Cash-strapped Midway Airlines, the Chicago-based carrier that had hoped to move into the major national airline leagues with a second hub at Philadelphia, said yesterday it is selling those operations to USAir Group Inc. for about $68 million.
The transaction -- if approved by the Justice Department -- would be a major boost for USAir, whose profits have been squeezed because of fare competition from Midway and Eastern Air Lines on the East Coast.
The Philadelphia facilities that Midway is selling originally belonged to Eastern Air Lines. USAir tried to buy them when they were put up for sale by Eastern in 1989 but was blocked by the Justice Department, which claimed it would be a threat to competition because of USAir's strong position in the Philadelphia market.
Midway paid about $100 million for the gates and other assets it is now selling for $68 million, according to President Thomas Schick. The sale, at a loss of about $30 million, was necessary because Midway finds itself short of cash. Higher fuel costs and lower traffic have created mounting losses at Midway that Chairman David R. Hinson yesterday said "threaten the company's continuing viability."
"This is very good news for USAir," said Paul Karos, an airline industry analyst with First Boston Corp. USAir stock closed up 75 cents yesterday at $171.12 1/2.
USAir was more reticent in describing the transaction, but spokesman David Shipley said the company's earnings have been hurt by competition from Midway at Philadelphia.
Although USAir has not received any word on how the Justice Department may react to the sale this time, Shipley said conditions have changed since the agency rejected the earlier transaction. Among other things, he said, a new terminal at Philadelphia International Airport has almost been completed with an additional 11 gates, allowing other airlines to start up competing service.
Although USAir has announced layoffs in the face of mounting operating losses, the airline considers the Philadelphia transaction "an investment in the future," Shipley said.
Justice Department spokeswoman Gina Talamona said the department continues to be concerned about competition in the airline industry and would review any acquisition that appeared to affect competition.