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United, Delta Set to Bid for Parts of Eastern

From Staff and Wire Reports

The auction for parts of grounded Eastern Airlines got under way Monday as Delta Airlines and United Airlines prepared bids.

United is expected to offer $60 million for three Eastern gates at Los Angeles International Airport and three more gates at Chicago’s O’Hare International Airport. The proposed deal includes takeoff and landing slots at O’Hare.

Meanwhile, Delta said it agreed to pay $42.9 million for 18 of Eastern’s 53 gates at Atlanta’s Hartsfield Airport and for Eastern’s route between Toronto, Canada, and Buffalo, N.Y. The transactions must be approved by the U.S. Bankruptcy Court in New York, which is overseeing Eastern’s case, and by the Justice Department.

Analysts believe that the Justice Department might raise antitrust objections to expansion at Atlanta by Delta, which already controls 55% to 60% of traffic at Hartsfield, its home base.

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It is also possible that the government might question United’s purchase of gates and slots at O’Hare, because it is already the largest airline at that airport. United is based in Chicago.

Delta said the gate purchase would allow it to consolidate its operations at Hartsfield to two concourses “for public convenience and operational efficiency.” As part of the consolidation, Delta would release its five gates at another concourse “to any interested airline.”

A United spokesman refused comment on the proposed transaction.

Eastern stopped flying Friday after operating for nearly two years in Chapter 11 bankruptcy. Its court-appointed trustee, Martin R. Shugrue Jr., said Saturday that the airline’s management was still talking to potential investors, but he conceded that “the task before us is indeed formidable.”

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Delta said it hopes to conclude its deal with Eastern by early February.

Eastern’s Atlanta gates are considered among its most valuable assets. Other major assets include 170 airplanes, about 90 of which are leased; maintenance bases at Miami and Atlanta; a pilot-training facility; gates at major airports, including New York’s La Guardia and National Airport in Washington, and landing slots at those two airports as well as at O’Hare.

Delta also extended until Jan. 31 its deadline for accepting Eastern tickets on a standby basis for passengers returning home and said it would allow Eastern customers who had not begun their trips to buy a Delta ticket for the same price through the end of January.

In trying to sell airplanes to pay its debts, Eastern must contend with a depressed market for used aircraft, particularly for its DC-9s and Boeing 727s.

Among the other carriers that might be interested in Eastern’s assets, Trans World Airlines, based in Mt. Kisco, N.Y., is preoccupied with its own problems. TWA is laying off 3,000 workers and cutting international service in response to the Gulf War.

“We are spending most of our time dealing with other matters. I don’t want to foreclose on any possibility of acquiring Eastern’s assets,” TWA general counsel Mark Buckstein said. “But Eastern is on the back burner at the moment.”

Last year, TWA made an offer for Eastern’s Atlanta facilities.

Lise Olson, a spokeswoman for American Airlines, said the Dallas-Ft. Worth Airport-based carrier is “looking at the list” of Eastern’s assets and may be interested in real estate and slots, rather than routes.

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