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America West offers equity
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December 10, 2001: 3:01 p.m. ET
Troubled No. 8 airline offers feds equity stake for loan guarantees.
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NEW YORK (CNN/Money) - America West Holdings Corp. is offering to give an equity stake to the federal government in return for federal loan guarantees, making it the first major airline to make that offer.
The Phoenix-based carrier, the nation's eighth-largest airline, did not disclose what percentage of ownership it is offering in return for the guarantees.
Shares of America West (AWA: up $0.04 to $2.62, Research, Estimates) were little changed in afternoon trading following the announcement.
Its original application for loan guarantees in mid-November did not include the offer of equity. The company's statement Monday said the offer of equity and some other changes in the application were made after negotiations with lenders and the Air Transportation Stabilization Board, which is overseeing the federal assistance program passed in the wake of the Sept. 11 terrorist attack.
It also said it will still seek only $400 million, even though the loan package it now is seeking has risen to $445 million from the $426 million it originally sought. It said that change reduces the amount of the guarantee to less than 90 percent of the overall package from almost 94 percent.
America West was one of the carriers seen to be on the shakiest financial ground in the wake of the attack. America West CEO Douglas Parker testified before Congress that the airline would consider seeking bankruptcy court protection without the federal bailout.
In addition to the guarantees, the company also has received $98.2 million in direct financial aid from the federal government under the bailout bill, out of $3.8 billion paid out so far.
A total of $5 billion in direct aid and $10 billion in potential loan guarantees was approved in the bill, but only about 85 percent of each passenger carrier's direct assistance had been paid through the end of last week.
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The only other carrier to apply for loan guarantees is Vanguard Airlines (VNGD: down $0.01 to $0.39, Research, Estimates), a Kansas City, Mo.-based carrier serving 15 cities with 13 aircraft. It announced Sunday that it had filed its loan application last week.
Industry analysts have said the provision in the bailout legislation that allows for equity in exchange for loan guarantees could limit the number of carriers that eventually may apply for the guarantees, since a federal equity stake could dilute the value of holdings of existing shareholders. 
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