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Airlines Reportedly Talking About Merger

January 15, 1987

NEW YORK (AP) _ American Airlines is talking with Pan American World Airways about the possibility of acquiring the financially troubled international carrier, the New York Times reported today.

Quoting what it called sources close to both companies, the newspaper said American is exploring the possibility of buying the whole airline and not just its valuable international routes.

The report did not further identify the sources and did not elaborate on the purported negotiations.

In response to the report, American spokesman Stephen McGregor said from the airline’s Dallas headquarters: ″We’ve got a corporate policy that prevents us from talking or speculating about mergers or acquisitions. I’m afraid that’s all I can say.″

Merle Richman, spokesman for New York-based Pan Am, said: ″It is the policy of Pan Am not to comment on any inquiries regarding mergers or acquisitions.″

The Times report came against a background of consolidation in the deregulated airline industry and extreme pressure on major carriers to cut costs. Several airlines have expanded by acquiring competitors, and industry analysts consider Pan Am one of the few remaining targets.

Rumors that American might buy Pan Am have surfaced sporadically since last year, when both carriers signed a marketing agreement under which Pan Am must offer American the first right of negotiations on the sale of major assets.

As part of their cooperation, Pan Am and American also have combined frequent flier programs, and Pan Am uses American’s Sabre computerized reservations system.

Pan Am is one of the oldest carriers, which pioneered routes into Asia, Europe and Latin America. The airline has been losing money for years and its troubles intensified in 1986 when fear of terrorism devastated its trans- Atlantic business.

American is one of the largest domestic airlines and has been growing primarily through internal expansion instead of acquisitions. But last year it broke with that policy by purchasing a Pacific coast airline, AirCal, for about $225 million.

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