Texas International Airlines wants National Airlines primarily for its airplanes; Pan American World Airways wants the Miami-based airline primarily for its domestic routes.
The differing purposes in pursuing control of National were apparent in exhibits filed by each airline with the Civil Aeronautics Board yesterday. The exhibits are to form the basis for each airline's case in the merger hearings which begin two weeks from today.
In July, Texas International signated its takeover attempt of National with announcement of the acquistion of 9.2 percent of National's stock: it now has 20.1 percent, bought at an average price of $27.83 a share. In August, Pan Am made an unsolicited offer to purchase National, which was accepted by National's management and directors. Pan Am now holds 18.9 per cent of National's stock, purchashed at an average price per share of $34.33.
The battle for control of National however, is necessarily being fought at the CAB, which must pass on the merger proposals. Mergers involving international routes, as these do, must also be approved by the president.
In testimony submitted to the CAB yesterday, TXI's president and chief executive officer, Frank Lorenzo, said purchase of National represented a financially attractive and "doable" way to expand from a small regional airline serving nine western and southern states with relatively small jets to a larger airline with larger aircraft serving longer routes.
Although new route authority has increasingly been granted by the current pro-competition CAB, aircraft acquisition presents a significant problem, the TXI filings suggest.
Because of the time lag and expense of acquiring new airplanes from the manufacturer, and the general lack of available used planes on reasonable terms, Lorenzo said "it would take years" to acquire new aircraft designed for longer haul routes unless it could buy National.
Assuming a "modest" fleet of 10 727-200s as the minimum necessary for TXI to become a long-haul carrier, and assuming that TXI could buy five for $16.5 million each for delivery in 1981 and five for $17.5 million each for delivery in 1982, with allowance for spare parts and training, the total price would be about $188 million, Lorenzo said.
On the other hand, considering the amount of National stock TXI has already puuchased and the additional stock it would take to reach 51 percent (even paying the $41 a share Pan Am has offered), the cost of taking over National would be about $156 million, Lorenzo said, $32 million less than the 10 new 727s - delivered three and four years from now - would be.
For Pan Am, National's route system is the attraction. "Pan Am has proposed this merger because of its urgent need for a domestic airline system." William T. Seawell, Pan Am's chairman and chief executive officer said in his testimony. Although the CAB has in effect issued Pan Am an open invitation to apply for new domestic routes - and has recently appeared to be granting them whatever they want - Seawell said yesterday, "we cannot afford the billion dollar cost or the time it would take to create a domestic system from scratch."
Yesterday, Seawell said Pan Am was in an "utenable position" being subjected to new competition from foreign airlines with strong route systems beyond their homelands, as well as U.S. airlines with strong domestic traffic support. "Yet we have no meaningful opportunity for expansion beyond our own operations," he said.