Allegis’ New Chief Promises More Cutbacks : Sale of Hertz and Hotels Could Bring $4.3 Billion

Frank A. Olson, new chairman and chief executive of Allegis Corp., held his first meeting with Wall Street analysts Wednesday and vowed to further reduce costs at the company’s United Airlines subsidiary.

He also predicted that Allegis will sell its Hertz rental car business and its Westin and Hilton International hotel subsidiaries by year-end and said a total price of $3.1 billion to $4.3 billion for the three units would not be unreasonable.

Olson and his Allegis colleagues “convinced us that they intended to cut a lot of fat,” Paul Karos, airline analyst with L. F. Rothschild, Unterberg, Towbin Inc., said later. “But they did not convince us that it will happen quickly. It will take time.”

Allegis also announced Wednesday that its earnings for the second quarter rose sharply, largely as a result of an improvement in the airline’s figures.

Allegis’ second-quarter earnings totaled $73.4 million, up from $18.5 million in year-ago period. The airline’s earnings increased to $68.6 million from $10.4 million in the same period of 1986.

$100-Million Goal

The corporation, which recently announced that it would abandon its diversification strategy to focus its efforts on the airline, said earlier this week that it will lay off about 250 of the airline’s managers. During the analysts’ meeting with the top Allegis executives Wednesday, Olson said the goal is to cut $100 million from the airline’s overhead.

The meeting, attended by about 20 analysts, was closed to the press. However, a number of analysts talked with reporters later.

Olson reportedly said Allegis is comfortable with Wall Street’s estimate that the subsidiaries would sell for between $55 and $75 per share. The corporation has 57 million shares outstanding, making a deal worth as much as $4.3 billion.

The chairman was also said to have told the analysts that the company, which will soon change its name to United Airlines, will face a major challenge in coming labor negotiations. Its contract with mechanics is up for amendment, and negotiations have broken off. The flight attendants’ union contract expires in November, and the pilots’ contract expires next April.

Olson indicated that the effort to cut costs at the airline would mean that the wage talks with the three unions would be particularly difficult.

Allegis announced June 25 that it would sell up to half of its Apollo computerized reservations system, and Olson said Wednesday that the buyer would be either an international airline, a domestic airline or a computer company. A portion could be sold to a combination of such companies, he added.