Trans World Airlines Inc. Chairman Carl C. Icahn yesterday accused the head of Pan American World Airways Inc. of trying to scuttle a merger between the two companies.
In a letter dated Dec. 24 and released yesterday, Icahn said Pan Am Corp.'s efforts to sell its lucrative shuttle operations separately appeared to be an effort to preserve Pan Am's management at the expense of the airline's shareholders.
Pan Am officials could not be reached for comment yesterday.
In a three-page letter, Icahn said Pan Am officials backed out of a Monday meeting at which arranging temporary financing for Pan Am and the proposed merger between the two carriers was to be discussed.
Icahn said press reports that Pan Am Chairman Thomas G. Plaskett is pursuing the shuttle sale made it appear "that you will go to any extremes to avoid the merger with us," which Plaskett previously described as potentially advantageous to both airlines.
Pan Am and TWA have been negotiating with each other over the past three months while also negotiating with other airlines on asset sales. Pan Am and United Airlines Inc. announced on Oct. 23 that UAL Corp., United's parent, would buy Pan Am's rights to fly to London's Heathrow airport and other assets for $400 million.
According to Icahn's letter, that announcement wrote a surprise ending to negotiations between Pan Am and TWA over a deal to merge and then to sell duplicate European routes to "another airline." Although Icahn did not identify the other airline, a source said it was American Airlines. American, after a brief correspondence with Pan Am saying it had sold its routes too cheaply, agreed to buy TWA's London routes and other assets for $445 million Dec. 16.
At the same time Icahn proposed again that Pan Am merge with TWA. The two airlines have been discussing such a deal since then, with Pan Am demanding some kind of interim financing but balking at the notion that it be arranged in the context of a Pan Am bankruptcy filing.
According to Icahn's letter and to TWA counsel Mark Buckstein, TWA and its attorneys spent the weekend drafting a term sheet for interim financing in anticipation of the Monday meeting. Buckstein said Pan Am asked TWA's group to send a copy of the term sheet instead. "It sounded like they had another agenda," Buckstein said.
"Maybe we're just being used by them as a stalking horse for other deals," he said. "I think they're doing the same stuff they've been doing all along, which is selling off assets cheap to survive alone. I don't think they want to merge with anyone or combine with anyone."
Icahn said in his letter that Pan Am should have offered TWA a chance to compete for the shuttle. According to Monday's Wall Street Journal, the parent of Northwest Airlines Inc. has reached a deal in which an Oregon-based utility holding company, PacifiCorp, would buy the shuttle for $150 million with Northwest operating it. If Pan Am ultimately ends up in bankruptcy court such a transaction might be viewed as an attempt to defraud other creditors, Icahn suggested.
Accusing Plaskett of bad faith, Icahn urged Plaskett and the Pan Am board "to carefully consider your next step before you destroy the possibility of a Pan Am-TWA combination, which might well be your airline's only hope of survival."