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Investor Group Agrees to Buy Ailing Braniff : Executives From Another Airline Reportedly Involved

June 11, 1988|ROBERT E. DALLOS | Times Staff Writer

NEW YORK — Struggling Braniff Inc., once one of the nation's major airlines but a victim of deregulation, will be bought by an investor group believed to include executives of another airline.

It was announced Friday that the Wall Street investment firm of Paine Webber had formed the group and that it has reached agreement to buy Braniff, whose headquarters are in Dallas.

FOR THE RECORD
Los Angeles Times Tuesday June 14, 1988 Home Edition Business Part 4 Page 2 Column 6 Financial Desk 1 inches; 24 words Type of Material: Correction
In an article in Saturday's Business section, an incorrect name was given for a former chairman of Braniff International Airways. The correct name is Harding L. Lawrence.

Paine Webber declined to identify the group's members or to say how many there are. However, sources who asked not to be identified said it includes executives now working for another U.S. carrier.

Braniff, whose planes once flew painted in bright colors such as orange, purple and lavender, filed for bankruptcy in 1982 and remained grounded for about two years after that. Since its resurrection in 1984, it has struggled in the strongly competitive environment of airline deregulation.

Braniff flies to Los Angeles and numerous other cities, including Chicago, Washington and New York. It also serves many cities in Florida and Texas.

The announcement of the deal was made by Dalfort Corp. of Dallas, which owns about 64% of Braniff's common stock. Spokesmen for Chicago-based Hyatt Corp., which is Dalfort's parent firm, did not return phone calls. The firms are all part of the financial empire ruled by the Pritzker family of Chicago. Jay A. Pritzker is chairman of all three.

Voices Doubts

The complex takeover plan involves payment of $7 a share cash to some shareholders and $5 in cash and $2 in a special dividend to others. All shareholders will also get stock worth 20% of the equity of the newly merged company.

The announcement sent Braniff stock up strongly in over-the-counter trading Friday; it rose $1.375 a share to $6.50.

Braniff's owners have been casting about for a way to return the airline to a money-making course and late last year proposed to acquire Pan American World Airways if it could get wage and other concessions from Pan Am's unions. However, the concessions were not forthcoming and the merger never took place.

Of the deal announced Friday, Paul Karos, airline analyst with First Boston Corp., a New York-based brokerage house, said: "I don't know how this investment can be profitable for the investors unless there is something that does not meet the eye. It could be (that they see) some undervalued assets or perceived future profit potential. . . . Or they might be planning to mesh with some other airline."

Braniff International, as it was then known, collapsed on May 12, 1982, under a $1-billion debt, the victim of high fuel costs and of its own flamboyance, expansion and fare-cutting tactics.

The first and the largest casualty of deregulation, which was approved by Congress in 1978, Braniff was rescued from liquidation by a $70-million investment by a Pritzker entity. Braniff Inc., the successor company, was established in March, 1984, and resumed flying at that time.

Since it emerged from bankruptcy, Braniff has been plagued, analysts said Friday, by poor pricing, marketing and competitive strategies.

The company, which had revenue of $239.5 million and a $9.6-million loss last year, reportedly owns about 54 airplanes and leases another 11. Earlier this year it acquired control of Florida Express Inc., a scheduled airline operating out of Orlando, Fla. The Florida airline has 18 aircraft.

The competition at Braniff's hub at Dallas/Ft. Worth Airport has been so severe that the airline recently moved its operations center to Kansas City International Airport. At Dallas, it operated 20 daily departures. At Kansas City, it expects to operate 50 daily departures by next week.

Julius Maldutis, airline analyst with Salomon Bros., a New York brokerage, said "the forthcoming shrinkage of Eastern Airlines, its principal competitor at Kansas City International Airport, should allow the company to return to profitability."

The carrier, which has a rich history, is named for its founder, Thomas Braniff, who launched the airline in the barnstorming days of the late 1920s and early 1930s.

From 1965 to 1980, Braniff was run by Hodding L. Carter, a flamboyant Texan and the architect of a bold expansion plan that plunged the airline into the financial peril that led to the bankruptcy.

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