Originally created 07/14/97

FAA: No review planned of ValuJet merger



ATLANTA (AP) - The Federal Aviation Administration says it will not review the planned merger of ValuJet and AirTran Airways, in which both carriers would operated under combined management but with separate licenses, The Atlanta Journal-Constitution reported Saturday.

The two budget airlines, which announced the merger Thursday, escaped review by the federal agency by planning to remain separate units of a combined holding company, at least at initially.

"In that case we have no role," said FAA spokeswoman Kathleen Bergen. "We will continue our normal surveillance activities at each of the two airlines."

However, an FAA review will be required if the merged parent company, AirTran Holdings Inc., decides later to integrate the two carriers and combine their operating certificates, Ms. Bergen said.

The planned merger will allow ValuJet to change its name to AirTran Airlines and will put both carriers under a common marketing banner and management.

ValuJet has failed to return to profitability, and some analysts say its name has been tarnished, since the Atlanta-based airline's fatal crash in the Florida Everglades last year.

Meanwhile, the planned merger will also dissolve ValuJet's management team. Lewis Jordan, chairman of ValuJet Airlines, and Robert Priddy, chairman of the airline's holding company ValuJet Inc., will recede into the background as non-executive board members.

Two other ValuJet cofounders, Maurice Gallagher Jr. and Timothy Flynn, would give up their board positions and become outside shareholders. The two have sold off substantial portions of their stakes since the stock tumbled after the crash.

That would leave D. Joesph Corr, a former Continental and TWA chief, as president and chief executive of the merged airline. Corr was brought in last fall to help ValuJet regain its competitive footing after the crash.

AirTran is based in Orlando, Florida.