ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Thursday, December 19, 1996 TAG: 9612190048
SECTION: BUSINESS PAGE: B-6 EDITION: METRO
SOURCE: Bloomberg Business News
British Airways Plc said Wednesday it plans to sell all of its $400 million stake in USAir Group Inc., ending a three-year partnership that went sour and possibly putting USAir in play once more as a takeover target.
The exit of USAir's biggest investor, coupled with recent improved financial performance as the No.6 U.S. airline, renewed speculation that another U.S. airline may be interested in acquiring Arlington-based USAir.
``Once they get their costs down, they are going to be attractive to other U.S. carriers,'' said Susan Donofrio, a senior airlines analyst at NatWest Securities Corp. in New York.
Merger talks between UAL Corp.'s United Airlines and USAir ended last year after United said it was deterred by USAir's operating costs, the highest among U.S. airlines. A United spokesman said Wednesday that the airline has no plans to take a second look.
BA's divorce from USAir was long expected - especially since BA turned to AMR Corp.'s American Airlines Inc. in June for a bigger U.S. alliance. Moreover, the sale will give BA a clean escape from its $400 million investment in USAir, which is rebounding from losses that last year forced BA to write down half of the stake's value. Its almost 25 percent share of USAir common stock is worth about $425 million, more than double the amount recorded in BA's books.
The move also signals the U.K. carrier's confidence that it can win antitrust approval in the United States and at home for the sweeping transatlantic pact with American. ``It shows to the market that they're convinced the BA-AA deal will go through,'' said Chris Partridge, an aviation consultant with Avmark International in London.
USAir's stock rose Wednesday by 12 1/2 cents a share to close at $22.62 1/2. British Airways' American depositary receipts rose 75 cents to $99.50.
USAir said in a statement it's pleased by the BA sales announcement, calling it the ``first step'' toward its goal of becoming an ``effective, independent'' carrier at London's Heathrow Airport, the world's busiest international airport.
USAir also said it will still ``vigorously pursue'' the lawsuit claiming breach of contract it filed in a New York federal court against BA and American in July. USAir later applied for transatlantic routes to Heathrow, complaining that the partnership with BA had left it simply a ``feeder'' airline with little expansion prospects.
USAir earlier said it will cancel on March 31 the code-sharing alliance with BA, which allows the U.K. airline to sell seats under its own flight codes on USAir routes.
BA called the suit ``groundless'' and said it had nothing to do with the decision to sell its stake. The airline said it will offer the shares first to USAir, which has 60 days in which to purchase them.
A USAir spokesman wouldn't say whether it will buy the shares. If it doesn't, BA will sell the shares in a series of private transactions or in an underwritten public offering. It can't sell a stake larger than 5 percent to any single investor.
The agreement with USAir adds more than $100 million to the U.K. carrier's annual profit by generating about 425 U.S. passengers a day, equal to one Boeing 747, for its transatlantic flights.
Still, it wasn't as successful in opening the U.S. market, which accounts for 40 percent of the world's passengers, as BA had hoped. Analysts estimate the alliance with American, which is the world's second-biggest airline and possesses a stronger network of flights across the U.S., will far surpass the benefits of the USAir linkup.
LENGTH: Medium: 72 lines ILLUSTRATION: PHOTO: Nhat Meyer/Staff Travelers wait in line to check in atby CNBRoanoke Regional Airport's British Airways and USAir booth on
Wednesday afternoon. color.