What about US Airways' stockholders?

08-18-2002

Last Sunday evening, US Airways president and chief executive officer David Siegel e-mailed a message to Dividend Miles members informing them of the airline's decision to file for Chapter 11 bankruptcy protection. A copy was posted on the carrier's Web site.

"Dear David Bear," the missive in my inbox began, "Because of your loyalty to US Airways ... It's important for you to understand that US Airways is not going out of business. ... Every ticket will be accepted and honored ... refunds and exchanges will be made ... reciprocal agreements with other carriers will remain fully intact and continue without interruption. ... Dividend Miles will continue to offer significant award benefits ... US Airways Clubs will continue to operate without interruption to members ...

"While US Airways was able to successfully negotiate cost-savings from most of its employee groups, we determined that we were unlikely to conclude consensual negotiations with certain vendors, aircraft lessors and financiers in a time frame necessary to complete an out-of-court restructuring.

"While we are disappointed at the outcome of our efforts to obtain the support of our business plan by some of our lessors and other key stakeholders. ... We believe that a financially sound and competitive US Airways benefits all of our constituents -- our passengers, our suppliers, our employees and the communities we serve."

What about longtime shareholders? Or should I say stakeholders?

Perhaps bag holders would be more accurate.

Like, I suspect, many thousands of other people in this area, I've been a small US Airways "stake" holder for a long time.

Back in 1987, using part of my annual IRA contribution, I purchased 100 shares of what was then USAir stock for about $1,200.

Though my holdings accrued no dividends or stock splits, I let my investment ride through 15 years of our favorite airline's financial ups and downs, the depths of the post-Gulf War recession, its on-again, off-again relationship with British Airways, the rise and fall of MetroJet, the long-proposed but eventually aborted merger with United Airlines, numerous episodes of labor brinkmanship, even the darkest of days since Sept. 11.

It was a bet made more on naive faith that the airline that began as Allegheny would always fly, rather than that corporate managers, who, I might add, were being sinfully well-compensated for their leadership, would pull the carrier out of its nose dive. That faith, perhaps, and a sense of loyalty to the airline I've associated with Pittsburgh for my entire life. What a fool.

The value of my US Airways shares, worth as much as $4,000 two years ago, slid so far that just before trading on the stock was suspended, my holdings wouldn't even have paid for an economy-class, round-trip ticket to nowhere. Any gains in selling would have been eaten up by stockbroker commissions.

Now we are being told that those long-held shares are worthless, a complete loss. To add insult to injury, because my shares were part of an IRA, the loss can't even be deducted from other gains in my portfolio (assuming that there were any gains in the first place).

Mr. Siegel, no one ever approached us about renegotiating the value of our shares in US Airways. The stock market took care of that. While you did issue cautions, no one from the company ever said "sell," even as, it turns out, your employees' pension funds were quietly liquidating their investments in the company.

Nor did any expert approach us about renegotiating our "goodwill" toward US Airways or our sense of hometown brand loyalty.

Apparently all that is worth nothing. Not even a "thank you."

Yes, shareholders had warning that bankruptcy was a possibility and to get out while the getting was still good -- well, perhaps not good, but at least of some worth.

Perhaps we've been through so many other critical times with US Airways that it was hard to believe this time was for real. Only a few months ago, its shareholders still ranked high on US Airways list of valued constituents.

Now we're the forgotten ones, the ones whose stakes in the company have been rendered valueless by this decision.

Of course, in addition to being shareholders, we're still passengers, who, assuming there will be some sort competition in the future among airlines for our business, will be making decisions on which airline to fly.

Although a symbolic offering or acknowledgment to small shareholders would probably be viewed warily by bankruptcy courts and new investor groups, your financial wizards should be able to devise some formula to provide US Airways' many thousands of small shareholders with some compensation for being faithful all these years, a token of your appreciation. Not the big institutional players and stock speculators, but long, loyal, individual investors who have stuck with the airline.

Ideally, you could offer some sort of stake in the US Airways that will, we all hope, emerge from Chapter 11 next spring as a healthier, stronger participant in the ongoing saga of air wars.

Or there could be some incentive or special option to purchase new shares in the company, should they ever become available again.

How about a voucher for a free round-trip ticket somewhere, in exchange for those years of loyalty? That's compensation you provide for passengers bumped off oversold flights.

Why not for shareholders bumped off an unprofitable airline? There are already millions of unclaimed Dividend Mile rewards out there. What difference would thousands more make?

You certainly know who we are. For years, your airline has been sending us quarterly and annual reports detailing the company's continuing quest toward profitability, not to mention compensation paid to those senior managers who were leading the effort.

We should have read more closely between the lines.

Maybe we'll remember to be more wary the next time around.

In addition to being a good public relations move, it would be a stand-up thing to do.

[Back to Articles Main]