TWA to Sell Chicago-to-London Routes

American Airlines agreed on Monday to purchase Trans World Airlines’ routes between Chicago and London for $195 million.

The transaction is significant because it gives American additional British routes that it could not otherwise obtain because of bilaterally determined limits on the number of flights between the two countries. And, despite denials by TWA Chairman Carl C. Icahn, it points up TWA’s financial problems.

As part of the deal, American will get four gates and expansion capabilities and a maintenance hanger at Chicago’s O’Hare International Airport.

American now operates one daily flight between its headquarters hub in Dallas/Ft. Worth and London’s Gatwick Airport. There are two daily flights in summer. The new flights will also have to arrive and depart from Gatwick because no new service into the more convenient Heathrow Airport is being allowed due to overcrowding.

According to the bilateral agreements between Britain and the United States, this restriction applies even when routes are changed from one carrier to another. TWA currently flies into Heathrow.

At about the same time that the announcement was being made by the two carriers, a letter dated Monday from Icahn to TWA employees was also being made public. In it, the billionaire investor said he was seeking to “put to rest certain rumors that have been circulating: TWA is in no way whatsoever in any financial difficulty.”

Icahn told his workers that TWA has more than $700 million in cash and within the next several months expects to have more than $1 billion. This reserve will protect the airline from an economic downturn, “which I have been predicting and that is already occurring in our industry.”

In his three-page letter, Icahn said that while TWA is “doing extremely well on its investments,” he conceded that the airline’s operations are “doing extremely poorly.” He has said previously that the entire airline is for sale.