Northwest makes offer for Eastern

October 17, 1990|By Los Angeles Times

EGAN, Minn. -- Northwest Airlines Chairman Alfred A. Checchi said yesterday that he made an offer for Eastern Airlines and is taking a look at other air carriers, including Pan American, World Airways and Trans World Airlines.

Checchi said that he submitted a bid for Eastern to the airline's bankruptcy trustee last week. He declined to discuss the offer in detail and said that he had no idea when he might learn whether it would be accepted.

"It could be Monday, or it could be 30 days from now," he said.

An airline acquisition would be the second in 16 months for Checchi, a Los Angeles investor who emerged from relative obscurity to buy Northwest's parent, NWA Inc., in June 1989. He and two partners put up $40 million of a total $700 million in equity and borrowed $3 billion from banks to close that purchase.

Checchi said that he is considering a deal now because current high fuel prices are wiping out airline profits and might force troubled airlines to seek a merger partner to survive.

"We have an opportunity to seek a company, or a piece of a company, that will allow us to be more competitive," he said. "We are in a pretty good position to be advantaged by the present environment."

Eastern is in bankruptcy proceedings, but it is not clear that it will be sold. Pan Am and TWA, money-losing carriers that are traditionally strong in the trans-Atlantic market, are for sale.

Checchi made his comments in an interview at NWA headquarters in Eagan, a suburb of St. Paul.

The air carriers' current problems have not passed Northwest by. Checchi said that Northwest expects to lose "its share" of the $1 billion deficit that the industry expects to record in the fourth quarter, largely because of a rapid jump in fuel prices.

To compensate for increased costs, Northwest and other airlines are cutting back on expenses and planning layoffs. Checchi said Tuesday that Northwest has reduced costs by $200 million and plans to begin selective layoffs next week. To the extent possible, he said, temporary employment cutbacks will be accomplished through voluntary leaves.

Checchi said that the number of employees involved in any layoff would be small, at least initially. "I find it personally repugnant to put people on the street and would fight and struggle mightily to avoid that," he said.

Northwest employs around 44,000.

Northwest is also taking steps to increase its revenue. Yesterday, it announced a 5.8 percent fuel-related fare hike, its third since Iraq's Aug. 2 invasion of Kuwait.

Baltimore Sun Articles
|
|
|
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.