USAir stock drops after takeover falls through Price down 24 percent after United decision

November 15, 1995|By Suzanne Wooton | Suzanne Wooton,SUN STAFF

USAir's stock price fell 24 percent yesterday, one day after United Airlines said it had decided not to pursue a takeover of the Arlington, Va.-based carrier.

The airline's shares dropped $3.75 to $11.625, or $1 a share lower than they had been trading Oct. 3 just after the two airlines announced they were negotiating.

United announced its decision not to acquire USAir after the stock market closed on Monday. United's shares rose $2.375 to $185 yesterday, continuing the upward trend that began in early October, when the Chicago-based carrier was trading at $166.625.

USAir was the sixth most active stock on the New York Stock Exchange yesterday, on a volume of 4.07 million shares.

With a merger now ruled out, USAir returns to the difficult job of reducing its high costs and restructuring the airline to compete with both low-cost discount carriers and carriers that have more profitable, longer route structures.

In addition, the airline will resume its search for a new chief executive officer to succeed Chairman Seth E. Schofield. Mr. Schofield announced his retirement more than two months ago but he agreed to remain until the negotiations with United were completed and/or a successor was found.

"It's now clear that United and American won't step in and solve their problems for them. What they've got to do is pretty clear," said Dan Kasper, transportation consultant with Coopers and Lybrand in Boston.

"What they're going to have to do is get a more competitive cost structure out of their labor force and downsize the basic operation," he added.

USAir said yesterday that negotiations with its machinists, which were just beginning as the merger talks got under way, would resume soon. But a spokesman for USAir said the company had no plans to resume talks with all its unions simultaneously.

For 16 months, USAir negotiated collectively with its four major unions in an effort to get $2.5 billion in cost-cutting agreements over the next five years. In August, however, the company abruptly called off those talks, saying there had been no progress and it instead would begin bargaining with its labor unions individually, starting with the machinists this fall.

A spokesman for the machinists union did not rule out the possibility of bargaining collectively once again.

"We stand ready to look at anything that can insure economic viability for the company," said Dennis Hitchcock, a spokesman for the International Association of Machinists and Aerospace Workers, which represents machinists and other ground workers at USAir.

But he indicated the employees might continue their push for an equity stake in the company in return for concessions.

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