Texas Air Corp., the parent company of Texas International Airlines, confirmed yesterday that it is forming a new airline subsidiary to provide air service to the East Coast. The airline will have a new name and a route system separate from TI's.
While the Texas firm did not disclose specific route plans, it said the subsidiary, based in New York, would begin providing regularly scheduled flights on short- and medium-haul routes from New Yorks LaGuardia Airport and Newark International Airport by early next year.
Although officials of the Texas company maintain silence, there is speculation that it plans to begin air service between LaGuardia and Washington's National Airport with fares lower than the Eastern Airlines' shuttle, which has a near-monopoly on the route.
The company noted that it is negotiating agreements for gates at LaGuardia and for gates and landing rights at National.
Texas Air Corp.'s disclosures came in a registrtion statement filed yesterday with the Securities and Exchange Commission for a proposed $30 million offering of convertible subordinated debentures with net proceeds to be added to the company's general funds.
In its filing, the company indicated that the subsidiary will begin operations with a fleet of six DC9 aircraft leased from the company. The parent company will invest $10 million in the equity capital of the New York subsidiary and will make an additional $15 million available as needed for capital expenditures, start-up expenses and working capital. The corporation also will acquire more aircraft to lease to its subsidiary, the SEC was told.
The formation of a new subsidiary presumably will enable the Texas company to operate in the East essentially as a new company, unencumbered with the economics of an older company, including the higher labor costs and work rules that have been built up over the years. Before the new subsidiary can begin service, it must get operating authority from the Civil Aeronautics Board and the Federal Aviation Administration.
It is filing with the SEC, the Texas company referred to the fray its entry into the northeastern air corridor may precipitate:
"The northeastern United States, which the subsidiary intends to serve, is dominated by larger, well-established airlines which can be expected to take vigorous action to maintain their current market shares. Nevertheless, the company believes that there will be a substantial demand for the New York subsidiary's flights although it may be expected that competition on these routes may increase."
Texas Air Corp. also disclosed that it was setting up another subsidiary, called Airline Development Corp., which will provide, for a fee, technical and management assistance to its new airline subsidiary and to other airlines.