- The Washington Times - Tuesday, October 10, 2000

Continental Airlines has offered to pay $215 million cash for DC Air, the spinoff airline being created by the planned merger of UAL Corp.'s United Airlines and US Airways.

Gordon Bethune, chairman and chief executive officer of the nation's fifth-largest airline, made the offer in a letter dated Oct. 2. In a follow-up letter sent yesterday, Mr. Bethune said he was "disappointed" that US Airways and UAL never responded to the bid.

The $215 million offer is more than a 50 percent premium on the $141 million bid for the airline from Robert Johnson, founder and chief executive of Washington-based Black Entertainment Television.

United and US Airways offered the spinoff airline to Mr. Johnson, a US Airways board member, as a way to eliminate antitrust concerns federal regulators may have with the $11.6 billion takeover. US Airways operates 40 percent of all domestic flights from Ronald Reagan Washington National Airport.

"While we have the utmost respect for Mr. Johnson's success in the entertainment business, he has no expertise in the airline business," Mr. Bethune wrote. "DC Air will be totally dependent on United Airlines to operate the business for it, thus bringing no real competition to this crucial market."

Continental, on the other hand, says it would bring true competition, making DC Air an all-jet airline serving the same markets as proposed in the deal with Mr. Johnson.

"This puts one big fat monkey wrench into US Airways' soap opera," said Mike Boyd, aviation analyst and president of the Boyd Group in Colorado. "This ups the ante."

Mr. Boyd said Continental's offer sends the message that if UAL and US Airways were serious about selling off the assets and creating competition, Continental would pay double for it.

Shareholders of Arlington, Va.-based US Airways are scheduled to vote Thursday on the company's acquisition by UAL, and the two carriers want to combine by early next year, pending regulatory approval.

Last month, the Senate Commerce, Science and Transportation Committee passed a resolution opposing UAL's plan to buy US Airways because the deal would hinder competition, sparking more acquisitions in the industry and deterring the creation of new airlines.

"A sale of DC Air assets to a strong and well-funded competitor like Continental Airlines … would provide sustainable competition and real benefits to consumers," Mr. Bethune wrote. "This should be the objective of United and US Airways as part of your divestiture strategy and certainly of the regulatory bodies reviewing your transaction."

UAL would not comment specifically on the offer but said United "has recognized from the beginning the need to maintain and enhance competition" in Washington by divesting US Airways assets at Reagan Airport, according to a statement by the company.

DC Air, which will be an independent airline, will bring added competition to the market and will provide service to those communities currently served by US Airways from Reagan Airport, the statement said.

The airlines' agreement with Mr. Johnson "prohibits discussions with third parties regarding any alternatives to the DC Air transaction," said a US Airways spokesman.

Mr. Johnson declined to comment on the offer.

Continental is offering to buy 119 jetliner takeoff and landing slots at Reagan Airport, 103 slots for smaller commuter planes as well as leases for eight gates at the airport, the ticket counter, ramp, aircraft parking and office facilities.

The airline currently has 23 daily departures out of Reagan Airport, according to Ned Walker, a Continental spokesman.

"We think we can effectively serve the market and serve it profitably," Mr. Walker said. "We think we can bring true competition. The existing offer fails to bring out competition."

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