Report: American Airlines to buy TWA
WASHINGTON – American Airlines will announce plans this week to buy financially troubled Trans World Airlines, the oldest continuous name in American commercial aviation, The Washington Post says.
Spokesmen for the carriers and other interests involved declined comment on the newspaper’s report in its Monday editions.
According to the Post, TWA plans to file for Chapter 11 bankruptcy protection on Wednesday, the third time it has done so, as a precursor of American’s takeover, which would be announced the same day.
The deal, whose price was not disclosed, also reportedly involves American buying a 49 percent stake in DC Air, a new carrier that is being crafted from the planned merger of United Airlines and US Airways.
To ease antitrust concerns, DC Air – which will be run by Black Entertainment Television founder Robert Johnson – would have most of the takeoff and landing slots at Washington’s Reagan National Airport now assigned to US Airways.
The sale could end St. Louis-based TWA’s decade-long struggle to turn a profit. However, sources said American does not plan to continue the TWA name, consigning it to the ranks of such once venerable air carriers as Pan American World Airways and Eastern Airlines.
Of the nation’s top airlines, TWA was the only carrier to lose money in 1999 – $353 million, the worst financial performance since the airline’s second financial reorganization in 1995. It was on pace to do even worse in 2000, despite increasing revenues. Through the first three quarters, TWA lost $115.1 million.
The Wall Street Journal reported that the deal calls for American to step in and provide financing after TWA’s bankruptcy filing. The paper said the equity value of the TWA deal is small and talks on the debt are ongoing. Sources told the paper that the total value of the assets and the assumed liabilities is expected to be about $2 billion, depending on what value is given to some of the liabilities.
The Post reported that American would purchase all of TWA’s assets and keep all 20,000 of the carrier’s employees. The deal would make American, a subsidiary of AMR Corp., a comparable size carrier to the proposed United-US Airways merger.
Acquisition of TWA’s St. Louis operation would give American a third hub in the middle of the country. American already operates hubs at Chicago’s O’Hare International Airport and at Dallas-Fort Worth International Airport.
The sale continues a trend of consolidation in the industry that started when United Airlines, the nation’s largest carrier, announced plans to buy US Airways. The Justice Department has yet to sign off on that merger, but the department has approved an alliance between Northwest Airlines and Continental Airlines.
The Post also reported that part of American’s purchase of TWA could include a deal with United to jointly operate the US Airways shuttle between Washington, New York and Boston.
”This will handle most of the antitrust issues,” Darryl Jenkins, a professor at George Washington University told the Post. ”This one deal will make the merger of United and US Airways likely.”
The Chicago Tribune reported that United has agreed to sell American, United’s largest competitor, parts of its operation for a fraction of their value. American would receive assets from United valued at more than $2 billion in the US Airways deal, but would pay ”significantly less” than $1 billion, sources told the Tribune.
The Justice Department’s antitrust division has told Chicago-based UAL that its acquisition of US Airways, which includes $7.3 billion in debt, was unlikely to be approved unless United agreed to rid itself of large parts of its operation.
Asked about the report late Sunday, Tim Doke, vice president of corporate communications for American, would say only: ”There is frequent speculation in the media about various transactions in which American Airlines may or may not be involved and we have a strict corporate policy not to comment on such rumors and speculation. We are talking to lots of folks about lots of different things all the time.”
TWA spokeswoman Julia Bishop-Cross told The Associated Press, ”We don’t have anything to say about that.” Spokesmen for United and US Airways also declined to comment.
There is no telephone listing in Washington for DC Air, which is still in the formation stage.
Shares of TWA fell 15 cents, or 11 percent, to $1.32 in trading Friday on the American Stock Exchange. Shares of AMR Corp. rose 68.8 cents to $43.75 on the New York Stock Exchange, where shares of UAL rose $1.19 to $45, and shares of fell 68.8 cents to $39.75.
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