With the blessing, encouragement, technical and financial aid of Continental Airline's management, a group of the airline's employes yesterday announced a stock-purchase plan designed to prevent Texas International Airlines from taking control of the Los Angeles-based airline.
The plan calls for Continental to issue new stock -- possibly doubling the 15.345 million shares now outstanding -- in order to dilute the 48 1/2 percent interest of Continental now owned by TI. Its application to acquire Continental is now pending at the Civil Aeronautics Board.
TI said yesterday that it would take "all appropriate action" to prevent the dilution of the Continental stock, adding that the employe plan appeared to be "more of an effort to retrench and protect current management than to further the interests of the company's shareholders or employes."
As outlined yesterday by employe and company spokesmen, the proposal calls for establishment of an employe stock ownership plan, which would seek to gain a controlling voting interest in Continental. If the new stock is issued, the cost of buying 51 percent of Continental's outstanding stock would be about $185 million, they said.
Under the plan described yesterday, most employes would pay for their share of the stock by giving up half of their pay increases over the next several years; instead of paying the employes the money, Continental would give it over to the employe stock ownership plan (ESOP). Employes not already slated for raises would contribute a certain percentage of their pay also, up to the legal maximum of 15 percent of an employe's salary that can be congtributed to an ESOP.
The ESOP would be managed by a tax-exempt trust that would borrow the $185 million to purchase the shares issued by Continental.
The plan will be presented formally to the board in a couple of weeks by Continental President A.L. Feldman if a substantial majority of the employes favor the more and the unions go along, a company spokesman said.
Paul Eckel, chairman of the newly formed group of Continental employes that announced the plan yesterday described Feldman as "receptive," a significant understatement judging by a recent Feldman letter to Frank Lorenzo, chairman of the executive committee of Texas International.
In the letter, Feldman said a merger between Continental and TI would result in a "very weak" company whose "chances for survival would be poor." The letter was a response to a Lorenzo letter three weeks earlier seeking friendly discussions toward the objective of amalgamating the two airlines.
In his letter, Feldman also outlined a financial scenario in which TI is so strapped for cash and loaded with debt after it buys Continental that it has to sell of a major part of Continental's fleet. However, the letter failed to mention the considerable financial resources of Texas Air Corp., TI's parent company.
TI said yesterday it was dissapointed by "Continental's irresponsible attach" on its merger plans and "dismayed" by the "incorrect impression left by Feldman's letter that detailed merger proposals have been made and discussed. It also noted that a meeting had been set up for Friday at Feldman's request to discuss a possible merger.
Although there are about 3,000 ESOPs throughout the nation, the Continental plan, if successful, would be the first one in which employes would own a controlling share of an airline.