- The Washington Times - Monday, March 5, 2001

Shares of US Airways Group Inc., are trading up and down depending on the odds of the Department of Justice approving its proposed $4.3 billion purchase by UAL Corp.'s United Airlines.
The stock closed at $41.35 Friday on the New York Stock Exchange, roughly $4 lower than in late January and early February.
Analysts attribute the slip of the Alrington-based carrier's stock to the uncertainty surrounding the proposed deal. But it also reflects investor disappointment with the airline's recent warning that investors will see larger losses than expected in the first quarter.
Analysts anticipated losses of $1.12 per share, according to a First Call/Thomson Financial survey. But the company issued a statement last week saying earnings would be "well below the current" consensus estimates.
The main dilemma for US Airways is the upcoming ruling on the proposed acquisition, which would give United, already the world's largest air carrier, even greater market dominance over its competitors.
"Everything is riding on the merger now," says analyst Raymond Neidl with ING Barings in New York. "I think there is a two out of three chance that it will go through."
In recent years, US Airways has seen its core East Coast business slip as competitors like low-cost Southwest and AirTran entered the market.
US Airways, like a number of major airlines, has struggled in the past year with higher jet fuel costs and labor disputes.
"Their cost structure is too high," Mr. Neidl says. "They have contracts with the unions that are too high and can't be supported. The only way for US Airways to go would be gradual liquidation, and at the end of the day I don't think politicians will let all those union jobs go down the drain."
The Department of Justice is expected to rule on the deal April 2. But analysts believe that date will be pushed back.
If the United-US Airways deal is approved, the offering price for the merging carriers will be $60. But if the purchase falls through, analysts estimate shares of US Airways will be in the $15-to-$20 range.
For its fourth quarter 2000, the carrier reported a sales increase of 10 percent to $2.356 billion from $2.135 billion the year before. But the airline incurred 24.7 percent higher losses during that time, to $101 million ($1.50 per diluted share) from $81 million ($1.16).
Diluted shares reflect the value of options, warrants and other securities convertible into common stock.
During fiscal 2000, US Airways saw a 7.8 percent rise in sales to $9.3 billion from $8.6 in 1999. But it also became unprofitable, losing $269 million ($4.02) compared to an income of $197 million ($2.64) the year before.
As US Airways share fluctuate, analyst are more cautious about the prospects that the United-US Airways plan will go through.
"Right now the market is saying that is a less than 50-50 proposition," says Tom Burnett, president of New York-based Merger Insight, a merger research group.
But the companies are putting on a brave face.
"Our main focus has been very, very much on the merger and on discussions with the Department of Justice and the state's attorney general and other interested parties toward moving that process forward," says US Airways spokesman Richard Weintraub.

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