Eastern Nears Deal in Sale of Latin-Caribbean Routes

Eastern Airlines appeared to be close Monday to completing a multimillion-dollar deal to sell its money-making Latin American and Caribbean routes to American Airlines.

Eastern had reportedly hoped to tell its bankruptcy creditors, who met Monday in New York, that the deal had been completed, but did not do so--apparently because differences still exist between the two airlines. Eastern did indicate in a revised business plan that a deal is close.

The carrier also predicted that it will suffer a net loss of $250 million in the fourth quarter of this year and also said it would seek an extension of the Dec. 29 date when it is scheduled to submit its reorganization plan to the bankruptcy court in New York.

Eastern, which is a subsidiary of Houston-based Texas Air Corp., also predicted that it would have an operating profit of $93 million next year and a “modest” net profit in the second half of 1990.

Five days after its machinists, pilots and flight attendants went on strike March 4, the airline sought protection from creditors under Chapter 11 of the U.S. Bankruptcy Code.

The Miami-based airline also told the creditors group that it will return to its plan to rebuild its operation to only two-thirds the size it was before it declared bankruptcy. The airline told its creditors that “the South and Central American route sale would provide additional financial strength to rebuild Eastern,” but it did not identify the potential buyer.

But while Eastern remained tight-lipped, American conceded that the on-again, off-again talks about the purchase were under way once more with Eastern. One stumbling block has been a demand by American that Continental Airlines, also owned by Texas Air, settle a suit over American’s computerized reservations system.

“We can confirm that we are in intense negotiations with Eastern,” said Mary O’Neil, an American spokeswoman. “We have not reached a deal yet. We hope to complete it very, very soon, and at this time it is impossible to determine when that will be.”

Noting that it had originally planned to continue to operate Latin and Caribbean routes, Eastern said it “regrets” that it now must do otherwise. It is expected that any sale of the international routes must receive government approval.

Industry observers indicated that the sale of routes appears to be almost a done deal.

“I think that the differences are like those of two people who like to bargain hard. I think it will be done, but clearly both parties are difficult to deal with,” said Hans J. Plickert, airline analyst with the Transportation Group, an affiliate of Paine Webber, the New York brokerage house.

Ray Neidl, airline analyst with Dillon, Read & Co., another New York investment firm, estimated that Eastern will get about $450 million for the routes. “To me it looks as if the deal is pretty well struck,” he said.