USAir asks Transportation to OK deal

November 28, 1992|By Knight-Ridder News Service

NEW YORK -- USAir urged the U.S. Department o Transportation yesterday to approve British Airways' proposed $750 million investment in unsecured equity in USAir to ensure the survival of the financially troubled airline.

USAir reported a loss of $260 million in 1991.

American, Delta and United airlines oppose the USAir-British Airways transaction, which, if approved, would form the world's largest airline alliance.

USAir said, "The Big Three oppose USAir's future, not the makeup of its board of directors."

Under the proposal, British Airways would get four seats on a USAir board that would be expanded to 16 directors from 13. In addition, British Airways would get two more board seats, held by members who will serve on both airlines' boards.

What this case is really about, USAir said, "is keeping USAir a strong competitor against the Big Three and preserving the 47,000 jobs of its employees."

The USAir-British Airways alliance is controversial because U.S. law permits foreign carriers to hold only 25 percent of a U.S. airline's voting rights, and 4 percent of USAir's voting rights already are held by various foreign investors.

This transaction would give British Airways 21 percent of the voting stock and a 44 percent equity position in USAir's parent, USAir Group Inc., based in Arlington, Va.

USAir said British Airways' proposed investment was consistent with U.S. law and that USAir's management would remain in full control of USAir's day-to-day operations. The bilateral aviation agreement between the United States and Britain "is not related legally or logically to the issue of citizenship and should not be linked," USAir said.

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