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Trump Wins the Battle for Eastern Shuttle

Times Staff Writer

America West Airlines, a small Phoenix-based carrier trying to make it into the big time, Wednesday withdrew its bid to buy Eastern Airlines’ profitable Northeast shuttle operation because it could not line up sufficient financing.

The development guaranteed that New York hotel magnate Donald J. Trump’s plan to buy the shuttle for $365 million will be consummated in about two weeks when the name will be changed to the Trump Shuttle. The shuttle flies between New York and Boston and New York and Washington.

Eastern is in Chapter 11 bankruptcy proceedings, and U.S. Bankruptcy Court Judge Burton R. Lifland must approve all sales of the airline’s major assets. Lifland had granted America West several extensions so that it could keep trying to obtain the financing. However, there was no extension Wednesday when the final deadline passed at 5 p.m.

In a statement issued Wednesday night, Michael J. Conway, America West’s president, said the withdrawal of the offer resulted from “time constraints, as well as financing terms that were unacceptable, (which) impeded our ability to finalize the necessary arrangements. . . . We came very close, but ultimately the lack of time was the deciding factor.”

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Eastern Needs Cash

America West officials were said to have announced their withdrawal of the shuttle bid during a conference call about 5:30 p.m. with Lifland and lawyers for all parties involved. A clerk in the judge’s office said Lifland then approved in principle the sale to Trump and will sign an order at a hearing today allowing finalization of the sale.

Eastern has said it needs the cash it will receive for the shuttle to finance its operations. The airline, which was struck by its machinists March 4 and which filed for protection from creditors under Chapter 11 five days later, has said it plans to reduce its size dramatically by selling off $1.8 billion worth of assets.

Eastern agreed to sell the shuttle to Trump last October, and Trump obtained all necessary approvals from federal regulators. Eastern had wanted to complete the deal quickly but was unable to do so before the bankruptcy filing in March. Bankruptcy laws require that the court consider any higher bids.

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Because America West did not plan to buy Eastern’s 21 shuttle jets, its $375-million offer was judged to be worth about $90 million more than Trump’s, which did include the 21 planes. In seeking to buy the shuttle, America West was attempting to gain a foothold in the tough New York market; the number of gates and landing slots at New York’s LaGuardia Airport, for example, are tightly restricted.

The withdrawal was a disappointment to Eastern’s creditors. “I think having come so close to the prospect of getting an extra $90 million for the estate is always disappointing, but life goes on,” said Joel Zweibel, the attorney representing the 16-member Eastern creditors committee.

Still to be decided at today’s hearing is whether the money Trump pays Eastern for the shuttle is to be held in escrow until the court decides what ultimately happens to Eastern. The carrier could still be sold or liquidated, or it could be allowed to follow its own plan to continue as a smaller airline.

The striking machinists, the airlines’ pilots and flight attendants, virtually all of whom have observed the strikers’ picket lines, have said they would refuse to return to work until the operation of the airline is taken out of the hands of Frank Lorenzo, chairman of Eastern.

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