The Civil Aeronautics Board yesterday tentatively approved the proposed acquisition of Continental Airlines by Texas International Airlines.
Continental, a Los Angeles-based airline with more than three times the annual revenues of Texas International, has been fighting most vigorously the takeover bid of the Houston-based airline. TI is a subsidiary of Texas Air Corp., which also owns New York Air. In its quest to thwart the takeover bid, Continental has been seeking to turn control of the airline over to its employes through the issuance of new stock to an employe stock ownership plan, thereby diluting TI's 48 1/2 percent holding of the company's stock. Continental's plan has been held up by an unfavorable California ruling.
During yesterday's discussion of the case, the CAB decided to take away Texas International's route between Dallas/Fort Worth and Mexico's Yucatan Peninsula if the proposed merger goes through. Because the board elected to delete TI's route, it said the merger decision would be sent to the White House for review. The president has 60 days to review the board's ruling.
The board also decided to have the staff draft a second order that would relax some of the regulatory restraints imposed by the board on Texas International pending the outcome of this case. TI currently holds its 1.4 million shares of Continental stock -- an investment of nearly $100 million -- in a largely nonvoting trust account designed to insulate it from control of Continental under federal approval of the merger was won.
Besides considering dissolving the trust, CAB members talked of a number of possibilities for the "hold-separate" order that is common in antitrust cases, including a prohibition on the comingling of the two airlines' assets and the requirement that TI retain Continental's current management until the presidential review period is over.
The CAB said it will give interested parties two days to comment on the order.
"We're disappointed but not surprised by the board's decision," Bruce Plowman, Continental's director of public information, said yesterday, adding that they were "pleased that the matter will receive the White House's close scrutiny."
John Carlson, vice president of public affairs for Texas Air Corp., said yesterday that TI was pleased by the board action.