Names and addresses and percentages of commitments Percentage of aggregate commitments 0.33333333 Name and address National Bank of Commerce_ 1525 Elm Street Dallas, Texas National Bank of Tulsa 320 South Boston Tulsa, Oklahoma The Philadelphia National Bank .333333333 Broad & Chestnut Streets The Chase Manhattan Bank (National Association) has sold to.. a participation equal to -% in the Revolving Credit Loans in an amount up to but not exceeding an aggregate principal amount at any one time outstanding of $300,000,000, to be made, from time to time, to American Airlines, Inc. under the Credit Agreement dated as of April 1, 1971, which Loans are due March 31, 1977, bearing interest at a rate per annum (on the basis of a year of 365 days) determined as follows: (a) from the date thereof to and including June 30, 1973 equal to 4 of 1% above the prime rate in effect from time to time charged by The Chase Manhattan Bank (National Association) for 90-day loans to responsible commercial or industrial borrowers and (b) thereafter equal to 11⁄2 of 1% above such prime rate payable quarter-annually on the first day of each January, April, July and October in each year commencing the first such day following the date of making thereof. This Certificate is issued under the terms of said Credit Agreement to which reference is hereby made. Assistant Treasurer 5. MATERIAL SUBMITTED FOR THE RECORD CONCERNING EASTERNCARIBAIR ACQUISITION [From Miami Herald, October 28, 1970] EASTERN AIRLINES TO PAY $10.4 MILLION FOR CARIBAIR (By Don Bedwell) In a bid to extend its routes throughout the Caribbean's Islands in the Sun, Eastern Airlines agreed Tuesday to purchase near-bankrupt Caribair Airlines for $10.4 million. Caribair formally known as Caribbean-Atlantic Airlines-approved the takeover agreement earlier in the week. Meanwhile, stockholders of Northeast Airlines voted their official sanction of a merger into Northwest Orient, a deal already awaiting federal approval. Eastern directors, meeting in New York, agreed to buy San Juan-based Caribair through a $10,395,000 note payable by Eastern over five years. That transaction is subject to approval by the Civil Aeronautics Board and, because it involves international routes, by President Nixon as well. Eastern's announcement suggested the urgency of Caribair's financial plight. A management agreement, the first phase of the two-part takeover arrangement, must be approved by the CAB within 30 days "or the purchase will not be consummated," Eastern said. The acquisition agreement itself must receive CAB approval by June 30 to be effective. Northeast and Northwest Orient Airlines, which last November announced their intention to merge, are still awaiting approval of that linkup from the slowmoving board. Stockholders of Northeast gave overwhelming approval to that merger. Northeast. 86 per cent of its stock held by Storer Broadcasting Corp. of Miami, lost nearly $5 million in the third quarter. Caribair, an island-hopping airline with Miami as its only U.S. gateway, has expressed concern that it will lose $4.8 million this year. The announced purchase price approximately covers Caribair's indebtedness to a single big creditor, Banco Popular of San Juan, which has advanced Caribair's founding Trigo family close to $11 million. Caribair owes an additional $3 million to other creditors, according to Miami attorneys close to the situation. The CAB, which rebuffed Caribair's appeal for a temporary $3.18 million subsidy earlier this month, gave Caribair's management little encouragement for federal help of any kind. "In view of the numerous nonsubsidized services available in the area of Caribair's operations," the board said, “a substantial issue is raised whether it would be in the public interest to subsidize Caribair's costly services when its competitors are able to operate without subsidy." Caribair had protested that those competitors, including Eastern and Pan American, have pushed the carrier into the red with nonstop service to its traditional island destinations. Eastern already serves Puerto Rico and the Virgin Islands as does Caribair. But CAB approval could give Eastern a host of new island destinations out of Miami, including Jamaica, Haiti, Antigua, Guadaloupe, Martinique, St. Lucia, Barbados, Trinidad, Curacao and Aruba. Competing carriers are certain to oppose any transfer of Caribair's routes to Eastern. The purchase price includes Caribair's routes three leased DC9 twinjets and other airline properties. Under a management contract, Eastern hopes to delegate a four-man team, headed by George A. Lyall, division vice president-passenger sales, to manage Caribair until it can be fully integrated into Eastern's system. After those operations are absorbed, Eastern said, "the remainder of that company will be liquidated." Samuel Higginbottom, Eastern's executive vice president, said the airline "will endeavor to offer an opportunity to Caribair's 600 employes to become full-fledged employes of Eastern." While awaiting final approval on the deal, Eastern said, it will advance up to $1 million "to be used exclusively to cover future operational expenses, including Eastern's management services." [From the Miami Herald, November 1, 1970] DREAMS OF DOMINANCE DASHED LIQUIDATION BITTER FINISH FOR PROUD LITTLE CARIBAIR (By Don Bedwell) Caribair, a proud little carrier with a record for making it on its own, turned to big Miami-based Eastern Airlines for rescue last week. An announcement that Eastern and Caribair would seek approval for a merger leading to Caribair's liquidation climaxed an increasingly desperate financial crisis for the San Juan-headquartered U.S. flag carrier. The $10.4 million price will just about pay off the line's major creditor-little reward for the Puerto Rican family that has labored since 1946 to make Caribbean-Atlantic Airlines a success. Economic reversals have dashed their dreams of establishing Caribair as the dominant airline linking the U.S. mainland and the Caribbean. Miami, its only U.S. gateway, had already been selected as its future marketing base. An unsympathetic Civil Aeronautics Board, diplomatic entanglements and excessive competition combined to thwart those plans. "Please instruct the CAB to make us viable," President Dionisio Trigo implored a Senate committee early in October after complaining that his traffic "was stripped away methodically" through route awards to competitors. Trigo complained-futilely-that the CAB "authorized Pan American to fly nonstop from New York and Miami to the Virgin Islands, our bread and butter run, without compensating Caribair for the enormous losses that resulted. "The CAB went even further," he added. "They authorized the air taxis to operate without limitations over our routes." Trigo complained that at least 20 air taxis were competing between the islands. Neither a conversion to all-jet operation, which necessitated discontinuance of service to several points and a personnel cutback a year ago, could turn the tide. Caribair was born in 1942 when a little firm called Powelson Line won CAB permission to fly Stinson trimotors between three Puerto Rican cities-San Juan, Ponce and Mayaguez-and on to St. Thomas and St. Croix in the U.S. Virgin Islands. Three years later, Powelson negotiated to supplement its fleet with a Lockheed Lodestar leased from Miami's National Airlines, which had aspirations in the Caribbean. But the CAB turned thumbs-down on that deal and Powelson's controlling interest was sold to a group of Puerto Rican investors headed by Trigo, a San Juan attorney who has served as president ever since. He guided Caribair to profitability through the 1950s. Trigo went before the CAB in 1961 with a grand plan for establishing Caribair as the U.S. regional carrier in the islands, flying as far south as Caracas, Venezuela from such mainland destinations as Chicago and New York as well as Miami. "The case dragged on for nine years," a Caribair vice president said earlier this year. "We watched our foreign-flag competitors equip themselves with jet aircraft, and we knew we had to do the same, regardless of the Caribbean case outcome." The carrier made one false start, modifying a fleet of prop-powered Convair transports with Rolls-Royce turboprop engines. Those seven unprofitable Convairs were pulled off the line late last year as Caribair discontinued service to two Puerto Rican and several down-island destinations unable to handle jet traffic. Service was discontinued to Ponce and Mayaguez, St. Kitts, St. Vincent, Dominica and Granada and 200 employes were furloughed. despite a move by employes to buy the carrier even if it meant mortgaging their homes. Three leased DC9s converted the carrier to all-jet operations, but couldn't stop the flood of red ink. The CAB authorized Caribair to inaugurate Miami service in 1969. But Caribair found itself flying nearly empty aircraft, as its CAB-dictated stopovers hamstrung it in competition against mainland carriers flying nonstop to San Juan and the Virgin Islands. Caribair's flights land at Port au Prince, Haiti, because the Dominican government has refused to permit them to land in Santo Domingo as planned. At the southern end of the line, the Venezuelan government has refused landing rights at Caracas. Those woes forced Caribair last year to plead for subsidy such as the U.S. government offers to comparable local service airlines on the mainland and in Hawaii. CAB members, while promising an expedited hearing on a permanent subsidy, rejected a temporary grant. Prior to 1968, Caribair hadn't asked a subsidy in 11 years despite the traditional unprofitability of short-haul air carriers. Back in 1955, Caribair's last year on subsidy, Trigo was rebuffed by the CAB when he requested to expand his DC3 fleet. He countered by offering to go off subsidy if he could build his fleet as he pleased. The CAB agreed, and Trigo went his own way, seeking to build a successful T.S. regional Caribbean airline-a goal which appeared last week to be out of reach. [From the Miami Herald, November 3, 1970] CARIBAIR CITES URGENCY ON AID (By Don Bedwell) Caribbean-Atlantic Airlines fears it will be forced out of business immediately if the Civil Aeronautics Board refuses to approve a financial assistance proJosal by Eastern Airlines. Attorneys for Caribair have told the Civil Aeronautics Board that the Puerto Rican airline is in "de facto bankruptcy," with liabilities exceeding assets by $18.5 million. Eastern has offered $10.4 million for Caribair, but told the CAB that approval of an interim management and financial assistance plan must be approved within 30 days or the deal is off. Meanwhile American and Western Airlines have announced their intention to merge in a transaction that would add nine cities to American's routes. That merger plan, announced even while American's proposal to absorb Trans Caribbean Airways still is pending before the CAB, is subject to approval by directors and stockholders of both companies as well as to the CAB and President Nixon. An American spokesman said it would be "hard to tell" whether American or United, now the largest U.S. airline, would be bigger if both the Western and Trans Caribbean takeovers are approved. Approval could give American, the second largest domestic carrier, authority to serve Anchorage, Alaska; Calgary and Vancouver, Canada; Seattle, Portland, Sacramento, Las Vegas and Minneapolis-St. Paul. The proposal calls for Western's declaration of a 5 per cent stock dividend. after which Western stockholders would receive for each of their shares one share of American common stock and a five-year warrant to purchase one share of American stock for $35. In Washington, Caribair attorneys told the CAB at a subsidy hearing that the carrier will continue operations with no cutback in personnel if Eastern's interim management plan is approved. If not, they warned, Eastern will pull out and Caribair will be forced to shut down. As an alternative, they said, authorization of a subsidy could keep Caribair in business even if the Eastern acquisition plan is rejected. Financial data submitted with the subsidy application indicate that Caribair owed $14 million on Aug. 31 to Banco Popular of Puerto Rico. The bank has said it can no longer advance funds. [From the Miami Herald, November 15, 1970] PAN AMERICAN FIGHTS EASTERN'S OFFER TO BUY FAILING CARIBAIR Like an aging maiden unaware that her glamor was fading, Caribbean-Atlantic Airlines waited too long to say “yes.” Documents handed to the Civil Aeronautics Board last week describe Caribair as an airline that repeatedly turned down offers from corporate suitors while her charms slipped away. "A number of attractive offers were made to Caribair in the early months of 1969 which would have resolved its financial difficulties," according to Pan American World Airways. They "were rejected or withdrawn because they did not satisfy the profit ambi tions of Caribair's controlling stockholders," Pan Am attorneys advised the board By August 1969, according to the brief, Pan Am was approached by Caribair management and Banco Popular of Puerto Rico, the island-hopping carrier major creditor, and asked to help. "It was represented to Pan American that the earlier opportunities for sale of Caribair were no longer available because of Caribair's increasingly unfavorable financial picture." Pan American urged the CAB to reject Eastern's offer to buy the Puerto Rican airline for $10.4 million. The international carrier offered a counter proposal to create "a new Caribair" through an injection of capital and technical know-how by U.S. and Puerto Rican interests. "Eastern has pursued a course of action designed to insure Caribair's liquidation," charged Pan Am, which said Eastern had refused to join it previously in s cooperative effort to save the island carrier. "Just before Caribair reaches the bankruptcy courts, Eastern proposes to extract and appropriate its route certificates," while intending to discontinue Puerto Rican local service, Pan Am said. Pan Am's attorneys expressed concern that Eastern's intrusion could cost Pan Am "millions of dollars of revenues" and might permit Eastern to emerge as the "overwhelmingly dominant" airline in the Caribbean. They called the board's attention to the desperate financial condition of Pan American's Latin American services, and of the Caribbean in particular," noting that 1970 losses "promise to be virtually as large as in 1969." They indicated that Pan Am could lose $1 million a year on its Miami-Jamaica revenues were Eastern to take over Caribair's competitive route. John C. Pirie, Pan Am's senior vice president and general counsel, urged the CAB to deny Eastern's request that an interim management agreement be approved within 30 days. Pan Am's brief came in reply to a CAB order for opposing carriers to give reasons why the Caribair takeover should be denied. Pirie characterized Eastern's bid as "a scheme to allow Eastern to operate certificated service nominally in Caribair's name until the formalities of Carib air's demise can be completed." Pan Am contends that its offer to take a financial position in the carrier was never pursued by Caribair or its creditors, nor were proposals that the carrier be acquired by the Puerto Rican govenment. "Caribair has had numerous opportunities to extricate itself from its diffculties and can blame only itself and the bank for failing to do so." Eastern offered an informal rebuttal to Pan Am's criticism, describing the bid as "a good thing for the area and the employes of Caribair, but mainly for the public. "We stand behind our pledge for new, improved air service to the people of the mainland and the Caribbean." Pan American proposed that a "new Caribair” be organized, involving Puert Rican investors such as Prinair and long-haul airlines such as Eastern and Pan Am. EXCERPTS FROM AUGUST 3. 1972. OPINION OF THE CIVIL AERONAUTICS BOARD IN EASTERN-CARIBAIR ACQUISITION CASE, DOCKET No. 22690 By the Board: This proceeding involves the application of Eastern Air Lines and Caribbean-Atlantic Airline (Caribbean) for approval of an agreement whered by Eastern would acquire Caribbean's certificate of public convenience and neces sity for route 59.1 and the carrier's right, title, and interest in lease agreements 1 Route 59 includes permanent authorizations to serve Mayaguez, Ponce, and San Juan (Puerto Rico). St. Thomas and St. Croix (T.S. Virgin Islands), and Santo Doming (Dominican Republic). It also includes temporary authorizations, expiring March 20 1974 to serve Miami (Florida), Kingston and Montego Bay (Jamaica). Port-au-Prince (Ha St. Maarten Curacao, and Aruba (Netherlands West Indies), St. Kitts, Antigua, St. Ta Grenada (West Indies Associated States, Great Britain), Guadeloupe and Martiniq (France), Barbados, Trinidad (Trindad and Tobago), and Caracas (Venezuela). Caribal also has exempted authority to serve Dominica and St. Vincent (West Indies Associat States) and Tobago (Trinidad and Tobago) until January 25, 1974. but it does not se these points It has suspended operations at Ponce, Mayaguez, St. Kitts, Grenada, 114 Trinidad. The Venezuelan Government has not authorized operations at Caracas. |