Business Notes AIRLINES

Hard times in the airline industry have left a few strong carriers with most of the traffic and a handful of debt-ridden ones struggling to stay aloft. Last week two of the weaker airlines decided that a merger may help them survive. TWA chairman Carl Icahn, who began pursuing a merger with Pan Am two months ago, finally persuaded the rival carrier to agree tentatively to a deal. Under the terms, TWA would acquire Pan Am for $375 million, or $2.50 per share in cash and securities. The merger, however, depends upon Icahn's ability to provide a bridge loan to help Pan Am cover losses during the low- traffic season after the holidays. One type of financing TWA is considering would require Pan Am, which lost $2 billion in the past decade, to file for reorganization in bankruptcy.

Icahn raised money for the merger by agreeing last week to sell TWA's profitable U.S.-to-London routes to American Airlines for $445 million. Just last October, Pan Am entered into a similar agreement to sell its London routes to United Airlines for $400 million.

If the TWA-Pan Am merger is successful, the nation's pioneers in overseas flights would still face formidable hurdles. TWA is saddled with one of the oldest fleets in the industry and an estimated $2 billion in debt, while Pan Am lacks a strong domestic system. Moreover, by selling their London routes to two of the most aggressive U.S. carriers, Pan Am and TWA can expect increased competition overseas. Yet the merger would have at least one advantage: the combined carrier would have to sell off overlapping routes, providing it with additional cash.