It looked like the end of a beautiful friendship. For the past decade, Edward R. Beauvais and Michael J. Conway worked as a team in running America West Airlines Inc., the Phoenix carrier Beauvais founded in 1981. But the duo began to split a year ago, when the carrier filed for bankruptcy and Beauvais stepped down as CEO.
On July 17, the last tie was severed: With apparent nudging from Conway, Beauvais stepped down as chairman. Then he blabbed to a Phoenix radio audience that layoffs were imminent, flights would be slashed, and routes to Hawaii could soon be a memory. Responds Conway: "An unfortunate combination of misinterpretation and misstatement."
SCHEMING. The embarrassing flap is just the latest problem for the Phoenix-based airline. America West is facing what may be its final crisis. For months, Conway has talked optimistically of a hefty cash infusion to allow the carrier to move toward reorganization. The money has yet to materialize. And this summer's savage fare wars have slaughtered hopes of stockpiling cash for the less-profitable fall and winter seasons. Cash reserves are down to about $40 million, a knowledgeable source says, compared with $70 million at the end of April. The airline has suspended payments for 60 days on many of its 85 leased planes. It is looking to cut its fleet of 104 aircraft by 15% and to lay off 1,500 of its 12,000 workers. The carrier will reduce service at its six-month-old Columbus (Ohio) hub and eliminate daily flights to Hawaii at least temporarily. America West has sold baggage-handling and other equipment to Phoenix for $500,000. Beauvais had to leave, says Conway, to show prospective investors "no stone will be left unturned." Beauvais was identified with the wildly expansionist schemes that got the airline into trouble, says Conway. Beauvais isn't commenting.
But these moves may be fruitless unless Conway can woo new investors. He swears help will come through "in a matter of days." But the airline's laggard performance killed an earlier deal to win private placement money from investors in Columbus. Now, Conway is pinning his hopes on a fragile coalition that includes Aeromexico, Ireland's GPA Group, a syndicate of Phoenix businesses, and possibly a group of Columbus investors headed by Banc One Capital Corp., sources say. Several parties would pony up $60 million in bankruptcy financing. Others would promise $100 million in equity for an 80% stake in the company when and if it emerges from bankruptcy. One potential investor says he believes America West will see changes in route structure, finances, personnel, and strategy that will create a "fundamental change" in the carrier.
America West is betting that aircraft lessors won't lose patience. Ina glutted market, thereis little incentive for them to repossess planes even if airlines suspend payments. This way, the airline is hoping to save money by renegotiating leases.
Now that Beauvais is gone, Conway must represent the airline on radio himself. If he can pull off his latest scheme, he may find himself in great demand. If not, he may wish he had Beauvais around to take the heat.