Texas Air Reportedly in Talks on Takeover of People Express
Airline entrepreneur Francisco A. (Frank) Lorenzo has been talking with People Express Airlines Chairman Donald Burr about a possible takeover of People Express, sources said Thursday.
But analysts maintain that such a consolidation would face stiff opposition from the Justice Department on antitrust grounds. Lorenzo’s Texas Air owns Continental Airlines and New York Air and is awaiting government action on its proposed purchase of Eastern Airlines. The Texas Air-Eastern merger, if it is approved by the Department of Transportation, would create the nation’s largest air carrier.
Burr and Lorenzo are reported to have personally taken part in negotiations at a dinner earlier this week. But, according to a source who requested anonymity, talks have been going on for as long as two or three weeks between officials of Texas Air and People Express’ investment banker, Morgan Stanley & Co.
“These talks have consisted of much more than dinner,” one informed source close to the situation said. “I know there have been exchanges of papers and statistics. There have been meetings of the financial people of Texas Air with Morgan Stanley people.” He said Morgan Stanley contacted Lorenzo to initiate the discussions. Officials of People Express, Texas Air and Morgan Stanley all declined to comment.
People Express said late last month that it was looking into the possibility of selling all or part of the airline holding company. Besides People Express Airlines, the company owns Frontier Airlines and two regional carriers.
Reports also have circulated recently that People Express was also holding talks with United Airlines. A spokesman for United said Thursday: “We have no comment. We will neither confirm nor deny such reports. There have been rumors about this for about three weeks.”
The sharp competition in Denver among United, People’s Frontier and Texas Air’s Continental was thought by some analysts to be one key to the current negotiations. Either Texas Air or United could knock out a troublesome competitor there by buying People Express.
Some observers said Lorenzo might ultimately drop any thought of purchasing People Express because it might jeopardize his $600-million takeover of Eastern. Texas Air, which said last February that it would take over Miami-based Eastern, already owns 51% of the airline’s shares. Approval by the Department of Transportation is expected this summer.
“The mere size of this airline (including People Express) would cause some soul-searching at the Department of Transportation and at the Justice Department,” said Louis Marckesano, airline analyst with Janney Montgomery Scott.
