US Airways to buy rest of Shuttle It already owns 47% of East Coast commuter service

Exercising an option

Entire operation recently valued at $285 million


November 20, 1997|By Suzanne Wooton | Suzanne Wooton,SUN STAFF

Shoring up its formidable franchise in the populous Northeast, US Airways said yesterday it will buy the rest of Shuttle Inc., the Washington-New York-Boston commuter service.

Formerly known as the Trump Shuttle, the shuttle has been owned since 1992 by a consortium of lenders but managed by US Airways, which holds a 47-percent equity stake in the operation. Under a long-standing agreement, the Arlington, Va.-based carrier has had the right to buy the shuttle.

US Airways said the purchase would be based on a valuation of the entire operation of $285 million. Although US Airways declined to specify how much it would pay, a spokesman said it would be the determined value minus the amount represented by its stake.

The purchase -- subject to government approval -- had been expected after US Airways, which handles about 45 percent of the daily passengers at Baltimore-Washington International Airport, reached a cost-cutting agreement with its 4,800 pilots last month. The airline is expected to secure concessions from its other unions soon.

The airline, which has been building profits for several years as part of a turnaround after piling up steep losses in the early 1990s, had said that the concessions were necessary for it to pursue its expansion plans. Following pilots' acceptance of a new contract, US Airways confirmed the purchase of as many as 400 Airbus Industrie jets worth up to $14 billion.

The deal with the pilots also cleared the way for US Airways to launch a low-cost, discount-fare operation, known as US 2, to compete with the growing number of discount flights operated by Southwest Airlines and others. BWI is expected to play a pivotal role in US 2, which will begin operating in 1998.

With the shuttle, the mainline operation and US Airways Express, US Airways has a dominant presence among airlines in the Northeast.

"The shuttle will be a key part of US Airways' extended pattern of operations as we build toward the future," Stephen M. Wolf, US Airways chairman and chief executive officer, said yesterday.

The shuttle earned $10.1 million on revenue of $156.5 million last year, up from $5.8 million on revenue of $144 million a year earlier, according to reports filed with the U.S. Department of Transportation.

Shuttle Inc. was recently valued at $285 million by the Blackstone Group, which was hired to determine a value after US Airways and Shuttle Inc. failed to agree.

Determining a value for the operation was difficult, however, because some of its most valuable assets are intangibles, such as its landing slots at New York's LaGuardia Airport.

The shuttle service flies 12 older Boeing 727s and employs 550 people. It flies 15 round trips a day between Washington National and LaGuardia and 17 daily round trips between LaGuardia and Boston, handling 1.4 million passengers a year.

Shuttle Inc. is a direct descendant of the Eastern Shuttle, run by the now-defunct Eastern Airlines. Eastern sold the operation to Donald Trump in 1989. A group of banks acquired it after Trump filed for bankruptcy. US Airways began operating the shuttle under its name in 1992.

US Airways shares closed at $48.75 yesterday on the New York Stock Exchange, up 81.25 cents.

Pub Date: 11/20/97

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