U.S. Opposes Merger Curb for Airlines : Move Is Inconsistent With Deregulation, House Panel Told

Times Staff Writer

The Reagan Adminstration said Thursday that no new authority is needed to thwart a hostile takeover of an airline by someone who might ultimately be deemed unfit to operate it.

Legislation to institute a 90-day cooling-off period during which the Department of Transportation would be able to examine in a “timely and meaningful way” the fitness of anyone seeking to take control of an airline has been introduced by Rep. Norman Y. Mineta (D-Calif.), chairman of the House Committee on Public Works and Transportation’s subcommittee on aviation.

That bill and a similar Senate bill were introduced in response to New York financier Carl C. Icahn’s fight to take over Trans World Airlines.

Asked for Help


TWA has filed suits in federal and Missouri state courts and asked the Department of Transportation to help stop Icahn’s efforts.

Icahn and investor groups led by him have acquired 32.77% of the airline’s stock, and he has said he would oust the current president, C. E. Meyer Jr., if he gains control.

Matthew V. Scocozza, the Department of Transportation’s assistant secretary for policy and international affairs, told the subcommittee that the Mineta bill was “inconsistent with the principles of deregulation established by Congress in the 1978 Airline Deregulation Act, in which industries are regulated only to the degree necessary to protect the public interest . . . consistent with the concept of a free-market economy.”

As both Meyer and Icahn listened, Scocozza said that “the public interest requires that U.S. carriers continue to serve foreign markets. . . . This interest, however, must not be confused with a perceived need to offer undue protections to a specific air carrier’s management.”


Protect Public Interest

He said the government had adequate authority to protect the public interest by holding hearings into any change of control and issuing an order to prevent an individual from exercising control of an airline.

Scocozza added, however, that “none of these provisions . . . authorize the department summarily to suspend or freeze a scheduled carrier’s economic operating rights, much less transactions in its securities.”

Addressing the subcomittee, Icahn angrily accused Meyer of “character assassination” and charged that any legislation passed now would be discriminatory.


“I resent the suggestion that the rules be changed in the middle of the game,” he said. “Retroactive legislation would be unfair. And legislation drawn narrowly to restrict my offer, in aid of entrenched management, would be doubly unfair.”

Meyer in turn accused Icahn of trying to “come in through the back door” to “hijack an airline fitness certificate.”

TWA petitioned the Department of Transportation on May 16 to investigate whether TWA would be fit to carry passengers if it should come under Icahn’s management. Scocozza said the department would announce within a few days whether it will act on the May 16 petition.

In Missouri, the state Supreme Court upheld a restraining order prohibiting Icahn from buying any more TWA stock before a court hearing June 17.


TWA has argued that Icahn intends to dismantle the airline and sell its assets, a contention that Icahn denied again in Washington on Thursday. TWA maintains that Icahn represents a threat to 11,000 jobs in the state where it has a hub at the St. Louis airport and a major maintenance facility in Kansas City.