In a bid to get out of the airline business, WorldCorp is hoping to sell its 59 per cent stake in World Airways and concentrate on its computer business.

'Our parent company has basically taken the lead of its main shareholder group [which wants] to position WorldCorp as an information technology business,' explains Charles Pollard, chief executive of the charter carrier, which recently re-entered international scheduled service.

WorldCorp, which sold 24 per cent of its stake in the carrier in a public offering last October, has put forward three options to sell the airline: an employee buyout; sale to an independent third party; or the less likely option of selling the stock on the open market. There is also speculation of a sale to another carrier, perhaps Continental Airlines. In June, the Houston-based carrier is scheduled to begin a codesharing alliance at its Newark hub with World. Neither World nor Continental would comment on that possibility. MHS, the Malaysian aviation concern with a 16.6 per cent stake in World Airways, is said to be supporting the sell-off plan.

Though early in the deal-making process, management of WorldCorp and World Airways are leaning towards structuring an employee stock ownership plan similar to the 1994 Esop put in place at United Airlines. Indeed, the company has already hired Houlihan, Lokey, Howard and Zukin, the same organisation which advised UAL on its Esop.

Whether World's 700 employees can gather the necessary cash to put together a deal remains to be seen, however. Tapping a $25 million benefits plan can supply only part of the $37 million that broker Stephen D Weinress estimates WorldCorp's stake is worth.

The sale comes at a time of transition for World Airways. Last year the carrier re-entered scheduled service after being absent since the mid-1980s. But the New York-Tel Aviv market in which it inaugurated services has not proved a success.

Overcapacity has plagued the route, further buffeted by the vagaries of Middle East politics. Though the airline saw a $17 million earnings improvement last year with net profits of $8.9 million on $259.9 million in revenue, a fourth quarter loss of $1.6 million, primarily the result of the Tel Aviv service, shook investor confidence.

Nonetheless, the airline insists it is in a strong competitive position, especially since being awarded the high-yield South Africa authority and allying itself with Continental to benefit from its extensive US-domestic traffic feed.

And, notes Weinress, the carrier's fundamentals are good: its core charter operations have a contract backlog of $462 million, and its cash and equivalents of $25.3 million are strong. The carrier predicts net income will jump 76 per cent this year.

Mead Jennings

Source: Airline Business