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UAL-AMR Transaction Questions and Answer (Here)
SPECIAL NEWSREAL

United and American Agree on Transaction That Enhances Benefits of US Airways Acquisition

In a transaction designed to enhance the competitive benefits of its proposed merger with US Airways and address U.S. Department of Justice concerns, UAL Corp.’s board of directors yesterday approved a binding memorandum of understanding with AMR Corp. AMR Corp.’s board also has approved the agreement. Under the agreement, AMR’s American Airlines will provide competitive service on key hub-to-hub routes where United and US Airways are currently the only competitors with nonstop flights.  The agreement also ensures vigorous competition that will benefit air travelers on these routes.  As part of the agreement, American also will enter into a 20-year joint venture with United to provide service on shuttle routes between New York La Guardia, Washington Reagan National and Boston Logan.  In addition, United will transfer up to 86 aircraft acquired in its merger with US Airways to American. UAL Corp. values the transaction at approximately 1.5 billion dollars.

In a separate agreement, AMR Corp. will announce today that it will purchase a 49 percent stake in DC Air, the company that will provide competitive service at Washington Reagan when United acquires US Airways.  American’s transaction provides DC Air with access to a substantial network and operating expertise that will allow it to provide strong competition with United. “I am very pleased to announce this agreement today,” said Jim Goodwin, chairman and chief executive officer.  “We have always recognized that in order to bring about the competitive, nationwide airline network provided by our merger with US Airways, we would need to address competitive concerns that have been raised.  “While our transaction with US Airways and our agreement with American are still subject to thorough regulatory review, we believe we have created a truly comprehensive solution to issues raised by the Department of Justice.  This transaction is a win-win for the customers, shareholders and employees of United and US Airways.”

AMR Corp. will pay United 1.2 billion dollars in cash for this transaction.  In addition, American will assume certain lease obligations and buy certain spare engines and other parts associated with the aircraft.  UAL Corp. said the transaction, if consummated as envisioned, provides for additional financial benefits by reducing the debt requirements related to its acquisition of US Airways.

UAL Corp. has conducted a thorough review of the financial benefits of this transaction, including its impact on revenues, profitability and cash flow. This deal increases and enhances the value of the original transaction with US Airways to United’s shareholders.  The transaction eases and expedites the disposition of assets that will be surplus to the combined entity’s needs. United’s acquisition of US Airways will proceed as originally planned, and specific US Airways assets will be transferred to American to complete the transaction.

Please see the end of today’s Special NewsReal for Safe Harbor information.

New Competitive Service Created

As part of this transaction, American (or its affiliates) has agreed to provide service on the following routes for a minimum of 10 years:

Details on the Sale of Assets

Under the agreement, upon the closing of United’s merger with US Airways, the company will transfer the following US Airways assets to American:

  • Twenty-two jet slots and 14 commuter slots at LaGuardia Airport;
  • Five gates at LaGuardia, three gates at Washington Reagan National, three gates at Boston Logan, and one gate each at Philadelphia, Atlanta Hartsfield and Newark;
    • *Thirty-six Fokker F-100 aircraft, 23 Boeing 757 aircraft and seven McDonnell Douglas MD-82 aircraft. United also will lease or sublease an additional four F-100s, 11 B757s and five MD-82s to American. Subject to agreement with relevant airline pilot unions, the transaction provides that American will offer employment to 1,100 current US Airways pilots associated with these three aircraft fleets.  If fewer pilots accept the employment offer, the number of aircraft transferred may be affected.  No United employees will be affected by the agreement.

    United and American Launch Joint Shuttle Venture

    As part of the transaction, United and American have agreed to enter into a 20-year joint venture relating to the existing US Airways Shuttle.  Under this joint venture, United and American will:

  • Each fly half of the daily shuttle flights between Washington National, LaGuardia and Logan, with each airline using its own aircraft and crews.
  • Jointly market a shuttle product with some common product standards.  United and American will coordinate schedules, pricing, flight operations, lounge access, quality standards and gate facilities.
  • Under the joint operation, customers will be able to select their frequent flier program of choice -- either United’s Mileage Plus(sm) or American’s AAdvantage program—and earn reward and recognition regardless of which airline’s shuttle flight they have selected.
  • Both airlines will honor each other’s shuttle tickets, enabling passengers to choose between the flights flown by either airline. United and American will introduce a new level of competition, customer choice and service to establish a competitive shuttle product.
    • Safe Harbor Statement

    Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: This article contains certain “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995.  These statements are based on management’s current expectations and are naturally subject to uncertainty and changes in circumstances. Actual results may vary materially from the expectations contained herein.  The forward-looking statements contained herein include statements about future financial and operating results and benefits of the pending merger between United and US Airways and the pending transaction with American.  Factors that could cause actual results to differ materially from those described herein include: industry capacity decisions; the airline pricing environment; competitors’ route decisions; the inability to obtain regulatory approvals; inability to agree on definitive documentation; actions of the U.S., foreign and local governments; domestic and international travel patterns; the inability to successfully integrate the businesses of United and US Airways; costs related to the merger; the inability to achieve cost cutting synergies resulting from the merger; labor integration issues; the economic environment of the airline industry and the general economic environment.  More detailed information about these factors is set forth in the reports filed by UAL and US Airways with the Securities and Exchange Commission.  Neither UAL nor US Airways is under any obligation to (and expressly disclaims any such obligation to) update or alter its forward-looking statements, whether as a result of new information, future events or otherwise. 

    WHQ Corporate Communications Unitel 700-4764