Texas Air wins OK from US to buy out ailing People Express
Washington — The Transportation Department gave final approval Friday to the purchase of People Express Airlines by Texas Air Corporation, clearing the way for Texas Air to become the nation's largest airline company. The department said it gave swift approval for Texas Air to buy People Express and the remaining assets of Frontier Airlines, a People Express subsidiary that shut down last summer, because of the low-cost carrier's ``extremely precarious financial condition.''
Texas Air already owns Continental Airlines and New York Air and is in the process of merging with Eastern Airlines. Altogether, the Houston-based airline company will have nearly 20 percent of the domestic airline market once the People Express deal is completed, industry officials estimate.
The Texas Air-People Express merger was opposed by several airlines, including Pan American World Airways and Presidential Airways, which complained that it would give Texas Air unfair competitive advantage on routes in and out of Newark, N.J., and in the highly competitive Denver market.
New York Air has extensive operations in and out of Newark, and Continental Airlines is a major carrier in and out of Denver.
But the Transportation Department said it saw no danger of a substantial reduction of competition in any market including Denver and Newark, where it said there is room for other airlines to compete.
The department gave its tentative approval to the $298 million purchase of People Express and Frontier assets on Oct. 14, but it did not issue a final decision until after reviewing additional comments on the case.
People Express earlier this month urged the government to give swift approval for the merger with Texas Air, saying it didn't have enough money to pay its bills and might have to shut down its services and seek protection under the bankruptcy laws.
Two weeks ago Texas Air advanced the Newark-based airline $10 million so it could pay a $13.4 million interest payment that had already come due. People Express said it was facing severe cash problems.
``DOT found that without quick action there would be a significant and unnecessary risk that People Express would fail and Frontier's system would not be revitalized,'' a department statement said.
It said that in addition to permitting People Express to continue its operations, the merger would also permit Texas Air Corporation ``to rapidly restore service lost when Frontier ceased operating and permit the reemployment of former Frontier personnel.''