Flight Plans for Profit

Trans World Airlines, the nation's fourth largest airline, last week moved to acquire Northeast Airlines, which serves New England and also has a New York-Miami route. For TWA, merger with Northeast will complete the New York-Miami leg of its triangle between the West Coast, Miami and New York. Although TWA will be stuck with Northeast's money-losing New England feeder services, it will pick up passengers for its long-haul and international runs. To Northeast, which lost $7,000,000 last year and is still in the red, merger will provide seriously needed working capital.

Masterminding the marriage of TWA and Northeast is Millionaire Howard Hughes, who owns 78% of TWA and 9.2% of Atlas Corp., the holding company that has a 56% controlling interest in Northeast. Under the merger terms, one share of TWA would be exchanged for three shares of Northeast common stock, if the plan meets the approval of TWA's board, the CAB, stockholders and major creditors. Hughes will also lend $9,500,000 to Northeast from his Hughes Tool Co. to get its six, new, leased Convair 880 jets into operation for the Florida tourist season this winter.

For badly ailing Capital Airlines last week there was a management shake-up that may well be the first in a series of steps toward merger. Out as general counsel and chairman of Capital's executive committee went Charles Murchison, the line's biggest stockholder (80,532 shares), who had hoped to become boss. In as board chairman went Aviation Trouble-shooter Thomas D. Neelands Jr., 57, longtime member of Capital's board (1948-58) and Wall Street investment banker, who has won a reputation as the man to find the money to save an airline.

When Neelands resigned in disgust from Capital's board in 1958, he warned that the line had "sought more routes than it could swallow and was working toward a crisis." Now, faced with a $33.8 million mortgage foreclosure on planes and a full-scale CAB investigation, Capital President David H. Baker and his backers on Capital's board have called on Neelands to solve the line's woes.

Capital is in such bad shape that Neelands does not think it can merge in the near future: it is in no position to bargain with another line. It lost $5,400,000 in the first three months this year, made a $50,000 profit in April. Neelands believes that the economics of the airline business will eventually force Capital to merge if he can build it up into a desirable property. This week he will start to salvage Capital by shaking up its second-echelon executives. Next, he hopes to get rid of Capital's money-losing feeder routes. Says he: "If we were relieved of our Tobacco Road route and the feeder-line system, Capital could make money."

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