Judge’s Deadline Today for Eastern Deal
The future of Eastern Airlines’ northeast shuttle operation remained in doubt Tuesday when a U.S. bankruptcy judge gave America West Airlines until 5 p.m. today to come up with financing for its attempt to buy the shuttle.
Judge Burton R. Lifland decided on the extension after an hourlong session with the interested parties in his chambers.
Phoenix-based America West has outbid New York investor Donald J. Trump for the shuttle, which provides service between New York and Boston, and New York and Washington. But America West has been having trouble arranging the financing.
Eastern had agreed to sell the shuttle, including its 21 jet airliners, to Trump for $365 million. The agreement was reached before the Miami-based carrier sought protection from creditors under Chapter 11 of the U.S. Bankruptcy Code on March 9.
America West has offered $375 million just for the shuttle’s routes and gates, which would allow Eastern to sell the 21 planes separately. Spokesmen for Eastern’s creditors have said in court that the America West bid could be worth as much as $94 million more than Trump’s.
There is a Friday deadline on the Trump deal, after which, the investor has said, he will cancel his offer. According to Trump’s agreement with Eastern for the purchase of the shuttle, the airline must pay him an $8-million fee if the deal collapses for any reason. He has scoffed at America West’s bid and has said he will not increase his own offer.
If America West does arrange adequate financing for the shuttle purchase, Lifland will hold a hearing Thursday morning to consider which of the two offers is better for Eastern. If America West does not come up with the financing, the Trump deal apparently will be made final. In bankruptcy proceedings, sale of all major assets by the bankrupt company must be approved by the court.
The Port Authority of New York and New Jersey has also expressed reservations about the America West offer, and the judge has scheduled another hearing for Friday to consider them.
Trump said he is prepared to begin operating the shuttle almost immediately. America West would need time--some say as much as a year--to obtain the necessary regulatory approvals.
Meanwhile, Joel Zweibel, the attorney for the 16-member creditors’ committee, said in an interview that an offer for the entire airline by a group led by William R. Howard, former head of Piedmont Airlines, was being opposed by the creditors. He said they believed that the offer was inadequate.
