American Gets 3 of TWA’s London Routes for Price of 6

NEW YORK — American Airlines agreed Thursday to pay Trans World Airlines $445 million for three routes between London and U.S. cities--a price it had originally offered for six routes.

The agreement--coming just days after American insisted that the original deal would have to be renegotiated in light of federal disapproval of the sale of all the routes to American--is a clear victory for TWA Chairman Carl C. Icahn. But it is a blow for Beverly Hills financier Kirk Kerkorian who had been waiting in the wings in hopes that the deal would collapse and he could buy TWA with the London routes intact.

Kerkorian’s spokesman, Alex Yemenidjian, said the billionaire “regretted not having the opportunity” to buy TWA.

Yemenidjian said Kerkorian has not given up his pursuit of TWA since an appeal of U. S. Transportation Secretary Samuel K. Skinner’s decision to award TWA’s key London routes to American is pending in federal court. The appeal was filed by TWA’s unions and a group of prominent St. Louis politicians and businessmen who backed Kerkorian.

Nonetheless, Yemenidjian all but conceded victory to American. “They are a formidable competitor,” he said. “We wish them well.”

The two airlines said they expect to close the transaction June 30, and American will begin operating all but a few of its flights planned for the routes July 1.

American won approval to buy the routes between London’s Heathrow Airport and Los Angeles, Boston and New York--considered by many observers to be the most lucrative among those offered by TWA. Skinner rejected the sale to American of routes to Philadelphia, Baltimore and St. Louis. In addition to receiving the cash it initially expected to get from American, TWA is now positioned to gain additional revenue from the sale of the remaining three.

Although American sought to renegotiate following the Transportation Department decision, some analysts believed TWA always had the advantage. Some warned that American risked not being able to buy any of the routes if it waited much longer.

Both Delta Air Lines and USAir had expressed an interest in some, or all of the routes. American also was eager to get into Heathrow--the main gateway to Europe--to compete with its archrival, United Airlines, which already has a head start on the busy summer season since it is flying to London on routes it purchased from Pan American World Airways.

Icahn, who had said many times in recent months that TWA faced bankruptcy if it did not soon get cash from the sale of the routes, said Thursday he was “pleased” with the resolution but added that TWA “still faces a number of complicated issues relating to its future.” The standoff resulted from Icahn’s insistance that American pay the original price for all of the routes. American said it would not pay that much.

“It was a game of chicken,” said Paul Turk, an analyst with the Arlington, Va., airline consulting firm, Avmark Inc. “The guys on the TWA side were saying ‘pay up or die.’ But if TWA had gone into bankruptcy, American might have had to pay much more for the routes to the bankruptcy court. Even $445 million is a bargain for the three routes. If American was holding out for a symbolic reduction to $444,999,999, it risked losing the whole deal.”

American said Thursday that it proceeded with the transaction, “after carefully reviewing the department’s order.” Said American Chairman Robert L. Crandall: “We feel there is no reason to further delay this transaction given the exhaustive and well-reasoned DOT opinion.”

Some analysts, however, said American paid too much. “It is just not an economic deal,” said Timothy Pettee, airline analyst with Alliance Capital, a pension and mutual fund investment company. “Perhaps they were overanxious to nail the routes down.”

Also contributing was Times staff writer Denise Gellene in Los Angeles.