Braniff International has asked a federal bankruptcy court to approve an agreement reached with Pacific Southwest Airlines to lease 30 of Braniff's grounded airplanes for a new division that will operate routes in and out of Dallas, PSA officials said yesterday.
Papers filed with the Bankruptcy Court in Fort Worth late Wednesday indicate that Washington, D.C., may be among former Braniff cities to be served by the new PSA division. Right now, the San Diego-based PSA serves cities in California, Nevada, Arizona and Washington.
"We will be hiring about 1,500 employes and we would anticipate that most, if not all, of them will be ex-Braniff employes," said PSA spokesman Bill Hastings yesterday. About 130 furloughed PSA employes will be given an opportunity first to join the new division, he noted.
The San Diego-based PSA had tried to form a venture with Braniff, which suspended services May 12, but the plan collapsed after Braniff's pilots refused to go along with seniority rules sought by PSA.
PSA doesn't plan to hire the Braniff employes on the basis of seniority but will interview those interested and take "the best ones," Hastings said. The division's employes will be paid what they would have gotten if the joint venture had gone forward, about 40 percent less than PSA's California employes to start.
The agreement holds out some hope that Braniff's shareholders and creditors will get something more than a liquidation would yield them, and it allows PSA a significant expansion from its West Coast base without a large out-of-pocket financial commitment.
An unusual part of the PSA-Braniff package will provide Braniff shareholders and some employes with script good for travel on PSA. For every hundred shares of stock held, a shareholder will be given a certain cash equivalent to be applied to a PSA ticket, Hastings said. Free travel will be given to those holding enough script.
Under the agreement, PSA will lease 30 Boeing 727 aircraft, 16 spare engines and other spare parts from Braniff for a quarterly payment of $6.3 million. In addition, PSA has agreed to purchase some of Braniff's ground equipment and other facilities, such as at Washington's National Airport.
Also under the agreement, Braniff will suppply PSA with $30 million in cash or cash equivalents, to be paid back over a five-year period. The interest to be paid, however, is tied in with the profitability of the new division. During the five-year span, Braniff is to receive half of the first $40 million in pretax profits generated by the new division, and 35 percent of earnings above that.
Braniff also will lend PSA another $9 million to repaint and renovate the 30 aircraft, repayable over five years at a fixed percentage rate.
PSA hopes to get its new division flying during the spring, Hastings said, adding that the route structure still is being worked out. Court documents indicated that PSA was buying Braniff ground support equipment in Newark, Houston, Chicago, Minneapolis, and New Orleans, making it quite possible that those cities will be served by the new division. The equipment can be moved, however.
PSA's new division and its old system will feed into each other but planes and employes will not be integrated now, "maybe down line," Hastings added.
PSA has had some initial discussions with the Federal Aviation Administration about the use of Braniff's landing rights at major airports. When Braniff suspended service, the slots were given temporarily to other airlines pending a possible Braniff reorganization. PSA contends that the landing rights ought to be transferred to the new division, because part of Braniff's reorganization is to lease and sell assets to PSA.