America West stock advances on news of loan

Tuesday, Jan. 15, 2002 | 10:48 a.m.

SUN STAFF AND WIRE REPORTS

America West Holdings Corp. said Monday it met conditions to receive as soon as this week a $429 million loan, the first secured under a U.S. government program to help airlines hurt by the Sept. 11 terrorist hijackings.

America West, the eighth-largest U.S. carrier, is the second-largest carrier of tourists and gamblers to Las Vegas behind Southwest Airlines.

The guarantee triggers more than $600 million in concessions negotiated by the airline from aircraft makers and lessors, suppliers and local governments.

America West stock jumped 23 percent this morning on the news, trading at $3.88. Credit Suisse First Boston analyst James Higgins maintained his hold rating on the stock, but estimated it will lose $2.85 per share this year, an improvement from his previous forecast of $4.

Goldman Sachs analyst Glenn Engel boosted his rating on the stock from market perform to market outperform.

The White House and Congress approved legislation after Sept. 11 to provide airlines with $5 billion in cash aid and $10 billion in loan guarantees to help the industry recover from a decline in air travel and costs for added security. America West is the only major airline to seek and receive a loan guarantee.

"They still have a lot of work in turning the airline around," said Ray Neidl, an ABN Amro analyst with a "hold" rating on America West. "This loan buys them some time."

Phoenix-based America West agreed to issue warrants to give the government the option to purchase almost 18.8 million shares of the company's Class B common stock, or about 57 percent based on the 32.8 million shares outstanding as of Oct. 29. The shares can be bought at $3 The stock price had declined 10 percent this year and lost 76 percent in the past 12 months.

Another 3.8 million warrants will be issued under the same terms to participants in the loan, and the carrier will issue $120 million in seven-year debt convertible to stock at $12 a share to aircraft lessors, the company said.

America West's board won't seek shareholder approval to issue debt or warrants, taking advantage of a New York Stock Exchange provision that allows such a vote to be waived if the delay needed for such a vote would jeopardize the company's viability, the company said.

America West said its agreement with the Air Transportation Stabilization Board won't require it to negotiate wage or benefit concessions from employees or change existing labor contracts. Under the agreement, the company must keep unit labor costs below those projected in the loan application or it will have to partially repay the loan.

Bloomberg News contributed to this report.