Representatives of United Airlines` management, pilots and flight attendants huddled in New York Friday, attempting to craft a new proposal for an employee buyout of its parent company, UAL Corp.
The meetings convened a day after British Airways PLC pulled out of the proposed employee buyout, dealing another blow to the struggling effort. The meetings were expected to last through the weekend.
It appeared doubtful that the group could come up with a fresh proposal, and one that has credible financing, before the UAL board is slated to hold a meeting Monday in Chicago.
News of British Airways` decision sent UAL shares plummeting $21.62 to close at $168.50 on the New York Stock Exchange. Since Oct. 13, when UAL revealed financing had fallen through, UAL shares have fallen $111, or 40 percent.
The $6.75 billion deal proposed by United`s pilots and management, led by Chairman Stephen Wolf, would have been the largest employee buyout in corporate history.
The deal failed to meet a deadline last week for bank financing, prompting British Airways to drop out because of uncertainty over the market and U.S. policy in regard to airline buyouts.
Earlier this week, Japanese banks that balked at lending money for the original bid were approached with the idea of financing a buyout at a significantly lower price.
But the loss of backing from the British carrier, which was to have invested $750 million in the deal, was seen as a crippling setback.
”It leaves a big question as to whether the deal will survive,” said Robert Decker, analyst with Duff & Phelps Inc. in Chicago. ”That $750 million won`t be easy to replace. Mr. Wolf`s deal may be coming unraveled.”
Foreign airlines, anxious to cement strategic alliances with U.S. carriers to improve their competitive positions, have been viewed as a ready source of capital in the leveraged buyout fever that was sweeping the airline industry.
But confusion over the U.S. Transportation Department`s stance on foreign airline investments is making executives of overseas carriers think twice about getting involved in such deals.
In a brief statement Friday, British Airways said that it ”does not intend to participate in any new deal for the acquisition of UAL in the foreseeable future.”
”The old transaction is closed,” British Airways chairman, Lord King, told employees in a company newsletter. ”Whether or not another proposal is forthcoming remains to be seen.”
The London-based carrier said that its marketing agreement for exchanging passengers with United would remain intact and that it would continue seeking strategic alliances with other airlines.
The pilots union remains committed to employee ownership and is ”anxious to hammer out some deal,” said a pilot spokesman, Hank Krakowski. He said he couldn`t predict what that might be.
”Uncertainty is the best way to describe what the pilots are feeling,”
Krakowski said. ”We don`t know what options await us.”
United`s flight attendants said Thursday they would join the buyout group on any new proposal but its machinists union has continued vocal criticisms of the effort.
When UAL directors meet Monday morning, they are expected to discuss alternative courses of action with their financial and legal advisers.
The board could decide to take a wait-and-see approach, making no moves to sell or restructure the company in the current unfavorable market conditions.
Earlier in the summer, billionaire investor Marvin Davis set the company into play with a offer to buy it for $240 a share. The management-pilot group then submitted an offer to buy UAL, which was eventually accepted after the board considered various options, including an auction of the company, a leveraged recapitalization, or a defensive acquisition of either Pan Am Corp. or Trans World Airlines Inc.
