May 24,
2000
- US Airways customers will gain benefits of United's global
route system
- Combination unites United's extensive east-west system with US
Airways'
comprehensive north-south routes, creating first truly
efficient nationwide network
- US Airways hubs in Charlotte, Philadelphia and Pittsburgh to
add U.S. and international service and frequency
- Competition in Washington, DC and other markets will be
maintained and increased due to asset divestiture
- Frequent-flyer programs will be consolidated, offering
passengers more destinations than any other airline
program
- No increases to domestic structure fares for two years
following close of merger, except for increases in fuel cost and
CPI
- Travel agents are guaranteed no reduction in domestic standard
base commission rates for two years following close of
merger
Chicago, IL, and Arlington, VA, (May 24,
2000) - UAL Corporation (NYSE: UAL) and US Airways Group, Inc.
(NYSE: U) today announced that their boards of directors have
approved a definitive merger agreement pursuant to which US Airways
will be acquired by United in an all-cash transaction valued at $4.3
billion (plus the assumption of $1.5 billion in net debt and $5.8
billion in aircraft operating leases).
Structure –
Terms
Under the agreement, each share of common stock of
US Airways will be converted into the right to receive $60.00 in
cash in a one-step merger transaction. Based upon US Airways’
closing price of $26.31 on May 23, 2000, this represents a premium
of about 130 percent to US Airways stockholders. The companies
anticipate that the transaction will be completed in 2001. The
combination will be accounted for as a purchase and is anticipated
to be accretive to United’s earnings per share in the second year
following the closing.
In recognition of the competitive
issues connected with this transaction, United also plans to divest
significant assets to maintain and enhance airline competition on
routes into and out of Washington, DC. In connection with this
planned divestiture, United and US Airways have entered into a
Memorandum of Understanding with Robert Johnson, under which Mr.
Johnson would buy certain of US Airways’ assets and create a new
airline. This new carrier, to be called DC Air, will be the first
significant new entrant at capacity-controlled Washington Reagan
National Airport in over a decade. United would retain certain
assets at Washington Reagan, including the US Airways Shuttle
service to New York and Boston and the assets necessary for United
to fly to Pittsburgh, Charlotte and Philadelphia from Washington
Reagan.
The Combined Company - Unparalleled
Convenience:
The combination of United and US Airways
will deliver significant benefits to millions of passengers and
hundreds of communities throughout the United States. The new
network will make traveling more convenient for passengers,
connecting US Airways’ eastern U.S. markets with United’s east-west
and international networks. It will also give United passengers
easier access to US Airways’ eastern United States network.
Passengers will benefit from the convenience of one-airline,
one-baggage check-in and one frequent flyer program.
- United will offer "seamless" one-ticket, one-airline service
on over 560 new city pairs - travelers will be able to fly without
the inconvenience of changing airlines. There will also be fewer
check-ins and baggage transfers.
- Many US Airways cities will gain easier access to
international destinations, strengthening their ability to attract
international investment.
- Travelers will be able to combine frequent flyer miles
accumulated in both airline programs into United's program.
Passengers who now earn frequent flyer miles on two carriers will
be able to consolidate their miles on United. This offers the
opportunity to earn travel awards to more destinations in more
countries than any other airline program offers.
- Passengers will also benefit from United's partnership with
Star Alliance member airlines - Air Canada, Air New Zealand, All
Nippon Airways, Ansett Australia, Lufthansa, SAS, Singapore
Airlines, Thai Airways and VARIG. This will make international
travel much simpler, with one-ticket booking, convenient baggage
transfers and easier check-in.
- United passengers will have the convenience of accruing United
frequent flyer miles on the US Airways Shuttle. Shuttle users will
be able to redeem their miles on United's unmatched international
network.
The Combined Company - Unparalleled Service:
United plans to serve all cities now served by US Airways. United
plans to also offer 64 new daily non-stop flights in the U.S. and 29
new daily international flights. Passengers will benefit from more
non-stop domestic flights. For example:
- From Pittsburgh, United plans to introduce the only daily
non-stop service to San Jose, CA and Portland, OR and add two
non-stops a day to Denver.
- From Philadelphia, United plans to offer the only daily
non-stop service to San Jose, CA, Portland, OR and Orange County,
CA.
- From Charlotte, United plans to introduce the only daily
non-stop service to Portland, OR, and San Antonio, TX.
- From Washington Dulles, United plans to introduce the only
daily non-stop service to Orange County, CA.
- From Tampa, United plans to provide the only daily non-stop
service to San Francisco.
Passengers will also benefit from more flights to Europe, Asia,
Latin America and the Caribbean. Some examples of these flights
include:
- From Pittsburgh, United plans to introduce new one-stop
service to significant Asian capitals, such as Beijing, Tokyo,
Seoul and Singapore, as well as to Buenos Aires, Rio de Janeiro
and other Latin American cities.
- From Washington Dulles, United plans to add the only daily
non-stop flights to Copenhagen and Bermuda.
- From Philadelphia, United plans to introduce the only non-stop
service to four international destinations - Amsterdam, Brussels,
Vancouver and Barbados. United also plans to offer additional
daily non-stop service to Frankfurt, Germany.
- From Charlotte, United plans to provide the only one-stop
service to Melbourne and Sydney, Australia; Auckland, New Zealand;
Taipei, and Seoul and new one-stop service from Charlotte to
Caracas, Rio de Janeiro, Sao Paulo, Buenos Aires and
Santiago.
The transaction will significantly enhance the ability of US
Airways hubs in Pittsburgh, Philadelphia and Charlotte to grow and
compete with other hubs and international gateways, giving
passengers easier access to the West and to destinations in Latin
America, Asia and Europe.
United is committing that it will not increase U.S.
point-to-point structure fares for two years following the closing
of the merger, with exceptions only for increases in fuel cost and
consumer price index (CPI).
United is also committing that for two years following completion
of the merger, travel agents are guaranteed no reduction in domestic
standard base commission rates.
Following the transaction, US Airways' facilities, routes,
equipment and personnel will operate under the United Airlines name.
The combined company would have approximately
145,000 employees
worldwide. This combination would create a global airline with
revenue in excess of $25 billion.
James E. Goodwin, chairman and chief executive officer of UAL
Corporation, said, "This combination provides significant benefits
to the communities and customers served by both companies. The
addition of US Airways will greatly improve United's ability to
serve customers in the East and to open its worldwide network to
them. Similarly, the combination creates more travel options and
convenience for Star Alliance passengers who travel to the cities US
Airways serves. As the first carrier with a strong presence across
the U.S., United will be positioned to provide a competitive
challenge in new areas. We have the financial strength and
unencumbered assets to continue to grow the company."
Mr. Goodwin continued, "For the passenger and cargo customers of
United, this merger will fill a geographic void along the East coast
and offers new reach to the East and Southeast. It also will provide
new competition to others currently serving those regions. US
Airways' system will allow United to serve Trans-Atlantic, Latin
American and Caribbean routes more effectively, intensifying
competition in those markets, and will improve our ability to reach
Asian destinations from across the U.S. This combination will also
allow us to enhance our code-sharing alliance, with our Star
Alliance partners, particularly across the Atlantic, making use of
US Airways' Pittsburgh, Philadelphia and Charlotte hubs. Together,
we will be able to upgrade service and access to the world for our
customers. Our customers will be linked to a system that will
directly carry them to the commercial centers of the world. In
short, United and US Airways together will create a more efficient
global airline network that can improve the quality of service for
its customers.
"We welcome the US Airways employees who will be joining the
United family. Both United and US Airways employees are known for
their commitment to service and professionalism. We look forward to
offering them additional opportunity in the combined company. In
addition, United intends to honor all union contracts, and this
transaction will not result in any furloughs of United or US Airways
employees," Mr. Goodwin added.
Stephen M. Wolf, chairman of US Airways Group, Inc., said, "The
agreement we are announcing today, in which United and US Airways
will merge, is a milestone in aviation history, melding the route
systems and assets of two proud and successful carriers into this
nation's and the world's largest and most comprehensive airline
network. During the past four years, working closely with the 40,000
dedicated employees at US Airways, we have made enormous strides
toward achieving our aim of becoming the carrier of choice. Today we
have the opportunity to achieve our goal of becoming a world-class
global carrier in a single stroke.
"By joining US Airways with United, we deliver value for our
stockholders, provide dramatically improved global service for
customers and achieve long-term security and career opportunities
for US Airways' employees. This is the right combination, the right
partner, the right time and the right step for our customers,
communities, shareholders and our employees," Mr. Wolf added.
Memorandum of Understanding to Divest Assets to Create a New
Carrier
United proposes to address potential competitive issues related
to the transaction in Washington DC by divesting sufficient assets
to create another airline to compete in numerous routes currently
served by US Airways in the Washington, DC area. In connection with
this planned divestiture, United and US Airways have entered into a
Memorandum of Understanding under which Robert Johnson would buy
certain assets and create a new carrier to be called DC Air. This
divestiture of assets will ensure that competition is maintained and
enhanced and further consumer benefits will result from the
merger.
The sale would include most of US Airways' assets and route
structure operating from Washington Reagan National Airport. These
assets would create a base of operations for the new carrier out of
Washington Reagan.
Mr. Johnson is the founder, chairman and chief executive officer
of BET Holdings II, Inc., and a member of the US Airways
Board.
Dividend
The transaction is not expected to affect United's recently
instituted annual dividend of
$1.25 per share of common
stock.
Approvals
The merger is conditioned upon, among other things, the approvals
of US Airways stockholders, regulatory clearance and other customary
closing conditions.
Merrill Lynch & Co. acted as financial advisor and provided a
fairness opinion to United. Cravath, Swaine & Moore and Kirkland
& Ellis (for antitrust matters) acted as legal counsel to
United. Salomon Smith Barney acted as financial advisor and provided
a fairness opinion to US Airways. Skadden, Arps, Slate, Meagher
& Flom and O'Melveny & Myers (for antitrust matters) acted
as legal counsel to US Airways.
About US Airways
US Airways, the US Airways Express carriers, US Airways Shuttle,
and low-fare MetroJet fly to 205 destinations worldwide, including
38 states in the U.S., Bermuda, Cancun, Grand Cayman, Montego Bay,
Nassau, San Juan, St. Thomas, St. Maarten, St. Croix, and the
Canadian destinations of Toronto, Montreal, Ottawa, Hamilton, and
London, Ontario. US Airways' transatlantic destinations include
Frankfurt, London, Madrid, Munich, Paris and Rome. US Airways'
Internet address is www.usairways.com
About United Airlines
United Airlines is the largest air carrier in the world, offering
more than 2,330 flights a day to 139 destinations in 26 countries
and two U.S. territories. It is an industry innovator with
breakthroughs such as Economy Plus seating, E-Ticket Service,
Airport Gate Readers, Mobile Airport ChariotsSM, United
Shuttle, and the introduction of the technologically advanced Boeing
777. United Airlines' Internet address is www.united.com.
Safe Harbor Statement under the Private Securities Litigation
Reform Act of 1995: This press release contains certain
"forward-looking" statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements are based
on management's current expectations and are naturally subject to
uncertainty and changes in circumstances. Actual results may vary
materially from the expectations contained herein. The
forward-looking statements contained herein include statements about
future financial and operating results and benefits of the pending
merger between United and US Airways. Factors that could cause
actual results to differ materially from those described herein
include: industry capacity decisions; the airline pricing
environment; competitors' route decisions; the inability to obtain
regulatory approvals; actions of the U.S., foreign and local
governments; domestic and international travel patterns; the
inability to successfully integrate the businesses of United and US
Airways; costs related to the merger; the inability to achieve cost
cutting synergies resulting from the merger; labor integration
issues; the economic environment of the airline industry and the
general economic environment. More detailed information about these
factors is set forth in the reports filed by United and US Airways
with the Securities and Exchange Commission. Neither United nor US
Airways is under any obligation to (and expressly disclaims any such
obligation to) update or alter its forward-looking statements,
whether as a result of new information, future events or
otherwise.
In connection with merger, US Airways will be filing a proxy
statement with the Securities and Exchange Commission. STOCKHOLDERS
OF US AIRWAYS ARE URGED TO READ THE PROXY STATEMENT WHEN IT BECOMES
AVAILABLE BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION. Investors
and security holders may obtain a free copy of the proxy statement
when it becomes available and other documents filed by United
Airlines and US Airways with the Securities and Exchange Commission
in connection with the merger at the Securities and Exchange
Commission's web site at http://www.sec.gov/. Stockholders of
US Airways may also obtain for free the proxy statement and other
documents filed by US Airways in connection with the merger by
directing a request to: US Airways, 2345 Crystal Drive, Arlington,
Virginia 22227, Attention: Kimberly Holland, Investor Relations.
Stockholders of US Airways may also obtain for free documents filed
by United in connection with the merger by directing a request to:
United Airlines, 1200 East Algonquin Road, Elk Grove Village,
Illinois 60007, Attention: Patty Chaplinski, Investor Relations.
US Airways and its directors and executive officers may be deemed
to be participants in the solicitation of proxies from US Airways
stockholders in favor of the merger. These directors and executive
officers include the following: N. Bruce Ashby, Mathias J. DeVito,
Rakesh Gangwal, Peter M. George, Robert L. Johnson, Robert LeBuhn,
John G. Medlin, Jr., Hanne M. Merriman, Thomas A. Mutryn, Thomas H.
O'Brien, Lawrence M. Nagin, Hilda Ochoa-Brillembourg, Richard B.
Priory, Raymond W. Smith, Stephen M. Wolf. Collectively, as of
January 31, 2000, the directors and executive officers of US Airways
may be deemed to beneficially own approximately 6.6% of the
outstanding shares of US Airways common stock. Stockholders of US
Airways may obtain additional information regarding the interests of
the participants by reading the proxy statement when it becomes
available.
United and certain of its directors and executive officers may
also be deemed to be participants in the solicitation of proxies
from US Airways stockholders in favor of the merger. These directors
and executive officers include: Christopher Bowers, Frederic F.
Brace, Rono J. Dutta, James E. Goodwin, Douglas A. Hacker, Francesca
M. Maher, Peter McDonald, Andrew Studdert and Daniel Walsh. As of
the date of this communication, United, Mr. Brace, Mr. Dutta, Mr.
Goodwin, Mr. Hacker and Ms. Maher do not beneficially own any shares
of US Airways common stock.