People Express May be Back on the Block

People Express Inc., the 5-year-old airline carrier that has spent the past year building up and then cutting back its operations, reportedly is considering putting itself up for sale, working with a partner or selling some assets.

The Wall Street Journal, quoting unidentified sources close to People Express, reported Thursday that Texas Air Corp. has been willing to negotiate with the Newark-based carrier but has not jumped at the chance to enter into an agreement with People Express, which lost $132.5 million in the first half of the year.

Anthony Hatch, an analyst with Argus Research Corp. in New York City, said the report of talks with Texas Air is not a good sign of People’s financial strength.

A joint venture with Texas Air or another company to win an infusion of cash would be “a new ballgame” in the industry, he added.

But it also might be a way for Texas Air to circumvent potential antitrust problems, Hatch said. Texas Air already is involved in East Coast air traffic as the owner of USAir. It also has announced plans to acquire Eastern Airlines, although the federal government has raised antitrust questions.

Two months ago, People Express rejected a $235.8-million bid from Texas Air to buy the company.

Richard Scott, spokesman for Houston-based Texas Air, declined Thursday to say whether new talks had taken place with People Express.

Russell Marchetta, People Express spokesman, also declined to comment on the published report or the company’s financial standing, except to say that August was a good month because the airline’s planes were 67% full.

“Everyone does well in the month of August. Unfortunately, there are Novembers and Februarys,” said Louis Marckesano, an analyst with Janney Montgomery Scott Inc. in Philadelphia.

He said People Express is not suffering from an immediate cash shortage that would force it to shut down. But he added that as time goes on, the company’s worth may drop and the carrier would be able to command less and less from a potential buyer.

In July, after rejecting Texas Air’s offer, People Express decided to sell its Frontier Airlines’ subsidiary to United Airlines for $146 million.

People Express received $50 million from United for assets such as gates and landing slots before a United union dispute led United to scrap the sale.