USAir stock rises 8% on possible sale

No. 1 stockholder fuels boom via an SEC filing weighing sale, merger

Alliance held more likely

Shares rise $2.875, to close at $38.50

were $77.375 a year ago

Airlines

August 03, 1999|By Robert Little | Robert Little,SUN STAFF

Stock in US Airways Group Inc. rose 8 percent yesterday, after managers of a hedge fund that controls more than one-fifth of its shares said they might seek the sale or merger of the company.

Tiger Management LLC, a New York fund that is US Airways' largest shareholder, said in a filing with the Securities and Exchange Commission that it might try to encourage "an extraordinary corporate transaction" that could include merger with another airline or an outright sale.

Tiger Management owns 16.5 million shares, or 22.4 percent, in the Arlington, Va., airline.

In their filing, fund managers said they had confidence in US Airways' management and its business plan, but said the company's stock price does not reflect its true value.

Shares of US Airways have plunged more than 50 percent from a high last summer of $77.375.

Officials at US Airways, the nation's sixth-largest airline and one of the dominant carriers at Baltimore-Washington International Airport, declined to comment.

The New York Stock Exchange reacted with enthusiasm, however. After closing Friday at $35.625 per share -- a 52-week closing low -- US Airways' stock rose $2.875 to close yesterday at $38.50 per share.

Yesterday's trading volume of 1.59 million shares was about triple US Airways' three-month daily average.

While the airline's stock has lagged recently, most analysts say US Airways' launch last year of MetroJet, a spinoff discount airline, has stemmed losses on competitive routes and should improve the company's long-term performance.

But while they agree the airline's value is not reflected in its stock price, they don't look for the company to be sold or absorbed soon.

Julius Maldutis, an analyst with CIBC World Markets in New York, said he does not consider US Airways a good candidate for a "classical merger," because such mergers are heavily regulated and few have been successful in the airline industry.

A more likely possibility, he said, would be the formation of an operating alliance with a domestic or international competitor.

US Airways once had an alliance with British Airways, whose efforts to form a cooperative agreement with American Airlines have recently been fouled by federal regulators.

"Does US Airways go back and relaunch its alliance with British Airways? Or does it now look at forming an alliance with American Airlines?

"I think the latter makes sense," Maldutis said.

US Airways and American Airlines already have linked their frequent-flier programs, and have discussed sharing their commuter airlines, American Eagle and US Airways Express.

The notice that Tiger Management filed with the Securities and Exchange Commission is not a guarantee that the fund will take any action, but it is required when an investor wants to try to influence a company's management.

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