Paul Lewis/WASHINGTON DC
Trans World Airlines has become the latest major carrier to become a takeover target, with two prospective bidders. Meanwhile, the US Congress continues to cast an increasingly critical eye over the proposed United Airlines and US Airways tie-up.
Air Tran Airways has been reported to be holding initial talks to acquire TWA. This is turn has spurred a competing $381 million offer from an unidentified consortium of private investors led by Global Airlines.
Atlanta-based Air Tran, formerly ValuJet, is rebuilding its operations in the wake of the 1996 fatal crash of a McDonnell Douglas DC-9 which resulted in the airline being temporarily shut down. While the carrier has returned to profitability, financial analysts doubt whether it has the financial clout to acquire TWA, which is larger.
Global Airlines is relatively unknown and had been considering launching a start-up after an earlier offer to buy TWA failed. The company has given TWA chairman Bill Compton until 25 June to respond to the new offer after which it will approach the airline's shareholders directly.
According to Global chief executive Emil Bernard, it has offered $5 a share, comprised of a $2 a share stake in Global, a $2 per five year convertible bond and $1 cash. TWA, which has not made a profit in more than 10 years and has seen its share price slump, confirms an approach by Global but declines further comment.
Air Tran chairman Joseph Leonard, in the meantime, has made a play for more slots at Washington National Airport in a testimony before a US senate committee examining the proposed United and US Airways merger. The deal is running into mounting political opposition over the proposed reallocation of US Airways' Washington slots to start-up DC Air as part of its planned merger.
"A cursory review of the business plan clearly indicates that DC Air will not be an independent carrier. DC Air will lease United aircraft and flightcrews, adopt the United pilot contract terms, use maintenance and ground facilities, participate in the United frequent traveller programme, all under the direction of a current US Airways vice-president," says Leonard.
He adds that divesting US Airways' slots to DC Air will not result in meaningful competition. DC Air chairman Robert Johnson, in response, has said he is only willing to participate in the merger if his carrier was to acquire all of the National slots.
Meanwhile, Continental boss Gordon Bethune, speaking in London, said that American Airlines stands to be the biggest loser if the United/US Airways merger goes through. "American could not sit idly by, it's too dangerous for them. They risk being squashed by a rival 30% bigger."
The Continental chairman and chief executive says American has already had talks with Delta and Northwest about a possible tie-up. "Something is going to happen and it will set the ball rolling for others to act." While Continental expects to play a part in any consolidation, the situation is complicated by the fact that 30% of the airline's stock is held by Northwest. Bethune says there has been no progress in attempts to buy back the shares.
Source: Flight International
