Gov't. Gets $116M From America West Stock

The federal government will pocket $116 million from the sale of stock options it received for guaranteeing an emergency loan package to the former America West Airlines after the Sept. 11, 2001, terrorist attacks.

That's in addition to the interest and principal payments it will collect on the $429 million loan package the airline got as it struggled with a drop in travel after the attacks.

The government is getting the money from US Airways, which combined with America West in a deal completed last week. The new company is based in Tempe, Ariz. and run by former top executives at America West.

The federal Air Transportation Stabilization Board also received the right to buy US Airways stock for giving that company a loan. But those warrants to buy stock at a set price were rendered worthless when it filed for bankruptcy.

The new company still has about $1 billion in outstanding federal government loans, which it is repaying. The former America West owned about $300 million, and US Airways $708 million. The loans are set to be repaid by 2010, company spokesman Phil Gee said.

Both companies were financially ailing when they took advantage of the government loan package in 2002. The government asked for and received a big chunk of each airline in the form of stock warrants _ options to buy stock at a set price _ in exchange for propping them up with the loans.

"We were the very first ones to get the loans right after 9-11, and it was entirely a cash flow situation for us," said C.A. Howlett, a former America West executive who's now a senior vice president with US Airways. "And US Airways was unique, because if you remember, the government shut down Washington Reagan Airport for months - and they have more than 200 flights a day from Washington."

There was some concern among investors about the stock warrants, Howlett said, because if the government decided to exercise them and sell all 7.7 million shares, it could drive the stock price down.

The deal removes that uncertainty, and it is another sign that the new airline is on a solid footing.

"It certainly sends a message that they're financially solvent," said Michael Boyd, who heads the aviation consulting company The Boyd Group. Boyd has done work for America West in the past.

He said the loans served their purpose _ helping out airlines harshly stung by the shutdown of the nation's airways following the attacks.

"Airlines live on cash, and the minute you stop flying the bills keep coming in but the money doesn't," Boyd said. "I think it was smart for them to go after the ATSB loan _ the government owed at least that much to them anyway.

The government said in late September that it wanted to sell or otherwise rid itself of the warrants. It also is looking into selling off the loan package to private investors without the loan guarantee.

It's doing the same with warrants it got from World Airways and Frontier Airlines.

America West granted warrants for 7.7 million shares at $7.27 per share. The deal announced Monday will net the government $115.8 million, which included a premium.

The $116 million payout won't significantly affect the company's cash position. The company says it will have about $2.5 billion in cash on hand once certain transactions close this week.

Shares of the new US Airways Group Inc. which began trading last week on the New York Stock Exchange, rose 66 cents, or 3.1 percent, to close at $22.16 Tuesday.

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