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Government OKs Takeover of Northwest Airlines

September 29, 1989

WASHINGTON (AP) _ The Department of Transportation today announced approval of the Wings Holdings Co. Inc. takeover of Northwest Airlines after first insisting on steps to prevent foreign control of the airline.

Transportation Secretary Samuel Skinner said an agreement with Northwest will alleviate government concerns about the interest of KLM Royal Dutch Airlines and foreign banks in the takeover by the holding company set up by Los Angeles investor Alfred Checchi.

Skinner has said the government is concerned about increasing foreign investment in U.S. airlines because it could compromise negotiations with foreign governments over routes.

Checchi, at a news conference with Skinner, said in a statement that he disagreed with some of the government’s conclusions in the $3.65 billion deal, including the influence KLM would have over the company.

″We do not agree that KLM is, or has ever been, in a position to exercise any actual control over NWA,″ Checchi said in the statement.

However, Checchi said Wings had agreed to reduce KLM’s interest, dissolve a three-member KLM financial advisory committee and take away the voting power of KLM’s one seat on NWA’s 12-member board on certain issues.

Skinner praised Checchi as a man with an outstanding reputation with both management and employees. As part of the agreement to approve the takeover, the department will conduct a continuing review of Northwest’s finances, requiring regular reports from the company.

The department also had expressed concern about the more than $3 billion in debt that the takeover gives the airline, the nation’s sixth largest.

Under the original arrangement, KLM was providing $400 million of the $700 million that Checchi raised to buy Northwest, but would have controlled only 5 percent of its voting stock.

The Transportation Department concluded, however, that the deal would put KLM ″in a position to exercise control over Northwest″ and that it would in effect no longer be considered a U.S. carrier under the law.

Foreign companies cannot own more than 25 percent of a U.S. airline.

Skinner said the department has an obligation to determine whether any acquisition will allow an airline to continue giving safe service and remain under the control of U.S. citizens.

Earlier this week, the government asked United Airlines to disclose how much a planned employee management takeover will allow foreign influence over that airline. The $6.5 billion stock buyout plan includes participation from British Airways.

Skinner declines to respond to questions on the department’s review of that transaction.

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