TWA, America West Protest AirCal Deal; Merger Still Seen Likely
Trans World Airlines and America West Airlines have filed objections to American Airlines’ proposed acquisition of ACI Holdings Inc., the parent of AirCal, but the moves were not seen as constituting a major impediment to the merger.
Spokesmen for both American and AirCal said it will probably not be possible to conclude the deal before the end of the year, as had been hoped. However, both airlines said the objections have no validity and are not seen as an important roadblock. The merger is expected to be approved in early 1987.
American had asked the Department of Transportation for expedited approval of the merger by Dec. 31. Edward Martelle, a spokesman, said there would have been certain tax advantages to completing the deal this year. American could have taken advantage of AirCal’s tax-loss carryforwards if the transaction had been approved in 1986, he said.
“The issues raised by America West and TWA will not delay the DOT’s timetable,” Martelle said, “whatever that timetable may have been. That may mean that the Dec. 31 approval will not happen, but we had no guarantees that that would have happened in the first place.” An approval after the first of the year, he said, “will not make or break the deal.”
Rick Russell, vice president of marketing for AirCal, conceded that an approval before Dec. 31 is now unlikely. But, he said, “we still are proceeding with plans for the ultimate merger of the two airlines. The merger will not lessen competition on the West Coast. We hope for a speedy approval just after the first of the year.” He said AirCal will join the American Advantage (frequent flyer) program Jan. 1.
While neither TWA nor America West flatly opposed the $225-million purchase of ACI by American, they complained that the deal would have certain anti-competitive effects in Los Angeles and Orange County. They urged that the Department of Transportation, before approving the merger, order American to give up some of its gates and landing slots there.
America West said the gate situation at Los Angeles International Airport “has reached truly critical proportions and . . . is having a clearly adverse effect on America West’s ability to compete.”
America West said it operates 19 round trips daily between LAX and Phoenix and two LAX-Las Vegas night round trips.
“Phoenix and, to a lesser extent, Las Vegas are America West hubs, and these links from LAX, are, therefore, a critically important determinant of America West’s ability to compete with American and other carriers in providing service at Los Angeles to and from other points in the United States,” an airline official said.
America West said that it plans to initiate daytime flights between LAX and Las Vegas on Feb. 15 and that it had contacted American to see if it would sublease some LAX gates for these operations, either from among American’s 12 gates at Terminal 4 or from AirCal’s 4 1/2 gates in Terminal 1. America West complained that American said it would make temporary arrangements to permit America West to initiate its Las Vegas service but that there would be no assurances of a permanent sublease arrangement.
TWA, in its objection filed with the Department of Transportation, urged that any action taken by the agency allowing the acquisition to proceed “should be made subject to the condition that American or AirCal relinquish a sufficient number of average daily departures at Orange County to ensure that Orange County will continue to be served by nine unaffiliated air carriers, the maximum number allowed under the (John Wayne) airport’s current access plan.”
TWA said its “focus” in making the objection was “limited to the competitive implications of the American-AirCal acquisition at (John Wayne).”
It said the Orange County facility has “quite possibly the most restrictive entry conditions of any significant airport in the United States.” Under this plan, no more than nine carriers, in addition to no more than five small commuter carriers, are allowed to operate. The airport maintains a waiting list that TWA said it has been on for about three years.
American, in its response to the DOT, said competition along the California air corridor is “flourishing.”
