How Carl Icahn paid for his acquisition of rival Ozark Airlines by selling most of Ozark's fleet

Among the shenanigans common to the arcane world of airline finance, leasing is finding a place as tool of corporate raider and chief financial officer alike. One of the first things, for example, that financier Carl Icahn learned about the airline industry after he won control of Trans World Airlines was that he should try to swallow the competition. So he decided to use leasing to accomplish just that.

With the approval of the Department of Transportation, Mr. Icahn led TWA to buy arch rival Ozark Airlines of St. Louis and its fleet of 50 aircraft for about $240 million last October.

Then, in a paper transaction in November, Icahn sold 35 of the Ozark DC-9 airplanes to a small company called Polaris Leasing for $237 million - which about equaled the cost of buying Ozark in the first place. Polaris immediately leased the planes back to Icahn's Ozark airlines. Polaris, itself, has since been bought by General Electric Credit Corporation.

If that transaction sounds fun, there are other less talked about deals.

These include flying multi-million dollar aircraft into international airspace in order to sign over the title, thereby making ambiguous the country and flag under which the plane is flying. This creates the possibility of ``double-dipping'' for tax credits by gaining tax advantages in more than one country.

American Airlines is one of the most aggressive of the US airlines pursuing complex financing techniques to lower the cost of owning or operating aircraft. American's chief financial officer, John Pope, is the architect of its airline financing. Late last year, Mr. Pope explained to Institutional Investor magazine a bit about the system.

``Before deregulation,'' Pope says, ``we at American [Airlines] never dreamed about such cost effective ways of borrowing money as British two-tiered double-dip tax leases, European dual-currency financings, or secured subordinated convertible debentures issued in New Zealand [dollars]. Now we think of them every day.''