America West Airlines and US Airways Group are talking with aircraft-maker Airbus and other potential investors about funding a merger of...
America West Airlines and US Airways Group are talking with aircraft-maker Airbus and other potential investors about funding a merger of the two U.S. carriers, people familiar with the talks said.
Airbus may provide a $250 million loan in exchange for aircraft orders, Air Canada parent ACE Aviation Holdings may contribute $100 million to $150 million in equity, and Par Capital and another hedge fund may provide a combined $125 million in equity, The Wall Street Journal reported yesterday. The news pushed America West shares up 36 cents, or 8.8 percent, to $4.45 yesterday.
The two carriers need financial partners for a merger because US Airways doesn’t have funding to emerge from bankruptcy proceedings and America West has said it won’t invest much of its own capital.
A merger would combine the East Coast network of Arlington, Va.-based US Airways with the U.S. West-focused route system of Phoenix-based America West. The two carriers said April 22 that they were in talks.
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But the two airlines declined to comment on the latest reports. Airbus spokeswoman Barbara Kracht, Air Canada spokeswoman Laura Cooke and Par Capital partner Edward Shapiro also declined comment.
Aircraft-maker Airbus, based in Toulouse, France, and the world’s largest aircraft maker, would provide funding in exchange for an order for 20 of its new A350 planes, the Journal reported. That would mark the first orders for the new jet from a North American customer, the newspaper said.
America West had 87 Airbus planes at the end of 2004, including 54 A320 single-aisle planes, according to Airbus’ Web site. US Airways had 127 Airbus planes in operation, including A319s, A320s and A321s. Both airlines also fly Boeing aircraft.
Airbus’ participation as an equity investor “is not normal but, on the other hand, you can see the reasons why they’d want to do it,” said Morton Pierce, chairman of New York-based law firm Dewey Ballentine and head of its mergers and acquisitions practice. “They’ve got planes they’d like to sell, and here’s a potential buyer. Why not help them out?”
The Journal said ACE is interested in gaining maintenance work from the combined carriers. ACE also may be trying to gain a foothold for when rules allowing greater foreign ownership of U.S. airlines are eased, said Ray Neidl, a New York-based analyst with Calyon Securities USA.