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BRITISH AIRWAYS TO INVEST $300 MILLION IN USAIR, FIRST PHASE OF NEW ALLIANCE IMPLEMENTED

 NEW YORK, Jan. 21 /PRNewswire/ -- British Airways (NYSE: BAB) announced today that it had completed the first phase of a new alliance with USAir.
 Their new arrangements cover the immediate injection by British Airways of $300 million (some 195 million pounds sterling) in USAir for an initial 19.9 percent of its voting interests, with options on a further $450 million (some 290 million pounds) worth of shares, the appointment of three members to an expanded USAir board, code-sharing on USAir flights in the USA and the launch by British Airways of three new transatlantic services.
 Today's $300 million investment is in the form of a new series of preference shares. These can be converted at any time after four years to common stock, at $19.50 a share. They would then represent some 17.1 percent of USAir's current equity share capital on a fully diluted basis. Meanwhile, the investment earns a dividend of seven percent a year.
 The initial 19.9 percent level of voting rights will rise to 21.8 percent on approval of the accord by USAir shareholders at their annual meeting in May.
 The agreement also gives British Airways options to invest up to a further $450 million in two phases, if regulatory and financial conditions permit:
 -- $200 million (some 130 million pounds) within three years, with financial terms similar to those covering today's investment, except with a conversion price of $20.50.
 -- $250 million (some 160 million pounds) within five years, again at similar financial terms but with a $21.82 conversion price.
 If both these options are taken up, British Airways' equity interest in USAir would rise to 32.4 percent on a fully diluted basis.
 Following today's investment, Sir Colin Marshall, Derek Stevens and Roger Maynard, British Airways' deputy chairman and chief executive, chief financial officer and director of corporate strategy respectively, will be joining a 16-member USAir board.
 However, unlike the agreement between the two companies of July 1992, the new arrangement involves no special governance measures.
 Also, the integration plan featured in that original July 1992 agreement has been shelved. Instead, both airlines intend examining ways of working together, where permissible, to their mutual benefit.
 The first example of this is their new code-sharing agreement, also signed today, which takes up rights granted under the current air services agreement between the US and the UK.
 It means that USAir flights from cities across the USA will progressively link at key gateways with British Airways' transatlantic services.
 These USAir operations will fly with both British Airways and USAir flight numbers. Schedules will be coordinated, and through check-in introduced with smoother transfers for passengers and their baggage. This will provide substantial advantages for air travelers.
 Also, USAir will divest its routes between the US and the UK upon implementation of the code sharing agreement to comply with competition law. To maintain service, British Airways will introduce non-stop flights to London from Pittsburgh, Baltimore and Charlotte. These will use Gatwick's North Terminal.
 Both parties are confident that their new transaction complies with US law and is similar to investments in a number of other US airlines by foreign partners, so they have judged that it was not necessary to seek prior approval from the US Department of Transportation.
 Both British Airways and USAir have stated that their conditional agreement of July, 1992, remains their preferred transaction. As part of their new understanding, each has the option of requiring its implementation, to its original terms, including the investment of the full $750 million, if it were to be agreed by the US Department of Transportation in its entirety within the next five years.
 For British Airways, today's agreement adds a valuable partner in the important North American market to the global airline alliance it is forging. The code-sharing agreement will provide feed to its transatlantic services, which should improve revenue.
 Lord King, British Airways' chairman, said: "We are still disappointed that we were unable to proceed with our original transaction with USAir. We have had to revise our plans in the light of that position.
 "We will continue to explore ways of deriving mutual benefit from this relationship, for the good of air travelers in the United States and worldwide.
 "We remain committed to the full liberalization of the air services agreement between the UK and USA. This must be linked, however, to a relaxation of US policy towards inward investment by foreign companies. We hope the winds of change in the regulatory climate blow sufficiently to allow our original business transaction to proceed."
 USAir is the third largest domestic carrier in the USA and the fourth biggest US airline overall, flying 54.6 million passengers in 1992, With its USAir Express affiliates, its route network covers 40 states, Canada, the Bahamas, Bermuda, Puerto Rico, France and Germany, serving 211 destinations.
 It is the leading airline at Charlotte, Pittsburgh, Philadelphia, Baltimore/Washington International, Washington National, New York LaGuardia, Boston, Tampa and Indianapolis. It operates 437 aircraft and employs 47,000 staff.
 -0- 1/21/93
 /CONTACT: John Lampl of British Airways, 718-397-4729/
 (BAB)


CO: British Airways; USAir ST: New York IN: AIR SU:

WB -- NY044 -- 7407 01/21/93 12:20 EST
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Date:Jan 21, 1993
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