Eastern Airlines to Sell Shuttle to New Unit
HOUSTON (AP) _ Eastern Airlines, a subsidiary of Texas Air Corp., will sell its Air Shuttle service to a new subsidiary, Texas Air announced today.
The sale price is $225 million in cash and marketable securities.
The shuttle service will be unchanged, providing the same aircraft, terminals, and hourly service linking New York, Washington and Boston, Texas Air said. Eastern, buffeted by financial losses, has laid off about 4,000 employees in the past year and a half in an effort to cut costs. The shuttle was considered one of its few profitable operations.
The new Texas Air subsidiary - to be called Air-Shuttle - will be based in Houston and will offer jobs to Eastern employees in order of seniority. Salaries and other terms of employment will be the same as at Eastern at the time the transaction is closed. No employees will be laid off as a result of the sale, Texas Air said.
The president and chief executive officer will be Bruce R. Nobles, currently president of Pan Am Corp.’s shuttle service, which competes with Eastern in the Northeast corridor.
The deal is expected to be completed as early as mid-April after Air- Shuttle receives approval from the Federal Aviation Administration and other government agencies.
Of the $225 million sale price, $125 million will be paid in cash at the time of the closing of the transaction and $100 million will be paid in 10- year marketable notes.
In addition, Air-Shuttle will lease 17 Eastern aircraft for seven years and enter into marketing agreements with Eastern for up to 15 years, providing Eastern about $145 million over the terms of the agreements.
Texas Air also owns Continental Airlines.