Pan American World Airways yesterday asked the Department of Transportation to force Texas Air Corp. to reduce its holdings in Eastern Airlines, so that other bidders for Eastern might emerge.
Frank Lorenzo, president of Texas Air, when asked yesterday whether his merger agreement with Eastern is safe from challenge, said Eastern shareholders are free to sell their shares to other bidders if they choose.
Pan Am did not say it wants to bid for Eastern. However, in its petition to DOT it said Texas Air's acquisition of 31 percent of Eastern's stock is an "illegal course of conduct" designed to have "a chilling effect on other carriers potentially interested in acquiring Eastern." Texas Air should own no more than 10 percent of Eastern's stock, and should be barred from voting its Eastern shares until the DOT rules on the proposed merger, Pan Am said.
Lorenzo declined comment yesterday on Pan Am's petition. However, he said "the folks who brought you New York Air aren't going to create a monopoly" in the East Coast air corridor, where Eastern and Lorenzo's New York Air are two of the dominant competitors.
Some critics are concerned that the merger of Eastern and New York Air would reduce competition significantly in the Washington-New York-Boston market. The Justice Department earlier this week told DOT it was concerned that Texas Air, with its 31 percent stake in Eastern, may gain effective control of Eastern before DOT has ruled on the merger. In response, Texas Air says its voting rights on its Eastern stock are limited by its merger agreement with Eastern.
Eastern's unions, led by the International Association of Machinists and Aerospace Workers, are looking for bidders to challenge Lorenzo, both in and outside the airline industry, sources said. It is not known whether such bidders have been found.