People Express suitors led by Texas Air, which already landed Eastern

Even as the nation queued up to buy souvenirs and cheer Lady Liberty on her 100th birthday, airline executives were lining up to bid for People Express. Leading the charge to buy People, the fifth-largest airline in the United States, is the apparently insatiable Frank Lorenzo. His Texas Air Corporation is already in the process of assimilating giant Eastern Airlines into its network.

But like a boa constrictor that can swallow objects many times its size, Texas Air apparently believes it can handle the Eastern and People acquisitions at once.

``It's a big bet,'' says David J. Smith, an airline analyst with Sanford C. Bernstein & Co. ``It's hard to believe somebody like Lorenzo [with an already highly leveraged company] can do it -- but if anyone can, he can.''

Monday's Wall Street Journal quoted sources as saying there had been a $12-a-share bid (about $314 million) by Texas Air. Western Airlines and two Japanese companies were also reported to be interested in bidding. Neither Texas Air nor People Express returned calls before press time confirming or denying bids.

Although People Express is losing money hand over fist (it posted a $58 million loss in the first quarter of this year), it remains a highly desirable property. In fact, although Texas Air appears to be getting its strong bid in first, there are numerous obstacles, including other bids and potential antitrust problems.

``I don't think Texas Air is the most logical buyer,'' says Robert Joedicke, an airline analyst at Shearson Lehman Brothers.

``They've got their hands full swallowing Eastern, and I'm not so sure the DOT [Department of Transportation] would put up with that.''

Indeed, there seem to be as many theories about what might happen as there are industry analysts. One thing they agree on is that as things stand Texas Air would have antitrust problems -- unless it did something totally unpredictable.

``Texas Air might acquire People but it might not acquire Eastern,'' says D. Quinn Mills, a professor of business at the Harvard Business School.

``I wouldn't be surprised if they [Texas Air] tried to get rid of Eastern. The Eastern acquisition always has been a little bit crazy. . . . I've never heard within the industry that the deal is as fully cooked as the media have said it is.''

Professor Mills says People is extremely attractive to Mr. Lorenzo and other airlines because, despite its losses, it is the lowest-cost carrier in the industry. People's cost per available seat-mile is 5.32 cents, compared with 6.12 at the next lowest carrier, Texas Air's Continental Airlines.

Denver-based Frontier Airlines, which was purchased just last year by People, seems to have been the undoing of People Express chairman Donald Burr, analysts say. That's because People did not have the money to battle both United and Continental in Denver. According to Mills, any People Express buyer would probably redistribute Frontier's aircraft and eliminate the company.

Smith at Sanford C. Bernstein believes there's a strong possibility United or even American Airlines could step out of the wings into the limelight.

He and Mills agree there is an incentive for United to buy People Express. United has a contract worth roughly $3.3 billion with Boeing to buy 113 airliners.

``United has been eyeing [People's] capacity for a long time,'' Smith says. Acquiring more than 120 jets for only $300 million or $400 million would be attractive. The catch is that United would not want to get caught with an overcapacity problem.

``United is a player,'' Mr. Smith says. ``They are a sleeping giant with a lot of cash. If they want People, they can get it.''

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