Skinner Wants Early Role in Airline Deals

WASHINGTON —  Transportation Secretary Samuel K. Skinner said Wednesday that he would like legal authority to judge airline takeovers before any deal was made but did not want a law to narrowly define the terms of acceptable takeovers.

He told the Senate aviation subcommittee that he would have preferred to have been involved in the Northwest Airlines takeover earlier so he could have warned its new owner against giving the Dutch airline KLM such a big stake.

Skinner last Friday approved a takeover of Northwest by Los Angeles financier Alfred A. Checchi, but only if KLM’s equity were cut to 25% from 57% and the Dutch airline’s power on the Northwest board were restricted.

Legislation Considered

He said it would have been simpler had there been a law to enable the government to judge prospective leveraged airline takeovers earlier in the transaction, adding, “Now we had to move to unwind the deal.”

Skinner has expressed concern that airlines with big debts from leveraged buyouts might scrimp on safety. He is also concerned about violations of the law that bans foreigners from controlling U.S. airlines.

Senate and House subcommittees are considering legislation on leveraged buyouts and foreign control of U.S. airlines.

The Transportation Department cannot block airline mergers outright but does have broad authority to issue or revoke an airline’s certificates to operate.

Separately, Texas Air Corp. Chairman Frank Lorenzo said concern about airline buyouts and foreign investment is ill-placed and said the government must allow airlines freedom to finance such deals.

Speaking to the Airport Operators Council International in Houston, Lorenzo said, “I hope we can ease our fears of foreign capital as well as leveraged buyouts.

“In the case of foreign capital, critics fail to consider that the investment of foreign equity is reducing the use of debt financing in leveraged buyouts,” he said.

Could Skirt Guidelines

Skinner said that while a statute enabling him to enter into takeover proposals earlier would help him, he did not want narrowly defined takeover guidelines written into law.

He said lawyers could find ways to get around the guidelines and said he preferred to judge takeovers--including the planned sale of United Airlines to its management and pilots with the backing of British Airways--on a case-by-case basis.

Skinner said his department was working on a broad policy for takeovers, but added: “I’m satisfied we’re staying ahead on what’s going on in the airline industry.”

Asked if foreign countries permitted U.S. ownership, Skinner said that with the exception of state-owned airlines, they permitted about the same degree of foreign ownership as does U.S. law.

In testimony before the House aviation subcommittee about the United deal, John Peterpaul, vice president of the International Machinists and Aerospace Workers union, said the union has decided against joining the leveraged employee buyout, at least as the deal is presently structured. He said the $6.75-billion transaction would put the airline too deeply in debt.