Next Time, Winners Might be Different

 
February 23, 1999

ALPA, Intl

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Speaking to a gaggle of media and a couple hundred or so airline employees and
other interested onlookers at company headquarters in Tempe, the silver-haired Franke was
intent on putting to rest rumors that America West was about to be bought by United
Airlines or Continental Airlines or Air Tanzania. The press conference no doubt was so
well attended because the rumor mill had ground out a scenario that a sale was imminent
and would be announced Monday, or today at the latest. For some, the no-sale revelation
probably was a disappointment.

Franke opened his remarks simply and clearly, stating that the company had
“terminated consideration of expressions of interest in the acquisition of America
West.” He spoke of a fiduciary obligation to shareholders, and returned to that theme
several times in answering media questions after the formal announcement.

But let’s make one thing clear: It wasn’t pressure from Tempe city officials
or state officials or Phoenix Mayor Skip Rimsza or any other outside interest that brought
Franke and his board of directors to the conclusion that no deal was a good deal. It just
made good business sense. The formal announcement brought a loud cheer from the crowd of
mostly airline employees, many of whom might have been among the losers if the airline had
been sold. Mergers and buyouts have a habit of resulting in downsizing. As it turned out,
they sounded as if they believed they were winners.

Other workers, particularly flight attendants, said they thought a merger might
increase pay and improve morale, so were downcast when they found out no sale was
imminent. The city of Tempe has to be considered a winner in this no-sale scenario. It
keeps a corporate headquarters that might have vanished into thin air. And it is assured
of keeping a corporate logo on the impressive new building that’s rising across the
street from the present America West headquarters. Filling the building might not have
been difficult, but this has to be a lot more satisfying. Rimsza is a winner of sorts, if
he can get a new Sky Harbor International Airport parking garage back on schedule after
delaying it 30 days in a fit of pique when he took seriously the rumors of an America West
sale. The airport won’t lose its major tenant—in fact, it will see it expand.

Obviously, the flying public and travel agents are the winners. Even for those America
West customers who call or e-mail the newspaper to gripe about canceled or delayed flights
or cranky flight attendants, having America West is better than not having it. Less
obvious but very important winners are the small companies, the vendors, in the Valley
that are dependent on America West for their financial well-being. Maybe it’s just
because I’m glad to see America West stay in the Valley for a while, but it’s
difficult finding many losers as a result of Monday’s news.

Certainly, any investors who may have loaded up on America West stock in anticipation
of a big jump in price when the rumored sale became reality were in a position to take a
hit if they couldn’t get out fast enough. Perhaps the flight attendants, who are in
the midst of an acrimonious disagreement with America West management over a new contract,
will see this as a losing proposition. Their union representatives had spoken of better
wage scales and better working conditions that could be found at other airlines.

In the final analysis, for winners and losers both, what happened Monday was plain and
simple a business decision. The next time—and you can bet there will be other
expressions of interest—the decision might go the other way if the price is right.