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American Morning

United Air Lines Nixes Plans to Purchase US Airways

Aired July 02, 2001 - 11:11   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
LEON HARRIS, CNN ANCHOR: One of the world's largest air carriers, United Air Lines, apparently has grounded its plans to buy US Airways. United's parent, UAL Corporation, says it ran into turbulence, if you will, when trying to get antitrust clearance for the deal. All of this, as you can see, is the top story on our Web site, CNN.com.

But CNN Financial News reporter Fred Katayama checks in now with more details from New York -- Fred.

FRED KATAYAMA, CNN CORRESPONDENT: Hi, there, Leon.

Well, we just got this statement in from UAL, the parent of United Air Lines. The company is confirming that it is in talks about possibly terminating the merger with US Airways. Earlier, a source familiar with the issue said UAL is dropping its plan to buy US Airways Group. The source said opposition by regulators convinced UAL to walk away from the deal. The source said: "We tried very hard and worked very creatively proposing various solutions at different times. We cannot get antitrust clearance."

Now, what caused regulators to oppose the deal was concern that the combined airlines would dominate the market in the nation's capital. The $4.3 billion deal between the No. 1 and No. 6 airlines would have left the three largest airlines controlling 80 percent of the nation's air traffic.

Consumer groups, some politicians and rival airlines criticized the merger, as well as UAL's own unions. The news doesn't really come as a surprise. Just last month, Transportation Secretary Norman Mineta said he expected the government would block the merger. The focus now is: What happens to US Airways? The airline has said in the past that it cannot go it alone, given that new competition has sprouted up along its roots. But analysts say US Airways can try to restructure itself or sell itself off in parts.

Analysts say the outcome is positive short term for United. The analyst says it will allow the airline to focus on fixing problems, such as its customer service and its relationship with labor unions.

UAL's stock, last time I checked, is up more than 1 percent this morning -- Leon.

HARRIS: Well, Fred, since you mentioned UAL's stock, any idea how all the other stocks involved in this particular issue are going to be -- what direction they may be heading in because of this news?

KATAYAMA: Well, it couldn't be good for the stock of US Airways Group. Last time I checked that one, it had not opened yet for trading, but indications were that -- was that the stock would open lower -- of course, some people saying that it's going to be hard for US Airways to find a new buyer, if it decides that it wants to do so. On the other hand, the airline does have more than $1 billion in cash. So some analysts say it can possibly restructure itself.

HARRIS: Fred Katayama reporting for us from New York, thanks much. We'll talk to you later on.

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