mba | press release

contact:
Morten S.Beyer
Chairman & CEO
tel: +1 703 276 3200
e-mail: mba@mba.aero

mba: American Airlines should take over United…

WASHINGTON, DC (August 18, 2004): As one of the foremost aviation consulting firms, Morten Beyer & Agnew (mba) today proposed the merger of United Airlines and American Airlines as the only practical solution to the financial problems of both airlines.

“We propose that American take over United, as the stronger of the two carriers and the one who possesses the more successful management”, said Chairman Mr. Morten Beyer. “United is burdened by its huge unfunded pension liability, continuing heavy losses despite its bankruptcy and cost reduction efforts, and has thrice been refused government loan guarantees required to fund its recovery.” Mr. Robert Agnew, President of MBA, pointed out that American’s balance sheet is stronger than United’s, with $3.853 billion in cash compared to $2.226 billion at United, and stockholder’s equity only minus $122.00 million compared to minus $6.624 billion at United.

“It is obvious that Major U.S. carriers face a dim financial future as they battle the steady growth of low cost competitors, ruinous competition among themselves, and relentless cost pressure from labor unions, rising fuel expense, and the costs of maintaining their inefficient hub-and-spoke route systems,” Mr. Beyer said. “A major impediment to a merger of United and American may lie in DOT and DOJ concerns over the anti trust implication of such a combination, but we believe there is no realistic alternative if we are to avoid the liquidation of United and the resulting adverse consequences to our air transportation system,” stated Mr. Agnew.

“We have always had the doctrine of saving failed corporations, including airlines, through merger, the most recent being American’s takeover of TWA,” stated Mr. Agnew. “We see the following major advantages to a merger of the two carriers:

American will become the dominant international carrier between the U.S. and all areas of the world,
The merger will save the jobs of many of United’s 80,000 employees and possibly as many as 200,000 airport, servicing, and other employees,
Service will be maintained over United’s extensive domestic route system and preserve competition with other Major carriers,
Wasteful competition between United and American will be eliminated in major markets and excess capacity reduced,
The investment and financing in both carriers’ extensive fleets will be preserved,
As American has more employees, its unions and their better labor relations will prevail,
As American has the stronger management, progress in overcoming the merger’s problems should be swift and effective,
The combination of station facilities, headquarters staff, and real estate will save hundreds of millions in unneeded duplication, and
A buy-out by American will no doubt be the best deal that United’s creditors will ever get,” Mr. Agnew concluded.

“What with the IAM suing to get the appointment of a trustee for United and the continued financial failure of the carrier, it is high time to take decisive action. We believe that the prospects of a merged company and the combined assets are sufficient to support the estimated $10.0 billion in additional equity and loans required to support the merger,” Mr. Beyer concluded.

about mba

MBA, founded in 1992, is an independent international aviation consulting firm specializing in airline management, marketing, maintenance and operations, regulatory compliance, technical support, asset value appraisal and technical analysis, forecasting of commercial jet transport, and general consulting for the aviation industry. MBA publishes semi-annual periodicals forecasting aircraft values to 20 years in the future. (Publications/Products: Future Aircraft Values (FAV) – Jet Transport, Regional, and Cargo; The International Aviation Oracle Newsletter; eFAV: the on-line valuation tool).