American Airlines is considering a bid for up to 49 percent of PWA Corp., parent of Canada's second-largest airline, according to industry sources.
American, based in Fort Worth, Texas, would bid up to $250 million for a stake in PWA of Calgary, Alberta, the owner of Canadian Airlines International, according to a published report in Canada.Sources say that Donald Carty, American's executive vice president of finance and planning and a former president and CEO of Canadian, has been shuttling between Fort Worth and Calgary in an attempt to hammer out a deal.
Mr. Carty also has been a frequent visitor to Ottawa, Canada's capital, to pitch the idea of an open-skies aviation agreement between the two countries. He has met with Finance Minister Don Mazenkowski, Transport Minister Jean Corbell and Trade Minister Michael Wilson.
PWA directors held a board meeting on Friday, but no announcement followed. A PWA spokesman declined comment. American officials were unavailable at press time.
An agreement would give American, which has a minimal presence in Pacific markets, access to Canadian's solid trans-Pacific route network. It also would infuse PWA with cash and link it up with a powerful U.S. carrier. Only United Airlines flies more domestic passengers than any airline except American.
The deal would have to overcome two regulatory hurdles, however. Canadian law prohibits foreign interests to own more than 25 percent of a Canadian airline. U.S. and Canadian officials have debated the idea of raising the threshold, but no formal policy has been made.
In addition, an Alberta law - known as the PWA Act - bars any individual or group from controlling more than 10 percent of the company.
The deal also could face roadblocks from Canadian opponents of an open- skies agreement, who fear that U.S. mega-carriers are poised to swarm over the border and swallow their smaller counterparts.
Canadian has spent more than a year seeking marketing and financial relationships with a U.S. carrier. It has alliances with Japan Air Lines and with Mandarin Air, a Taiwanese airline.
Canadian lost US$88 million in the first six months of 1991 because of weak passenger loads and tough competition from its chief rival, Air Canada.
Talks of a possible American-PWA marriage come as U.S. and Canadian negotiators prepare to meet in Denver today for another round of talks aimed at reworking the current bilateral air pact.
Analysts say there is little chance of a breakthrough in the upcoming round, although they expect the Canadians to present a proposal.
The present agreement is considered one of the most restrictive of its kind in the world.
Former Transport Secretary Samuel K. Skinner had pushed for a fully deregulated aviation relationship. But analysts say an American-PWA deal is a sign that such a scenario is well out in the horizon.