American now world’s largest airline
AMR completes $742 million TWA purchase
AMR Corp., the parent company of American Airlines, bought the assets to bankrupt TWA on Monday.
FORT WORTH, Texas, April 9 — American Airlines became the world largest air carrier and grounded a venerable competitor Monday after acquiring the assets of bankrupt Trans World Airlines. The deal, which closes the books on the longest-flying carrier in American commercial aviation, was completed following a day of legal maneuvering capped by a federal judge refusal to grant a stay that would have blocked the deal.
“TODAY WE CELEBRATE a true milestone for the employees and customers of both American Airlines and TWA. The combination marks the beginning of a new era in aviation, as we bring together some of the most valuable assets and some of the best people in the industry,” said Donald J. Carty, chairman and chief executive of American Airlines.
American, the No. 2 carrier before the deal, swaps positions with No. 1 United Airlines in terms of revenue passenger miles. The combined company will offer travel to more 300 cities worldwide on more than 900 aircraft.
American’s newfound supremacy could be short-lived, though. The airlines will reverse positions again if United succeeds in its bid to obtain most of US Airways.
For now, customers should see no differences as the airlines will operate independently, with separate reservation systems, payrolls, aircraft and policies. TWA eventually will be integrated fully into American’s operations, though it was not clear how long the transition period would last.
“These companies have very similar roots,” Carty said. “Certainly, in the most recent decade or so, American has been much more successful than TWA. But in the first 50 years of the two carriers’ operation, these were very similar airlines with very similar histories and very similar cultures.”
TWA, based in St. Louis, was formed in 1930 from the merger of Western Air Express and Transcontinental Air Transport. That year, the combined company became the first airline to offer coast-to-coast air service.
Movie mogul Howard Hughes once owned a controlling interest in TWA. In its prime, TWA was the airline of choice for the rich and famous.
But TWA had not posted an annual profit since 1989. Three years later, it filed for Chapter 11 bankruptcy protection, the first of three times it would do so. The last was on Jan. 10, the day the deal with American was announced.
“Unfortunately, the industry just kind of passed them by,” said Robert Milmore, an analyst at Arnhold and Bleichroeder in New York. “It’s sad to see the tradition of what once was; on the other hand, I think it’s much better that they’re now aligned with a much stronger carrier.”
A federal appeals court cleared the way Monday for the sale, denying a last-minute bid by a group of Israeli TWA workers to stop the transaction. The Jewish Labor Federation, which represents about 100 Israeli TWA employees and retirees, wanted the appeals court to send the case back to federal bankruptcy court for more consideration, said Bruce Zabarauskas, the lawyer representing the workers.
Fort Worth, Texas-based AMR Corp.’s deal to pay $742 million for the airline, plus the assumption of $3.5 billion in debt, does not include funds for TWA’s unsecured creditors. The Israeli workers are unsecured creditors owed about $18 million in salaries and benefits, Zabarauskas said.
On Friday, U.S. District Judge Sue Robinson denied the creditors’ request to delay the sale, including a protest by former TWA owner Carl Icahn. Regulatory approval was granted Friday by the U.S. Department of Justice.
Analysts said American pursued TWA to add the centrally located St. Louis hub to its network and ease delays at crowded Chicago O’Hare and Dallas-Fort Worth International airports.
At Lambert Airport in St. Louis, officials and thousands of airline employees gathered Monday to celebrate the deal’s pending completion with speeches and a barbecue.
Robert W. Baker, vice chairman of American Airlines, was named chief executive officer of TWA L.L.C., the new, wholly owned subsidiary of American. Former TWA president and CEO William F. Compton will serve as president.
“American Airlines is not just buying slots and gates and hangers. American Airlines is acquiring our greatest asset, the TWA employees,” said Compton, a former TWA pilot who still holds the rank of “captain.”
The new company still faces several challenges. Leaders of American’s three unions are withholding support for the purchase because they fear the difficulty of absorbing TWA’s workers could cause turmoil.
“We’ve made no secret of our preference for internal growth rather than growth from acquisition,” said Gregg Overman, spokesman for the Allied Pilots Association, which represents American’s pilots. “That noted, our focus now is on securing a favorable agreement with AMR management covering this acquisition and on working through the integration issue with the TWA pilots.”
But TWA’s unions, including the International Association of Machinists and Aerospace Workers the Air Line Pilots Association have agreed to the sale to AMR.
U.S. Circuit Judge Samuel Alito also ruled Monday that a section of the sale agreement dealing with AMR’s responsibility for discrimination claims against TWA will not take effect for now.
Shares of AMR fell 5 cents to $33.92 in trading on the New York Stock Exchange.