American Will Pay $471 Million to Expand Its Routes

American Airlines said Tuesday that it agreed to purchase the money-making South and Central American routes of Eastern Airlines in a deal valued at $471 million.

The two carriers, which had been holding intense talks in the last few days, had apparently agreed to announce the deal at a news conference in Miami today. But according to Houston-based Texas Air Corp. which owns Eastern, American’s chairman Robert L. Crandall jumped the gun and told American employees at Dallas/Ft. Worth headquarters late Tuesday.

The transaction will allow American to beef up its international operations and to buy 35 important landing slots, at two airports in New York and in Washington and Chicago. The slots are very valuable because these are the only four U.S. airports where landing positions are restricted by the federal government.

As part of the transaction, Texas Air’s Continental Airlines agreed to settle a lawsuit over American’s computerized reservation system. Details of the settlement weren’t disclosed. The deal also includes Continental Airlines’ Miami to London routes, Eastern’s routes between Miami and Toronto and Tampa and Toronto and certain assets.

The lucrative South and Central American routes, which are among the few profitable operations at Eastern, were acquired from Braniff International Airlines for $30 million in 1982. American also tried to buy the routes at that time.

“American has been pursuing the expansion of its international operations for some time,” Crandall said in a statement. “This will make the U.S. a stronger competitor in Central and South America by linking that region to American’s extensive domestic route system.”

The routes make up about 10% of Eastern’s capacity. Earlier this year, Eastern sold its other very lucrative operation, the Northeastern shuttle, which flies between New York and Boston and New York and Washington. The sale to millionaire Donald J. Trump for $365 million included 21 airplanes.

The transaction announced on Tuesday does not include airplanes. Eastern has said that it will sell 14 of its Lockheed L-1011s, many of which have been used on the routes it is selling.

Texas Air said “the sale of these assets will enable Eastern Airlines to continue on its course of successfully rebuilding as a smaller and stronger airline for the future, with its operations centered at its Atlanta hub.”

Eastern has told creditors that it would ultimately rebuild to only two-thirds of the size it was before it filed for bankruptcy protection. The airline has also said it hopes to emerge from bankruptcy early next year and be profitable in 1990.

The sale must be approved by the U.S. Justice and Transportation departments since the routes are covered by bilateral agreements with various countries. The routes serve Argentina, Bolivia, Brazil, Colombia, Chile, Ecuador, Paraguay, Peru, Venezuela, Panama, Guatemala, Belize, Costa Rica, El Salvador and Honduras. In addition, because Eastern is operating under Chapter 11 of the federal bankruptcy code, the bankruptcy court in New York must also approve the transaction.

American, which said it hopes to complete the deal in two to three months, said it would offer employment to all of Eastern’s 1,000 employees in South and Central America.

American will also buy Eastern’s interest in a cargo building in Miami; its leasehold interests in a hangar and cargo building at Kennedy; a downtown office building and airport facilities in San Juan, Puerto Rico, and its interest in four South American ground handling companies.