Braniff Cancels All Flights, Lays Off Most of Workers

Braniff Inc. laid off most of its remaining 1,800 employees Tuesday, hours after it canceled all flights.

Thomas J. Voltz, Braniff marketing vice president, said the troubled airline would attempt to reorganize as a charter carrier with 300 to 500 employees. The carrier also continued to explore other options, including selling itself.

Cash-starved Braniff filed for bankruptcy protection from its creditors Sept. 28 and reduced its flight schedule by more than 80% from hubs in Orlando, Fla., and Kansas City, Mo. The troubled airline had slashed most fares to $99 to attract passengers, but without success.

It wasn’t clear whether Braniff would succeed as a charter airline. “It’s something that might be viable,” Voltz said. “We are really now assessing how viable it is.”

Orlando-based Braniff currently operates charter flights for two National Football League teams, the Kansas City Chiefs and the New Orleans Saints. Voltz said those flights would continue.

Though Braniff’s stock is traded over the counter, most of its shares are held by an investment partnership headed by Jeffrey Chodorow, a Philadelphia real estate investor who also owns a large stake in a doll manufacturer. Chodorow purchased the airline from hotel magnate Jay A. Pritzker, who rescued it from an earlier bankruptcy in 1984.

Braniff filed for its latest bankruptcy after the investment firm of Drexel Burnham Lambert was unable to raise $100 million in debt and equity to save the cash-squeezed airline. Drexel had come to Braniff’s aid in April by raising an initial $100 million in high-risk junk bonds, priced to yield a whopping 16.9%.

Investment firms that bought Braniff debt from Drexel are now among the airline’s biggest unsecured creditors. Court documents show that American Capital Fidelity Corp., a Century City investment firm controlled by millionaire William Belzberg, bought $7.5 million of the notes, and Century Institutional Investors, a firm with close ties to ex-Drexel investment banker Michael Milken, bought $2.5 million in debt for one of its customers.

Another Drexel customer, Columbia Savings & Loan in Beverly Hills, loaned Braniff $15.8 million shortly before the airline sought bankruptcy protection. Persons familiar with that transaction said the secured loan was arranged by Drexel.

Braniff has hired the New York investment firm of Merrill Lynch & Co. to explore its options, including a possible sale. Joel Shapiro, one of Braniff’s bankruptcy attorneys, said Merrill Lynch has been approached by two investors who he would not identify.

Persons familiar with Braniff’s problems said the two investors were Kansas City businessmen spearheading separate efforts to buy the airline. The possible buyers were said to be John Latchow, a prominent retired stockbroker for Shearson Lehman Hutton, and Farhad Azima, a former chairman of two airlines that have entered bankruptcy proceedings, Global International of Kansas City and Capitol Air of Smyrna, Tenn.

Neither could be reached for comment Tuesday.

Any sale or reorganization of Braniff must be approved by the U.S. Bankruptcy Court in Orlando, where the case is filed.

Airline industry analysts said Braniff has few assets that it can sell to raise cash since most of its planes are leased, and airport flight-time slots in Kansas City are not in great demand. Braniff’s biggest potential asset is delivery positions for 21 fuel-efficient Airbus Industrie A-320 aircraft, but Braniff’s ownership of the positions is in dispute.

The seller of the aircraft, GPA Group, contends that it no longer is obligated to sell the planes to Braniff and is looking for a new buyer for the A-320s. A bankruptcy court hearing on the dispute is set for Friday, and the outcome is important to Braniff.

Though a decision against the airline wouldn’t necessarily affect its plans to operate a charter business, “it would affect the amount of cash we have and our ability to pay debt,” Voltz said.

Meanwhile, Southwest, Continental and Eastern airlines said they would accept Braniff ticket-holders on a standby basis. Braniff advised ticket-holders to call (800) 282-5586 for refund information.