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Merger Update: United May Change Terms

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Source: Archived Content

Date: Jun 30, 2001

It certainly had to happen.  With any sane, logical person realizing that this merger would never have been approved by the Department of Justice, it was only a matter of time before UAL Corporation would devise a new plan.  Revise the terms.  Change the offer.  You get the idea.

Today it was reported in a Washington Post article that "United Airlines wants to kill its current deal to buy US Airways in an effort to get a lower price."

It's a lengthy article, but here's a couple of interesting highlights:

  • United is considering a range of options, according to sources, including selling some routes to low-fare carriers such as Air Tran Airways or Frontier Airlines to generate the competition government regulators require as a condition for approving the deal; buying only parts of US Airways instead of the whole airline; and altering its plans for the Washington-New York-Boston shuttle.
  • United has until July 11 to notify the Justice Department of its intention to go ahead with this merger.  Failing to meet this deadline will automatically 'doom' the deal, because the airlines promised antitrust regulators that they would provide at least 21 days' notice before closing the merger.
  • Under the terms of the contract, neither side can alter the deal until August 1.  After that date, either party can walk away or try to restructure the agreement.

Whatever happens, consider this:  United's stock price has fallen 41 percent, from $60.38 the day before the accord was announced to close at $35.15 on Friday.  That's 41 percent exclusively during the period of this proposed merger!

Speaking of stock price, did anyone ever wonder why on earth UAL Corporation would agree to pay $60.00 per share for US Airways stock (that's currently selling at $24.30 by the way)?  The Washington Post article reported that Rick Dubinsky, chairman of United's pilot union and a member of the UAL Board of Directors, summarized that decision as a:

"little over eagerness on our side to get this thing done. They were concerned about American and wanted to make sure they didn't get into a bidding war with them. So they put out a number that no one would go near."

Over eagerness?  Yep, in the words of Shakespeare:

"Men at some time are masters of their fate"
Julius Caesar, Act I, Scene 2

Needless to say, maybe we'll be getting near a closure on this exhausting saga.  Exhausting for the employees, the traveling public, and probably for a few people up in Washington as well.  So keep in mind the upcoming dates, July 11 and August 1, and keep your eye on the clock.

Tick tock, tick tock, tick tock.

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