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Merging air carriers are nothing new in the U.S. or around the world, for that matter. ValuJet Airlines and AirWays Corporation, will fold their two holding companies in together to form a newly created holding company operating as AirTran Holdings, Inc. Atlanta-based ValuJet has had trouble filling seats since a highly publicized accident in the Florida Everglades killed all passengers of one of its aircraft last summer. Despite regaining its FAA certificate and returning to the skies, the low-fare carrier has struggled to attract the passenger volumes it once enjoyed. Last week, the airline reported its aircraft were only 53% full in June. Two years ago, ValuJet aircraft were running over 75% full during the same month. Smaller AirTran reported a load factor of 69.4% for June. The merger, subject to shareholder, bondholder, regulatory and certain other approvals will create an airline with over 2700 employees, serving 46 cities with up to 248 departures. The transaction provides for a one-for-one stock exchange, whereby each share of AirWays stock will be exchanged for one share of ValuJet common stock. ValuJet will issue approximately 9,067,937 shares of common stock in the transaction, representing a value of aproximately $61.8 million based on ValuJet's closing stock price of $6.81 on July 9th. The final merger and closing date are anticipated to occur within three to four months. The combination has been structured as a tax-free merger. The carriers will continue to function under their respective operating certificates. The location of the holding company's headquarters is under review, with Orlando currently the lead candidate. Airline executives say a final decision will be based on the proposals of various communities to ensure the best results for shareholders, employees, and customers (read: "we'll accept offers"). ValuJet will nominate four members to the board of directors of the combined entity, while AirWays will nominate three. Robert D. Swenson, chairman, president and chief executive officer of AirWays Corporation will serve as a non-executive chairman of the combined company. D. Joseph Corr, who joined ValuJet in November 1996 as president and chief executive officer will serve in the same capacities of the combined company. Corr previously served as chairman, president and CEO of Continental Airlines and as president of Trans World Airlines. "This agreement provides an excellent opportunity to combine two complementary business plans and provide access to reliable service and affordable fares to large markets currently served by ValuJet and mid-sized cities with AirTran service," said Corr. "The merged company will benefit from access to AirWays' maintenance facility in Orlando and the ValuJet launch order for 50 firm and 50 option McDonnell Douglas MD-95s with delivery scheduled to begin in June 1999." "The companies have many synergies including affordable fares, a focus on the leisure traveler and some of the industry's most dedicated and experienced employees," said Swenson. "This merger should significantly enhance AirTran's growth prospects with the strong cash position of the merged companies and our combined operating fleet total of more than 40 aircraft. We believe this merger will generate substantial benefits for our shareholders, employees and customers." AirTran Airways provides service between Orlando and 23 cities with a fleet of Boeing 737 aircraft. The carrier is expecting delivery of its eleventh Boeing 737 aircraft by the end of this month. Atlanta-based ValuJet Airlines currently operates 200 system-wide peak daily departures to 24 cities with a fleet of 30 aircraft. |
