ValuJet Buys Airline --and a New Name

From Associated Press

After more than a year of reminding too many people of a disaster rather than low fares, ValuJet on Thursday said it would take a new name.

ValuJet is buying a much smaller airline, AirTran Airways, from Airways Corp. for $66.3 million worth of stock and taking its name.

"We could pick one name or the other, and we felt that the AirTran name better represented the interests of the company," ValuJet President and Chief Executive D. Joseph Corr said.

ValuJet's cartoon character of a smiling airplane will be wiped off its 30 planes and replaced with AirTran's name and rising-sun logo.

A May 11, 1996, crash into the Florida Everglades that killed all 110 people aboard seemed to forever tarnish ValuJet's name. As a young airline that was scrutinized for growing too fast, shaking the crash's stigma was more difficult than for other carriers.

The AirTran deal will add 10 planes to its fleet, but Federal Aviation Administration spokeswoman Diane Spitaliere said the agency would not be involved in approving the deal.

ValuJet will be named AirTran Airlines and operate as a sister carrier to AirTran Airways. That way, the two keep their separate federal operating certificates, keeping the FAA out of the deal.

ValuJet has lost money since the crash of Flight 592. Investigators believe improperly packed oxygen generators that were loaded aboard the DC-9 fueled a fire in the cargo hold that brought down the plane.

The airline became the subject of an intense safety review after the crash and was grounded by the FAA for more than three months. The National Transportation Safety Board is supposed to release its final report on the crash later this year.

Terms of the deal call for ValuJet to pay one share of its stock for each AirWays share.

The stocks of both companies rose Thursday on the Nasdaq Stock Market. ValuJet shares added 50 cents to close at $7.32, while Airways shares rose $1.25 to close at $5.63.

Corr said his company first approached AirTran several months ago about a merger. ValuJet spokeswoman Marcia H. Scott said the troubled airline also had talked to several other airlines but wouldn't say which ones.

AirTran serves 23 mid-size cities from Orlando and carried more than 1 million passengers last year. It will have an 11th Boeing 737 aircraft by the end of July. The company reported it lost $6.9 million last year.

ValuJet, which lost $41 million last year, serves 24 cities with 30 jets. The company has been drawing on a $250-million cash balance it had before the crash to stay in business.

Steven Lewins, an analyst who follows ValuJet for Gruntal & Co. in New York, said both companies are expected to continue to lose money.

"I would be more comfortable if ValuJet got its own house in order first," he said.

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