Braniff to Add 50 Airliners to Fleet in $3.5-Billion Deal

Braniff, in an effort to quickly re-enter the major leagues of the U.S. airline business, said Wednesday that it will add 50 Airbus Industrie jets to its fleet and take options on 50 more in a deal valued at $3.5 billion.

The Dallas-based carrier, a pioneer of the airline industry that has been struggling since it emerged from bankruptcy in 1984 and resumed flying, is obtaining the rights to the initial 50 aircraft by paying $115 million to cash-strapped Pan American World Airways, which had ordered them originally.

Braniff arranged to obtain the European-made airliners, according to its chairman, William G. McGee, because it could get them far more quickly than it could get comparable planes from another manufacturer, backlogged Boeing of Seattle.

The airline, which is building up a major hub in Kansas City, will not buy the airliners but will lease most of them from three other companies: the manufacturer, the engine maker and another firm.

“When the opportunity came along” to obtain the rights to the A320s that Pan American had ordered, McGee said in an interview after a news conference here, “it placed us in a situation to considerably move our expansion forward. This was a wonderful opportunity. If we had ordered from Boeing, we would have had to wait till at least 1993.”

As it is, Braniff will take delivery of the first 10 planes next year.

For Pan American, the deal provides a badly needed cash windfall. Jeffrey Kriendler, a spokesman for Pan American said it is a “win, win, win situation for everybody. The sale gives us a very substantial cash infusion, which we will use to continue our recovery plan.”

He said the A320 is not suited to Pan American’s current route structure, adding that the airline is purchasing some Airbus Industrie A310s, which have a longer range and can fly across the Atlantic Ocean.

Pan American’s original order, which Braniff will assume, involved firm orders for 16 planes and options for 34 more. However, Braniff is making all 50 firm orders.

McGee said the 50 planes will be acquired over a six-year period, with the first two to be put into service next July.

First to Order

Financing for 42 airliners has been committed by GPA Group Ltd., a major airplane leasing company based in Ireland; IAE International Aero Engines, the engine supplier for the planes, and by Airbus itself. Airbus is an aircraft manufacturing consortium made up of French, British, West German and Spanish companies.

The financing for the remaining eight aircraft must be arranged later by Braniff.

In 1985, Pan American became the first American airline to order the A320. Northwest Airlines ordered 100 the next year. All told, according to Airbus, about 700 orders have been placed worldwide for the A320.

The two-engine plane will seat 148 passengers in a first-class and coach configuration and has a range of about 3,000 miles when fully loaded. Braniff, which does not now have first-class sections, will reinstitute them in an effort to attract more business travelers.

McGee, who joined Braniff six months ago after resigning as chairman of Piedmont Airlines, said Braniff ultimately plans a fleet of 171 airliners, compared to the 53 it now has. There have been reports that Braniff will acquire a number of Boeing 737s from American Airlines.

Braniff got a shot in the arm in October when Eastern Airlines, which had operated a major hub in Kansas City, pulled all but six daily flights from the airport there. Braniff, which had 50 flights a day in and out of the hub when the new management took over last year, now has 83 daily and expects to increase the number to 100 this year.

Too Rapid Expansion

Braniff is named for its founder, Thomas Braniff, who launched it in the barnstorming days of the late 1920s and early 1930s. In the mid-1960s, Braniff planes were painted in bright colors, and one DC-8 jet on a Latin American route was painted in a wavy pattern designed by artist Alexander Calder.

After having several owners since it emerged from bankruptcy, Braniff is controlled by Bia-cor Holdings, a corporation controlled by the CoreGroup, a Philadelphia-based investor group.

Braniff International, as it was called then, expanded its routes and fleet too quickly after airline deregulation in 1978 and collapsed on May 12, 1982, under a debt load of about $1 billion. At that time it had 82 planes.

Louis Marckesano, airline analyst with Janney Montgomery Scott, a Philadelphia brokerage house, said Wednesday that he is worried that Braniff might again be expanding too quickly. “If so, Braniff could fall on its face,” he said.

But McGee said the company is operating “cautiously and carefully and is not on the kind of track it once was.”

He predicted that Braniff within 18 months would again be one of the nation’s so-called major airlines, which means that it would have annual revenue of more than $1 billion. “We expect to have this company profitable by the end of 1989,” he added.