Computerized Reservation System, JFK Terminal Buildings : Pan Am Offers to Buy Some TWA Assets
In a situation that is becoming more complex each day, Pan American World Airways has offered to buy some of Trans World Airlines’ most valuable assets, including its PARS computerized reservation system.
“Inasmuch as it appears that the TWA board of directors is weighing various alternatives at this time, including the possible sale of assets,” Pan Am Chairman C. Edward Acker wrote in a letter to his counterpart at TWA, C. E. Meyer Jr., “we at Pan Am believe it would be prudent for TWA’s board of directors to consider the sale of certain of these assets to Pan Am in order that TWA’s stockholders achieve the greatest value for them.”
The letter, dated Aug. 15, said that Pan Am is seriously interested “in the possibility of purchasing” TWA’s reservations system, its “Getaway” tour-package program, its terminal facilities at New York’s John F. Kennedy International Airport and some aircraft.
The letter mentioned no specific sums, but Acker said he is ready to begin negotiating immediately for any or all of the assets.
Ulrich V. Hoffmann, TWA’s general counsel and senior vice president for external affairs, declined to comment on the letter.
The belief that TWA’s assets may be on the auction block arises out of the current battle for control of TWA between Texas Air Corp., which operates Continental Airlines and New York Air, and corporate raider Carl C. Icahn. Texas Air, which owns 6.4% of TWA, this month increased its offer for TWA stock to $26 per share. But Icahn, who has bid $24 per share, already controls 45.54%.
Texas Air, with which TWA had reached a merger agreement until Icahn renewed the bidding, has suggested to TWA’s board several ways to dilute Icahn’s stake, including the issuance of TWA preferred stock to boost Texas Air’s voting power, redeeming some of TWA’s convertible preferred stock outstanding and allowing Texas Air to exercise its option to buy 6.4 million TWA shares not yet issued.
Industry observers also say that TWA’s board might decide to sell some of its key assets to Texas Air or others so that, if Icahn does win, some of the most lucrative assets would be gone.
The TWA board is scheduled to resume talks today on the rival offers.
Observers say that Pan Am is worried about the competition that might arise if Texas Air acquires TWA and turns it into a discount carrier.
Expand Domestic Feeder System
Acker wrote that Pan Am, which recently agreed to sell its Pacific division to United Airlines for $750 million, has indicated its intentions to expand its domestic feeder system and concentrate on improving service to Europe, the Middle East, the Indian subcontinent, Africa, the Caribbean and Central and South America. Money from the sale to United might be used to “acquire assets to accomplish these goals,” he wrote.
TWA’s reservations system, with about 5,000 subscribing travel agents, is the third largest in the industry behind systems owned by United and American.
A group of 24 U.S. and foreign airlines, of which Pan Am is one, last week also expressed interest in buying the system from TWA. The group, which contends that other computerized systems are “biased” in favor of their owners in the selection and manner that they list flights for travel agents, wants to turn the system into a “neutral” one.
The Getaway tour program is a profitable ground-tour program operating in all of the overseas cities served by TWA. TWA has two buildings at JFK International, one for domestic travel and the other for international flights. Located on 25 acres, the two buildings represent the largest amount of space held by a single airline at the airport. Pan Am’s facilities at JFK, on the other hand, are cramped.
The takeover battle for TWA has attracted investors to Texas Air. Fidelity Management Research Co., which operates 31 mutual funds from its Boston base, informed the Securities and Exchange Commission that it had increased its holding in Texas Air to 1.9 million common shares, or 13.09%. A spokesman said the holdings were for investment purposes.
Earlier, Saul P. Steinberg, chairman of Reliance Group, an insurance and financial company, reported that it had acquired 5.4% of Texas Air, while an investment partnership, Odyssey Partners, said it had bought 5.39%.
