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America West Not for Sale? Yeah, Right

Holly Hegeman

Either America West Airlines (AWA Quote) is playing very hard to get or the recently rumored sale of the carrier is toast.

Late Monday, Bill Franke, the chairman of America West, called a press conference in Phoenix. Reading from a prepared statement, he said America West has taken the for-sale sign from its front yard, and declined to take any questions.

Franke said: "In discharging its fiduciary obligation to shareholders, and after careful review of the highly conditioned expressions of interest and of antitrust, regulatory and employee issues, the board of directors unanimously concluded that America West's shareholders, employees and the communities we operate in will be better served by a growing, profitable and independent company."

Franke then added that America West had significant strategic opportunities as an independent airline: "We have positioned the airline with a low-cost structure, a flexible fleet plan, a strong balance sheet, growing hubs and committed employees. We are confident about the company's future as an independent airline."

A widely reported deal between America West and UAL (UAL Quote) died because the two sides couldn't get past various restrictions. According to sources familiar with the talks, United, a unit of UAL, offered to purchase the airline. The offer was in cash, but was contingent upon several "conditions," some of which the America West board didn't like. In addition, the amount of the offer -- which remains unconfirmed -- was regarded as insufficient.

One of the main dealbreakers seemed to be the danger posed to America West during the period of time between when United's offer was accepted and when the deal actually closed. Apparently, the America West board was concerned that America West would bear all of the risk should the deal fall apart, or if the deal was not approved by the Department of Justice.

However, we also know that Franke is a shrewd negotiator, and sources close to the negotiations told us this evening that the announcement may be a ploy to extract a better offer from UAL, or, perhaps, a deal with another airline may be forthcoming.

As long as we're being suspicious, it should be noted that Franke's declaration that the airline is and will continue to be an independent, growing and healthy company doesn't seem plausible.

Employee morale at America West has never set a standard in the industry, and the situation there now is worse than ever after this follow-the-bouncing-offer experience. Employees that we talked to in recent weeks were very anxious to see merger with UAL take place.

The flight attendants, who have waged a four-year battle for a new contract with America West management, are now in the first week of a 30-day cooling off period, the National Mediation Board having declared an impasse in negotiations with the company last week. Indications seem to point towards a potential strike come midnight March 19th.

In addition, America West is not as well off financially as it seems. As we have written here in the past, last quarter's numbers were probably the high-water mark for the short term. I don't think this quarter' s numbers are going to look nearly as good.

So, tonight, according to Franke, there is no deal from United to purchase America West. The airline is not for sale, it will continue to be a healthy, thriving, independent entity -- in short, all is right with the world.

Well, call us cynical non-believers, but we just don't think the last aria has been sung on this one yet.