ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Thursday, May 30, 1996 TAG: 9605300077
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
DATELINE: ARLINGTON
SOURCE: BLOOMBERG BUSINESS NEWS
USAir's stock price rose Wednesday amid speculation the beleaguered airline would benefit from a linkup between British Airways and American Airlines.
British Airways, which owns 24.6 percent of USAir Group Inc.'s common stock, is close to an agreement with American's parent, AMR Corp., that could include an outright acquisition of USAir, BusinessWeek reported in its June 3 issue.
Shares of USAir rose $1.25 to a three-year high of $20.121/2 on trading of 2.38 million on the New York Stock Exchange. That's almost triple its three-month daily average volume of 802,200 shares. The carrier's Series B preferred stock increased $2.871/2to $56.121/2, a two-year high.
``There is a tremendous amount of speculation about the benefits of an American-British Air-USAir alliance,'' said Bill Mastoris, an analyst with Mendham Capital Group. ``Certainly, USAir would stand to be a major beneficiary.''
Initially, industry consultants speculated that such an alliance would hurt the code-sharing agreement that currently exists between London-based British Airways and USAir. But at USAir's annual meeting last Wednesday, Chairman and Chief Executive Stephen Wolf spoke highly of the carrier's long-term relationship with British Airways, fueling the notion that the carrier would be involved and not shut out in an alliance with American.
Wolf also didn't rule out the possibility of selling USAir, saying repeatedly that the carrier could not survive unless it expands, and that means either buying one or more smaller airlines or being sold itself.
Dallas-based AMR considered buying USAir last October to prevent United Airlines parent UAL Corp. from buying USAir. Such an acquisition would give either AMR or UAL, who are neck-and-neck in a race for market share, a big jump over the other. After a six-week review, though, UAL decided not to buy USAir, and AMR didn't proceed with an acquisition.
Mastoris and other analysts have speculated that AMR also could take a minority stake in the nation's fifth-largest carrier, possibly the 10.2 percent stake Berkshire Hathaway is looking to sell or part of British Airways' holdings. Berkshire, the investment firm controlled by billionaire Warren Buffett, said earlier this month that it planned to sell its USAir stake, which has lost more than half of its value since it was purchased in 1989.
In exchange, Mastoris said, AMR could use its expertise at cutting costs and providing quality service to improve operations at USAir, which has the highest costs in the industry.
At last week's meeting, Wolf said lowering the airline's costs and making it into an airline of choice, not convenience, were the highest priorities.
LENGTH: Medium: 60 linesby CNB