A verdict is due imminently in a trial that likely will determine whether Braniff Inc. keeps control of its most valuable asset and continues operating.
The trial began Monday in U.S. Bankruptcy Court in Orlando, Fla.Braniff, which filed Sept. 28 for protection under Chapter 11 of the Federal Bankruptcy Code, is trying to keep its delivery position for 50 Airbus Industrie A320s that it agreed to lease or buy from GPA Group Ltd. and others. Delivery dates for the aircraft are scheduled through 1994.
Just hours before the bankruptcy filing, GPA terminated its agreement to lease 26 Airbuses to Braniff, although the airline had taken delivery of five of the jets. Without the aircraft, Braniff, based in Orlando, is likely to liquidate rather than continue operating, lawyers speculate.
Since halting all regularly scheduled flights and laying off most of its remaining employees Nov. 7, Braniff has continued operating as a charter airline.
In the trial, Braniff tried to show that GPA improperly terminated the lease agreement.
Throughout the bankruptcy proceedings, American Airlines has negotiated with Braniff about the possibility of taking delivery of those aircraft.
Braniff is suing GPA for breach of contract, violation of the U.S. Bankruptcy Code and other alleged business misconduct. GPA, an aviation company based in Ireland, maintains its U.S. headquarters in Stamford, Conn.
Various contracts, which would enable Braniff to continue taking delivery of the jets, are crucial to the airline's ability to reorganize under Chapter 11, said Matthew Siembieda, a Philadelphia lawyer representing Braniff.
"This is the most important asset that this debtor has, and it's the most pivotal asset with which the reorganization turns. The cloud on this asset has inhibited the debtor's ability to reorganize," Mr. Siembieda said.
Braniff has been exploring the possibility of selling the airline or its assets to potential investors based in Kansas City, Mo.
The carrier's remaining assets include some aircraft parts and some passenger-loading gates at Orlando and Kansas City international airports.
As long as GPA considers the lease agreement with Braniff to be invalid and thwarts delivery of more Airbuses, the airline cannot sublease the jets or sell its delivery position for them. Mr. Siembieda estimated the value of the Airbuses at more than $100 million.
Francis Carter, a Miami lawyer representing GPA, said the aviation company properly terminated its lease agreement with Braniff. The airline's contracts with GPA have no value, he said.
"They're market-based leases. They're based on Braniff's credit- worthiness. "
Braniff's contention that the agreement is valid has prevented GPA from leasing the aircraft, Mr. Carter said. The aviation company is incurring tax liabilities as more Airbuses are delivered.