Airline industry analysts said yesterday that the prospect of a merger between Trans World Airlines Inc. and Pan American World Airways Inc. appears unlikely and could serve to further cement a deal Pan Am has with United Airlines Inc.
TWA Chairman Carl Icahn proposed merging the two financially weak, competing carriers only if a deal to transfer Pan Am's valuable London routes to United for $400 million and link the two carriers in a marketing agreement falls through. But spokesmen for both Pan Am and United said they expect the final terms of their agreement to be worked out by a midnight deadline tomorrow.
In fact, said one analyst, Icahn's proposal might increase the pressure on United to complete the deal, because Pan Am can talk to other potential suitors once the deadline passes for sealing the deal.
"United and Pan Am today are doing the final documentation of that agreement. It's a binding agreement," said United spokesman Lawrence M. Nagin.
Nagin was in London where U.S. and British negotiators are expected to begin talks today under a bilateral agreement between the two countries for United to assume Pan Am's routes.
Pan Am stock closed up 25 cents to $1.87 1/2 yesterday.
In his offer, Icahn proposed a merger of TWA and Pan Am for $150 million in cash and securities, though analysts said it was difficult to pin a value on the deal. Icahn also offered to buy the Pan Am Shuttle, but Pan Am spokesman Jeff Kriendler said yesterday that the airline has no interest in TWA's offer for the shuttle.
The shuttle has no shortage of would-be buyers, but so far none has offered a price that is attractive to Pan Am. Bruce Nobles, who formerly headed both the Pan Am and the Trump Shuttle, said yesterday that Pan Am last week rejected an offer for the shuttle from a group of investors he now heads. "They came back last Tuesday after the board meeting and said the shuttle was no longer for sale," Nobles said.
Although airline industry analysts said they considered a merger between TWA and Pan Am a long shot, they also thought a combination could result in a viable airline that would blend TWA's St. Louis hub and transatlantic routes and Pan Am's growing Miami hub and Latin American routes.
If the airlines were to merge, TWA would likely finance the deal by selling routes where the two airlines compete. That would include the flights to London's Heathrow Airport that Pan Am has agreed to sell to United and other international routes. Altogether, those sales might produce $750 million to $1 billion, said one person familiar with earlier talks between Icahn and Pan Am President Thomas G. Plaskett.
"That goes a long way to allowing you to buy something and begin to downsize it and eliminate people," said one analyst who asked not to be named. "You may have something that has a chance of making money if you buy it right."