UAL Turns Down Pilots’ $4.5-Billion Bid to Buy Airline : Carrier and Reservation System ‘Not for Sale,’ Board Declares
UAL Inc., the parent of United Airlines, rejected late Friday the April 5 offer by the airline’s pilots to buy the carrier and its computerized reservation system for $4.5 billion .
After a special board meeting in Chicago that lasted all Friday afternoon, UAL said: “The airline and Covia (the subsidiary that owns the Apollo reservation system) are not for sale.” The board said the offer by the United Airlines Pilots’ Master Executive Council to buy the airline was not in the best interests of UAL’s shareholders, employees and customers.
There was no immediate response from the pilots. A man who answered the telephone at the executive council’s office in Chicago said none of the organization’s officers were available to comment and that he knew nothing about the rejection.
Vote on Name Change
The pilots complained two weeks ago when they made the offer that they were unhappy with UAL’s diversification program. Several years ago, the corporation bought the Hertz rental car company. It also owns the Westin hotel chain and recently purchased the Hilton International hotel business.
To reflect the diversification, the holding company is in the process of changing its name to Allegis Corp., a change scheduled to be voted on by shareholders next Thursday.
In rejecting the offer, the board said it “confirmed its continued commitment to an integrated travel services strategy.” It added that “continued ownership and operation of United Airlines and Covia are essential elements of the strategy. . . . Such strategy is in the best interest of the company’s stockholders and . . . a strong airline with a sound balance sheet is beneficial to the employees and the public served by the company.”
Unacceptable Conditions
The board also said the offer contained a number of unspecified “conditions and uncertainties” that were unacceptable. The pilots’ $4.5-billion offer would have included $2.2 billion in UAL debt, meaning that the pilots would have had to come up with $2.3 billion.
A UAL spokesman later said that even if the airline had been for sale, the pilots’ offer was “grossly inadequate.”
However, airline analyst Timothy Pettee of the Bear, Stearns brokerage said: “I don’t think this signals the end of the situation. This does not preclude the pilots from making another offer, and the other employee groups have not been heard from yet. They may come up with their own offers or they may support the pilots.”
Separately, UAL on Friday reported a net loss of $30.5 million for the first quarter of 1987, compared to a net loss of $103.1 million for the same period last year.
The corporation’s announcement said its operating revenue for the first quarter of this year was $2.37 billion, compared to $1.96 billion during the year-ago quarter.
“We’re . . . seeing steadily improved results at United,” Richard J. Ferris, UAL’s chairman and chief executive, said. “The airline operated profitably in March, an encouraging sign for our outlook for the rest of the year.”
United had a net loss of $41.4 million for the quarter, compared to $107.3 million for the first quarter of 1986. The airline’s operating revenue was $1.85 billion, up 25% from the first quarter of 1986, and the operating loss was $11.9 million, compared to a $133.2 million deficit for the same quarter a year ago.
