Advertisement

AMR’s Takeover of TWA Finalized

REUTERS

AMR Corp. closed its $742-million purchase of bankrupt Trans World Airlines Inc. on Monday after clearing a final legal hurdle. The deal makes AMR’s American Airlines the world’s largest air carrier.

“It’s done, the deal’s closed,” TWA spokesman Mark Abels said. “We feel great. This is a great solution for TWA.”

At a party at TWA’s home hub airport in St. Louis, thousands of workers cheered the deal, which saved them from an uncertain future with financially ailing TWA, Abels said.

“The groundbreaking airline we are creating today will offer expanded service to customers and increased opportunity for employees, and will provide significant value to American Airlines shareholders,” said Don Carty, chief executive of Fort Worth-based AMR.

Advertisement

A U.S. Appeals Court in Philadelphia earlier Monday withdrew an order it had issued over the weekend holding up the deal. The order came in response to a motion by the General Federation of Jewish Labor in Israel, which said the deal ignored protections for its 100 members in Israel.

TWA had ceased its flights between New York and Tel Aviv, which American said it decided not to fly because they would be unprofitable. Once the court withdrew the order, the deal was able to go through.

TWA, which had not posted an annual profit in more than a decade and in 2000 made its third bankruptcy filing, was nevertheless an icon of U.S. internationalism in an earlier era of air travel.

The TWA brand started in 1930 with the merger of Western Air Express and Transcontinental Air Transport. Howard Hughes controlled the airline for 25 years starting in 1939. In 1946, it started transatlantic service to Paris, Rome, Athens, Cairo, Lisbon and Madrid.

Advertisement

TWA was an airline of many firsts. In 1957, it was the first carrier to offer freshly brewed coffee in flight, and in 1961, it showed the first in-flight movie.

A TWA plane flew Pope Paul VI home from the historic first papal visit to the U.S. in 1965, a year after now-defunct rival Pan Am carried the Beatles to the U.S. for the first time.

It also suffered tragedies, such as the 1996 crash of Flight 800 in the Atlantic off Long Island in which 230 people died.

The purchase of TWA, the No. 8 U.S. airline, pushes American past UAL Corp.'s United Airlines in size. United could again leap past American if its planned purchase of US Airways Group Inc., the No. 6 U.S. airline, is approved by federal regulators. A ruling is expected soon, but industry experts say there is substantial doubt about whether the deal will be approved.

American now faces the challenge of integrating TWA, including reaching agreements with key labor groups at American.

In a major step Monday, the carrier said it reached a tentative agreement with its pilots. The proposal provides job protections for American’s pilots, guarantees growth in the number of captain jobs, and keeps the operations of TWA’s assets separate from American’s during a transition period.

The deal, which requires approval of the board of the Allied Pilots Assn. union, was reached after nearly six weeks of negotiations, which were facilitated by a private mediator.

American said it would continue talks with its other employee groups to reach agreements covering the TWA integration.

Advertisement

The companies have begun planning the integration with a team of about 80 coordinators. With open houses this week, employees will become more acquainted with their merger partners, Abels said.

“We’re going to start down the road to integration. It’s going to take months . . . maybe a year or more,” Abels said.

TWA will be temporarily operated by a separate unit of American, headed by Bob Baker, American’s vice chairman, as chief executive, and former TWA CEO William Compton as president.

Shares in AMR closed off 3 cents at $33.94 Monday on the New York Stock Exchange.


Advertisement