Sounds Good, If It Flies

In the 37 years that Edwin I. Colodny piloted USAir Group Inc., he didn't need many maps. He confined the airline's operations to the domestic market, mostly in the East. On July 1, Chief Executive Seth E. Schofield took over as chairman. And it looks as if he's planning to push the carrier into unfamiliar territory.

Schofield has his sights firmly set on global competition. To get there, USAir is negotiating to purchase the assets of troubled Trans World Airlines Inc. To finance the deal, Schofield hopes to sell as much as 49% of an expanded USAir to British Airways PLC. USAir and BA won't comment on the report. But TWA Chairman Carl C. Icahn has confirmed that he has had discussions with USAir, though he says he has received no formal offer.

The vol a trois could be just what each of the three needs. Cash-starved TWA, which is operating under Chapter 11 bankruptcy protection, needs dough. USAir needs to expand operations. And BA wants entree into the U.S. market.

To make it all happen, the carriers will have to clear some daunting hurdles. BA will need U.S. government approval to acquire the substantial stake in USAir. USAir must figure out how to buy TWA's assets without acquiring its huge pension liabilities. And both TWA and USAir may have trouble completing the deal. "They're crazy if they think they're going to go into bankruptcy court and buy TWA assets without any competing bids," says a U.S. competitor.

`I'D SELL.' But if it all works out, USAir finally could find itself flying more international skies. In the past, Colodny shunned opportunities to pick up overseas routes from the Transportation Dept. "USAir was a prime candidate to win a Tokyo route and possibly one to London, but it would not compete for them," says a senior Transportationofficial.

New routes would help boost USAir's finances, which have been awash in red ink (chart, page 35). The arrangement could also bolster the airline's position at home. Together, USAir and TWA carried 73.3 million domestic passengers last year, more than any other U.S. carrier. And their combined capacity would rank them No. 4 in the U.S. industry.

Chances are, TWA is ready to sign on the dotted line. Icahn's airline is gravely wounded. By selling it, Icahn could claim to have kept it alive. "If I were in his shoes," says one rival, "I'd sell the cattle when it still has some meat."

Then there's BA. The British carrier has been itching to gain a foothold in the big U.S. market. During the past several years, it has kicked the tires of United, Northwest, and Continental but walked away. This time, BA may be serious enough to push the government into opening British skies. Since the Transportation Dept. would have to approve BA's 49% stake in USAir, Washington plans to use the threat of rejection to force London to ease its strict control over airfares and landing rights for U.S. carriers. Britain's powers stem from the 1976 Bermuda II treaty, which the U.S. already is trying to renegotiate.

London has been unwilling to budge. But when talks resume on July 20 in London, the U.S. may find itself with more clout. "You better believe there is a linkage between our talks and their ability to buy into a U.S. airline," declares Patrick V. Murphy, Deputy Assistant Transportation Secretary.

If this strategy works, it could be a major coup for Schofield. His first action as chairman shows that he's ready to make some big moves--just what's needed to pull USAir out of its financial nosedive.

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