TWA Seeks To End Discount Ticket Pact With Icahn Co.
Updated 1:47 PM ET January 29, 2001
WASHINGTON (Dow Jones)--Trans World Airlines Inc. (TWA) is seeking court authority to reject its discount ticket arrangement with an entity led by financier Carl Icahn, characterizing certain anti-termination provisions within the agreement as "unenforceable."
The request, filed late Friday with the U.S. Bankruptcy Court in Wilmington, Del., brings to center stage an issue that has likely been one of the primary reasons behind Icahn's adamant opposition of AMR Corp.'s (AMR) American Airlines' bid to buy substantially all TWA's assets.
The 1993 discount ticket contract between TWA and Icahn's Karabu Corp. allows Karabu designee Lowestfare.com to purchase tickets from TWA at about 55% of the published fare. Lowestfare can then turn around and resell the tickets for its own profit, subject to certain conditions.
The American Airlines purchase arrangement, however, requires TWA to terminate, or "reject," the discount ticket deal.
Section 365 of the Bankruptcy Code generally allows a bankrupt party in its business judgment to opt whether to keep (assume) or reject current leases and contracts. The provision allows troubled entities to keep favorable arrangements while ridding itself of arrangements it determines to be unfavorable.
Icahn, in an apparent effort to avoid having the contract rejected in a bankruptcy filing, added certain provisions to the discount ticket contract that required TWA to assume, and not reject, the contract in the event it files for bankruptcy.
Counsel for Icahn couldn't be immediately reached for comment. Icahn hasn't yet filed a response to the rejection request.
In 1985, Icahn acquired a majority of TWA and three years later took the company private. In 1992, he ceded majority ownership of the airline to the company's creditors as part of a Chapter 11 reorganization. Although the company emerged from the filing in 1993, it again filed for Chapter 11 two years later in 1995.
TWA filed for Chapter 11 again on Jan. 10 in order to implement the sale of substantially all its assets to American Airlines.
Entities controlled by Icahn, including Karabu, High River Limited Partnership and Lowestfare have opposed the sale and related requests.
On Saturday, the U.S. District Court in Wilmington, Del., approved the bidding procedures, overruling objections by Icahn and others.