American's plan to buy TWA gets federal nod


Saturday, March 17th 2001, 12:00 am
By: News On 6



WASHINGTON (AP) _ American Airlines is planning to move swiftly to acquire TWA after getting the government's approval, retiring one of the most storied names in U.S. aviation history.

The Justice Department's antitrust division decided Friday against challenging the $742 million purchase after it completed a review of the deal and took into account TWA's bankrupt financial condition.

``We're very pleased,'' TWA spokeswoman Chris Kelly said. ``It's a major step forward. We're looking forward to closing the transaction quickly.''

American's takeover of TWA comes amid heightened concerns about shrinking competition in the airline industry and complaints from passengers about flight delays and bad service.

It is not expected to be the last merger. United Airlines has bid to obtain most of US Airways, and a Continental Airlines-Delta Air Lines deal reportedly is under discussion.

American will pay $742 million for most of TWA's assets, including up to 190 planes and its St. Louis hub operations.

Earlier in the week, a federal bankruptcy court approved the sale of TWA's assets to American Airlines, a subsidiary of AMR Corp. If the sale were not approved, TWA's chief executive told the court, he would be forced to liquidate the carrier.

Members of Congress scrutinizing airline consolidation and customer service supported the decision, but expressed concern about other mergers.

``TWA's grim prospects help justify this merger, but the green light should switch back to yellow for other possible airline mergers,'' said Vermont Sen. Patrick Leahy, the ranking Democrat on the Judiciary Committee. ``The trend toward consolidation has implications for the public and for competition in the marketplace that need to be closely examined.''

Antitrust experts said the Justice Department had to weigh whether letting American absorb TWA would narrow consumers' choices in airline travel.

``It apparently decided that the public would be better off if the two companies get together rather than have TWA exit the market,'' said Bill Baer, a private antitrust lawyer.

The Justice Department decision essentially removed government obstacles to the merger.

But American still needs approval from the Transportation Department before it can take over TWA's international routes, said Bill Mosley, a DOT spokesman. The carrier's application, submitted Feb. 28, is under review, he said.

Mosley said the agency will look at how the takeover of the international routes would affect competition and whether it would benefit the flying public.

American's bid includes the assumption of $3.5 billion in aircraft leases. It was announced in principle Jan. 10 _ the same day that TWA filed for bankruptcy for the third time in less than a decade. The timetable for closing the deal is early April.

Billionaire financier and former TWA chairman Carl Icahn, who had proposed keeping TWA alive with a $1.1 billion plan hinged on large job cuts and $100 million in labor concessions, planned to appeal the bankruptcy court's ruling approving the sale of TWA assets to American.

But John Hotard, a spokesman for American, said an appeal of the bankruptcy court ruling would not delay the closing.

TWA, which traces its roots to the 1925 founding of Western Air Express, has had a storied history. Once owned by the reclusive billionaire Howard Hughes, it catered to movie stars and other celebrities.

In 1985, it held the world's attention when one of its jetliners was hijacked in Beirut. Eleven years later, it was at the center of another tragedy, the crash of TWA Flight 800, a Boeing 747 jumbojet bound for Paris that exploded in the air and crashed shortly after taking off from New York.

The airline hasn't turned a profit since 1988 and has filed for bankruptcy twice before. It lost $115.1 million in the first nine months of 2000 and $353 million in 1999. TWA said an increase in oil prices pushed it into bankruptcy this time.

TWA has 20,000 employees, and American officials have said that American would offer jobs to all 17,600 unionized workers, including about 2,300 pilots.

But some sensitive labor issues remain unsettled, including how much seniority TWA pilots would get at American. Seniority affects pilots' assignments and pay.