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"United's Waves Help Jostle Hertz, Others"
Friday, September 1, 2000
United's Waves Help Jostle Hertz, Others
NEW YORK — Turbulence from United Airlines' long, hot summer of canceled
flights helped shake up No. 1 car rental company Hertz Corp. (HRZ.N) and a
connecting carrier, Atlantic Coast Airlines Holdings Inc. (ACAI.O), on
Even as United's turmoil stemming from a labor contract added to Hertz's
woes and jostled regional airline Atlantic Coast, analysts said a tentative
deal in the work dispute could mean good news for makers of regional jets.
"When you have somebody this big, with this many problems, it doesn't
surprise me'' that other companies and industries would be both hurt and
helped, said Glenn Engel, an analyst with Goldman Sachs.
The 10,500 pilots at United, the world's biggest airline, have refused to
work overtime during the summer as a way to speed a successful end to
United, part of UAL Corp. (UAL.N), cut about 23,000 flights between April
and mid-August, leading to snarled traffic and frustrated travelers.
United and its pilots' union reached a tentative accord last Saturday. The
deal included pay hikes of 45 to 55 percent over the four-and-a-half-year
life of the contract.
Hertz said its earnings for the second half of the year and for 2001 would
fall short of Wall Street estimates, in part because stiff competition was
holding down rental prices.
But, in a byblow from the United turmoil, the Park Ridge, N.J., company also
blamed United's labor dispute, along with bad weather, for keeping travelers
away from airports.
Hertz fell $4-11/16, or 16 percent, to $25-7/8, firming a bit off a 12-month
United was "a factor in airport rentals in the third quarter and obviously
should be non-recurring when that labor dispute is finished,'' said Hertz
spokesman Rich Broome.
Atlantic Coast, the regional air carrier, also pointed a finger at United.
The Dulles, Va., company said its third- and fourth-quarter earnings would
fall short of Wall Street forecasts. It said bad publicity stemming from the
United dispute had led to lower bookings in August.
Atlantic Coast, which also blamed higher fuel prices and bad weather for the
downbeat forecast, fell $3-1/2 to $28-1/4 in heavy trade.
Atlantic Coast and SkyWest Airlines Inc., part of SkyWest Inc. (SKYW.O), are
the two biggest regional carriers feeding United. SkyWest was off $1-3/16 at
Analysts said the tentative labor contract could hold a prize for such
builders of smaller regional jets as Brazil's Embraer SA (EMBR3.SA) (ERJ.N)
and Canada's Bombardier Inc. (BBDa.TO).
Under terms of the initial deal, United could raise the number of regional
jets -- mid-range aircraft mostly seating fewer than 100 people -- that
smaller carriers would have available for outsourcing deals from major
The tentative accord would boost the number of regional jets on hand to
several hundred from the current level of 65.
"For Bombardier and Embraer, this is good news,'' Goldman Sachs' Engels
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