It is a wonder that anyone would want to buy the "Mickey Mouse airline," which is what patrons of Air West call the Western states' regional carrier. Its turboprop planes are notorious for late arrivals and departures, and the company is losing cash nose over wingtip. It ran up a deficit of $3.6 million in the first nine months of 1968. For all that, Hermit Billionaire Howard Hughes eagerly snatched up Air West on New Year's Day.
The line was the product of a unique three-way merger that in 1968 brought together Pacific Air Lines of San Francisco, Phoenix-based Bonanza and Seattle's West Coast. None of the three was big enough to boss the other two, and the result of divided leadership was snarled schedules and fouled-up reservations. The Bank of America, which financed the merger with $54 million and expected its money back by Jan. 1, advised Air West's management to sell the company "before it is no longer at tractive." Meanwhile, no more loans.
Bitter Brawl. Enter Hughes. His of fer last August of $22 a share, or about $94 million, set off a turbulent board room brawl. Air West Chairman Nick Bez, 73, former head of West Coast and a generous contributor to the Democratic Party in Washington State, spoke for Hughes. Lined up against him were Vice Chairman Edmund Converse, for mer head of Bonanza, and President G. Robert Henry. They insisted that Air West has enormous potential and that the offer, made through the Hughes Tool Co., was far too low. Says Henry: "We're spread over the richest and most progressive part of the country. You couldn't have a better territory." In deed, since the merger Air West has increased its routes by more than one-third, to 9,982 miles crisscrossing eight Western states and reaching into Canada and Mexico.
The anti-Hughes forces were relieved when Mallory Randall Corp., a Brooklyn-based manufacturer of plastic containers, stepped forward with an alternative bid, offering to swap shares worth some $109 million. Then, only seven days before the Hughes offer ran out on Dec. 31, Northwest Airlines made an attractive stock-swap proposal. Air West's routes would tie in perfectly with Northwest's, Henry argued.
Nonetheless, Air West's stockholders two weeks ago voted 52% in favor of Hughes. Then, in a surprising move, Air West's directors voted 13 to 11 not to sanction the sale. With that, some big pro-Hughes shareholders threatened court action. Hughes' agent, Francis Fox, who communicates with his secretive boss via closed-circuit TV, got in touch with the holdout directors. Perhaps because of the threatened lawsuits, six of them switched to Hughes.