Another $250 million will come
from Airbus in the form of a loan. The companies have also agreed
that the merged company will be the launch customer for the Airbus
A350, with deliveries scheduled from 2011 to 2013. Synergies "We
are exceptionally pleased with the financial support this
transaction has received, but it would not be available if we did
not have a business model that worked in today's difficult industry
environment," said Parker. "We have created a competitive business
that is profitable even with oil prices at $50 per barrel, achieved
primarily because of the $600 million of annual net operating
synergies. These synergies are higher than generally experienced in
airline mergers for two reasons. First, US Airways and America West
now have very similar labor costs so there are no large negative
synergies related to contract integration, and second, US Airways'
bankruptcy allows us to right-size capacity, thus increasing the
network synergies." The $600 million in anticipated annual
synergies are the result of route restructuring, revenue synergies
and cost savings. Route restructuring synergies of approximately
$150-200 million are created by reducing aircraft and unprofitable
flying, better matching aircraft size to consumer demand by route
and incorporating Hawaii service into the network. Revenue
synergies of $150-200 million are achieved by taking two largely
regional airlines and creating one nationwide, low-cost carrier
that can provide more choice for consumers when combined with
improving connectivity across both airlines' networks and by
increasing aircraft and other asset utilization. Lastly, the
combined airline expects to realize cost synergies of $250-300
million annually by reducing administrative overhead, consolidating
both airlines' information technology systems and combining
facilities. In addition to the operating synergies created by the
merger, the new relationship with Air Canada provides for even
greater operating improvements. The merged airline and Air Canada
plan to work together to create value for each other through
maintenance contracts, airport handling agreements and the eventual
expansion of the Star Alliance agreement, which could include
codesharing with Air Canada, consistent with the U.S.-Canada
bilateral aviation agreement. Fleet/Route System US Airways/US
Airways Express currently serves 179 cities and America
West/America West Express serves 96 cities. When merged, the
combined airline will become the nation's fifth largest airline, as
measured by domestic Available Seat Miles (ASMs). The combined
airline is expected to operate a mainline fleet of 361 planes
(supported by 239 regional jets and 57 turboprops for feed into the
mainline system), down from a total of 419 mainline aircraft
operated by both airlines at the beginning of 2005. US Airways
projects returning 25 additional aircraft by the end of 2006, in
addition to the 46 aircraft that US Airways already has announced
it plans to return. Nearly all of the aircraft are being returned
to General Electric Capital Aviation Services (GECAS). The combined
airline also will take delivery of 13 Airbus A320 family aircraft
previously ordered by America West Airlines. Airbus has also agreed
to reschedule and reconfirm 30 narrow body A320-family aircraft
deliveries from 2006 - 2008 to 2009 - 2010. To rationalize
international flying, the merged company will work with Airbus to
transition to an all-Airbus international fleet of A330 aircraft
and, beginning in 2011, A350 aircraft. Once fully integrated, the
airline plans to have primary hubs in Charlotte, Phoenix and
Philadelphia, and secondary hubs in Las Vegas and Pittsburgh. The
merged airline plans to have focus cities in Boston, New
York/LaGuardia, Washington, D.C., and Fort Lauderdale.
People/Culture US Airways currently employs 30,100 people and
America West employs 14,000 people. Contract integration of
represented employees is expected to occur after integrated
seniority lists have been negotiated between each respective
airline's labor groups. America West's Parker continued: "Although
US Airways and America West are clearly two different airlines with
two different cultures, our common traits far outnumber our
differences. We are all aviation professionals proud of our
heritage, eager to serve the traveling public and hopeful for the
future. While seniority integration will be a challenge for us and
our employees, we will ensure that those issues are discussed and
resolved in a fair and equitable manner. Throughout this process,
as has always been the case, we will continue our commitment of
open and honest communication with our employees. We are building a
new future that will present far greater job security and growth
opportunities than either airline would have achieved on its own,
and we are doing so with the ability for all to share in the
collective upside." Equity Allocation The $350 million of private
equity commitments are based upon a total implied private full
equity value of $850 million for the merged corporation. Of that
$850 million valuation, 45 percent will be allocated to America
West, 41 percent to the new equity and 14 percent to US Airways.
This valuation results in an implied value of $6.12 per share for
the publicly traded America West stock, taking into effect dilution
from outstanding warrants and options and the anticipated treatment
of convertible securities. The partners have agreed that up to $650
million of total equity can be raised including any proceeds from
planned a rights offering. Any additional equity would dilute all
participants pro rata. However, any additional equity raised above
$350 million will not reduce the $6.12 per share of implied value
for the publicly traded America West stock. The right to
participate in a rights offering for up to $150 million in common
shares of the merged companies is to be allocated 61.5 percent to
the stakeholders of US Airways and 38.5 percent to the common
stockholders of America West. Approvals Under the terms of the
agreement, the merger is expected to occur subsequent to
confirmation of US Airways' plan of reorganization and emergence
from Chapter 11. Because the merger and related equity investments
are subject to US Airways' pending Chapter 11 proceedings in the
U.S. Bankruptcy Court for the Eastern District of Virginia in
Alexandria, the transaction will also have to be approved by the
U.S. Bankruptcy Court and will be subject to a competitive bidding
process that will be proposed to the Court. The transaction, which
has been approved by both company's boards of directors, is also
subject to the approval of America West's shareholders. Both
airlines will file the necessary documents for review with the U.S.
Department of Justice, the U.S. Department of Transportation and
the Securities and Exchange Commission as well as secure other
necessary regulatory approvals. In addition, both airlines hold
loans with a federal guarantee from the Air Transportation
Stabilization Board (ATSB), and the carriers are in joint
negotiations with the ATSB on the treatment of those loans under
the proposed merger. US Airways Group, Inc. is being advised by
Seabury Group LLC as restructuring advisor and financial advisor
and the law firm of Arnold & Porter LLP; advisors for America
West Holdings Corp. include Greenhill & Co., LLC as its
principal financial advisor, Merrill Lynch & Co. as structuring
advisor to certain financings, and the law firms of Skadden, Arps,
Slate Meagher and Flom, LLP and Cooley, Godward LLP. Media Call and
Webcast Information On Thursday, May 19, from 2:15 p.m. to 3:15
p.m. PDT (5:15 - 6:15 p.m. EDT), America West and US Airways will
host a media briefing via telephone conference call. This media
briefing will also be webcast live simultaneously on a listen-only
basis at the investor relations section of
http://www.americawest.com/ and http://www.usairways.com/. A replay
of the webcast will be archived and available for 30 days. To
access the call, dial 913/981-4900 and enter pass code 8829743. The
audio playback of the conference call will be available through May
21, 2005. The numbers to call for the playback are 719/457-0820 or
888/203-1112 and the replay passcode is 8829743. Press conference
location and satellite coordinates On Thursday, May 19, from 5 p.m.
to 5:45 p.m. PDT (8 p.m. to 8:45 p.m. EDT), the airlines will host
an in-person press conference at America West Airlines' Corporate
Headquarters, 111 W. Rio Salado PKWT in Tempe, Ariz. in the Annex
Rooms, south side of the building. The press conference will be
available via telephone on a listen-only basis. Please dial in
approximately 15 to 20 minutes prior to the start of the call.
Operators will provide instructions on the format being used during
the call. The call may last up to 60 minutes including the
question-and-answer period. To access the call, dial 304/345-7506
and enter pass code 959620. The call will also be webcast live on a
listen-only basis at the investor relations section of
http://www.americawest.com/. The webcast will be archived for one
week. The audio playback of the conference call will be available
through May 26, 2005. The numbers to call for the playback is
402/970-2661 or 877/471-6581 and the replay passcode is 759707. The
press conference will also be available live via satellite through
the following feed: Thursday May 19 2005 4:45 p.m. - 5:45 p.m. PDT
Galaxy 11 KU - Band Transponder 13 Uplink Freq: 14260 vertical
Downlink Freq: 11960 Horizontal B-roll footage The footage will be
available with soundbites from Doug Parker and Bruce Lakefield. The
B-roll will also feature America West and US Airways aircraft
taxiing and taking off and will include air-to-air footage. The
B-roll at 6:45 p.m. PDT and 12:30 a.m. PDT will include clips from
the press conference. To access the B-roll, use the coordinates
below. Thursday May 19, 2005 5 p.m. - 5:15 p.m. PDT IA 5
Transponder 7 C-Band Downlink: 3840 Vertical Thursday May 19, 2005
6:45 p.m. - 7:00 p.m. PDT IA 5 Transponder 7 C-Band Downlink: 3840
Vertical Friday May 20, 2005 12:30 a.m. - 12:45 a.m. PDT IA 5
Transponder 7 C-Band Downlink: 3840 Vertical Preview and access
this video on Pathfire DMG: 21814. Search within the PR Newswire or
MultiVu section by story ID number 21814 or by headline. For
technical assistance call Pathfire Customer Care at 1-888-345-0489
or e-mail . Analyst Call and Webcast Information On Friday, May 20,
from 5:30 a.m. to 6:30 a.m. PDT (8:30 - 9:30 a.m. EDT), America
West will host a analyst briefing via a telephone conference call.
This analyst briefing will also be webcast live simultaneously on a
listen-only basis at the investor relations section of
http://www.americawest.com/. A replay of the webcast will be
archived and available for 30 days. To access the call, dial
913/981-4900 and enter pass code 4249724. The audio playback of the
conference call will be available through May 22, 2005. The numbers
to call for the playback are 719/457-0820 or 888/203-1112 and the
replay passcode is 4249724. FORWARD-LOOKING STATEMENTS Certain of
the statements contained herein should be considered
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. These forward looking
statements may be identified by words such as "may," "will,"
"expect," "intend," "anticipate," "believe," "estimate," "plan,"
"could," "should," and "continue" and similar terms used in
connection with statements regarding the companies' outlook,
expected fuel costs, the RASM environment, and the companies'
respective expected 2005 financial performance. Such statements
include, but are not limited to, statements about the benefits of
the business combination transaction involving America West
Holdings Corporation ("America West") and US Airways Group, Inc.
("US Airways" and, together with America West, the "companies"),
including future financial and operating results, the companies'
plans, objectives, expectations and intentions and other statements
that are not historical facts. Such statements are based upon the
current beliefs and expectations of America West and US Airways'
management and are subject to significant risks and uncertainties
that could cause the companies' actual results and financial
position to differ materially from these statements. Such risks and
uncertainties include, but are not limited to, the following: the
ability of the companies to obtain and maintain any necessary
financing for operations and other purposes, whether
debtor-in-possession financing, in the case of US Airways, or other
financing; the ability of the companies to maintain adequate
liquidity; the duration and extent of the current soft economic
conditions; the impact of global instability including the
continuing impact of the continued military presence in Iraq and
Afghanistan and the terrorist attacks of Sept. 11, 2001 and the
potential impact of future hostilities, terrorist attacks,
infectious disease outbreaks or other global events; changes in
prevailing interest rates; the ability to attract and retain
qualified personnel; the ability of the companies to attract and
retain customers; the cyclical nature of the airline industry;
competitive practices in the industry, including significant fare
restructuring activities by major airlines; the impact of changes
in fuel prices; economic conditions; labor costs; security-related
and insurance costs; weather conditions; government legislation and
regulation; relations with unionized employees generally and the
impact and outcome of the labor negotiations; US Airways ability to
continue as a going concern; US Airways' ability to obtain court
approval with respect to motions in the Chapter 11 proceedings
prosecuted by it from time to time; the ability of US Airways to
develop, prosecute, confirm and consummate one or more plans of
reorganization with respect to the Chapter 11 proceedings; risks
associated with third parties seeking and obtaining court approval
to terminate or shorten the exclusivity period for US Airways to
propose and confirm one or more plans of reorganization, to appoint
a Chapter 11 trustee or to convert the cases to Chapter 7 cases;
the ability of US Airways to obtain and maintain normal terms with
vendors and service providers; US Airways' ability to maintain
contracts that are critical to its operations; the potential
adverse impact of the Chapter 11 proceedings on US Airways'
liquidity or results of operations; the ability of US Airways to
operate pursuant to the terms of its financing facilities
(particularly the financial covenants); the ability of US Airways
to fund and execute its Transformation Plan during the Chapter 11
proceedings and in the context of a plan of reorganization and
thereafter; and other risks and uncertainties listed from time to
time in the companies' reports to the SEC. There may be other
factors not identified above of which the companies are not
currently aware that may affect matters discussed in the
forward-looking statements, and may also cause actual results to
differ materially from those discussed. The companies assume no
obligation to publicly update any forward-looking statement to
reflect actual results, changes in assumptions or changes in other
factors affecting such estimates other than as required by law.
Similarly, these and other factors, including the terms of any
reorganization plan of US Airways ultimately confirmed, can affect
the value of the US Airways' various prepetition liabilities,
common stock and/or other equity securities. Accordingly, the
companies urge that the appropriate caution be exercised with
respect to existing and future investments in any of these
liabilities and/or securities. Additional factors that may affect
the future results of America West and US Airways are set forth in
their respective filings with the SEC, which are available at
http://www.shareholder.com/americawest/edgar.cfm and
http://investor.usairways.com/edgar.cfm, respectively. ADDITIONAL
INFORMATION AND WHERE TO FIND IT In connection with the proposed
transaction, a registration statement, including a proxy statement
of America West, and other materials will be filed with the SEC. WE
URGE INVESTORS TO READ THE REGISTRATION STATEMENT AND PROXY
STATEMENT AND THESE OTHER MATERIALS CAREFULLY WHEN THEY BECOME
AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE
PROPOSED TRANSACTION. Investors will be able to obtain free copies
of the registration statement and proxy statement (when available)
as well as other filed documents containing information about US
Airways and America West at http://www.sec.gov/, the SEC's website.
Free copies of America West's SEC filings are also available on
America West's website at
http://www.shareholder.com/americawest/edgar.cfm, or by request to
Investor Relations, America West Airlines 111 West Rio Salado Pkwy,
Tempe, Arizona 85281. Free copies of US Airways' SEC filings are
also available on US Airways' website at
http://investor.usairways.com/edgar.cfm or by request to Investor
Relations, US Airways Group, Inc., 2345 Crystal Drive, Arlington,
VA 22224. This communication shall not constitute an offer to sell
or the solicitation of an offer to buy any securities, nor shall
there by any sale of securities in any jurisdiction in which such
offer, solicitation or sale would be unlawful prior to registration
or qualification under the securities laws of any such
jurisdiction. No offering of securities shall be made except by
means of a prospectus meeting the requirements of Section 10 of the
Securities Act of 1933, as amended. PARTICIPANTS IN THE
SOLICITATION America West, US Airways and their respective
executive officers and directors may be deemed, under SEC rules, to
be participants in the solicitation of proxies from America West's
stockholders with respect to the proposed transaction. Information
regarding the officers and directors of America West is included in
its definitive proxy statement for its 2005 Annual Meetings filed
with the SEC on April 15, 2005. Information regarding the officers
and directors of US Airways is included in its 2004 Annual Report
filed with the SEC on Form 10-K on March 2, 2005. More detailed
information regarding the identity of potential participants, and
their interests in the solicitation, will be set forth in the
registration statement and proxy statement and other materials to
be filed with the SEC in connection with the proposed transaction.
(AWAG) http://www.newscom.com/cgi-bin/prnh/20050223/LAW097LOGO
http://photoarchive.ap.org/ DATASOURCE: America West Holdings Corp.
CONTACT: America West Holdings Corp., +1-480-693-5729, or Hill and
Knowlton, +1-917-446-8065, for America West Holdings Corp.; or US
Airways Group, Inc., +1-703-872-5100 Web site:
http://investor.usairways.com/edgar.cfm Web site:
http://www.shareholder.com/americawest/edgar.cfm Web site:
http://www.usairways.com/ Web site: http://www.americawest.com/
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