Copyright 2000 Chicago Sun-Times, Inc.
Chicago
Sun-Times
May 25, 2000, THURSDAY, MIDWEST
SECTION: FINANCIAL; Pg. 24
LENGTH: 393 words
HEADLINE:
United's merger bid may hit turbulence;
Unions, feds eye US Airways
deal
SOURCE: AYNSLEY FLOYD; ASSOCIATED PRESS
BYLINE: BY DAVE CARPENTER
BODY:
United Airlines' parent said Wednesday it is
buying US Airways for $ 4.3 billion in cash in a deal that would give the
world's largest airline vastly larger operations along the East Coast and nearly
triple its daily flights to more than 6,400 a day.
But UAL Corp.'s plan
faces daunting obstacles, including a possible bidding war, objections by key
unions and antitrust questions over the expansion of the world's largest
airline.
One likely result: A new wave of consolidation is widely
expected to sweep through the airline industry in the wake of Wednesday's
announcement. Industry analysts cited Northwest Airlines, Alaska Airlines and
America West as possible takeover targets -- shares of all three
companies rose in trading Wednesday. Some suggested a higher offer may emerge
for US Airways.
What appears certain is that other U.S. competitors
would be forced to act to prevent the new mega-airline from jetting far ahead in
the market.
"Someone has to grow (through a merger) to effectively
compete with UA," said Terry Trippler, who monitors the airline industry for
Minneapolis-based 1travel.com.
The effect on consumers is cloudier. Some
analysts immediately predicted higher prices, more flight delays and reduced
service in the Northeast if the merger goes through. But they also said it would
be easier for consumers to make travel arrangements through just one airline if
the deal goes through.
First, the proposal faces the same bumpy path
that halted previous efforts to acquire US Airways -- by United in
1995 and American Airlines in 1998.
Antitrust issues may be the biggest
problem. The government has in the past raised concerns about the high
market-share levels -- more than 75 percent -- held by most
major airlines in their hubs.
In an effort to placate regulators, UAL
plans to sell the bulk of its operations at Washington's Reagan National Airport
to Robert L. Johnson, the chairman and chief executive of BET Holdings II Inc.
and founder of Black Entertainment Television. The new airline, to be called DC
Air, will be the nation's only major black-owned commercial carrier.
Because Elk Grove Village-based UAL is 55 percent employee-owned,
representatives from the pilots' and machinists' unions sit on its board.
Corporate bylaws require approval of such a transaction by at least one of them.
GRAPHIC: United Airlines pilots head to a gate at
O'Hare Airport Wednesday, the same day UAL Corp., United's parent, announced a
deal to acquire US Airways. ; ASSOCIATED PRESS
LOAD-DATE: June 02, 2000 
