Hughes Gets His Way

In 42 U.S. and Canadian newspapers this week, full-page ads purchased by Boston's near-bankrupt Northeast Airlines will thankfully proclaim: "Welcome aboard. Howard Hughes!" After stalling off enigmatic Industrialist Hughes for two solid years, the Civil Aeronautics Board last week grudgingly authorized his Hughes Tool Co. to buy 56% of Northeast's outstanding stock from New York's Atlas Corp. The consideration that finally turned the tide in Hughes's favor, said the CAB in its caustic decision, was "not whether Hughes Tool Co. could provide efficient management, but whether Northeast would have any management at all."

On the face of it. Hughes's victory seems a Pyrrhic one. For the $5,000,000 that he will pay Atlas, Hughes will get control of an airline that lost $9.4 million last year and currently reports a "net worth deficiency" of $23.4 million. Merely to keep the line alive is certain to cost Hughes many millions more. And by decreeing that transactions between Hughes Tool Co. and Northeast may not exceed $100,000 a year without its specific approval, the CAB seems to have ruled out a lucrative trick that Hughes used to practice with Trans World Airlines: buying planes through Hughes Tool and then reselling them to the airline at a profit.

Despite this, however. Hughes had every reason to be satisfied with last week's action. Northeast's massive losses can be applied as tax credits to the handsome profits earned by Hughes Tool, and the aviation industry is betting that Hughes will yet find a way to pass off on Northeast the four idle Convair 880 jetliners still owned by the tool company. More important, Hughes obviously hopes to use Northeast as a weapon in his fight to regain control of the TWA shares (78.29; of the line's outstanding stock) that edgy creditors forced him to put into a voting trust two years ago. If he can pull hapless Northeast out of its difficulties (which will not be easy), it will be increasingly awkward for the bankers and the CAB to hold to the line that Hughes is too erratic and inefficient a manager to be permitted to run TWA.

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