American becomes nation's largest carrier with TWA deal

Posted: Thursday, April 12, 2001

FORT WORTH, Texas (AP) -- Though American Airlines has completed its acquisition of most of the assets of Trans World Airlines, there's an even tougher job on the horizon for the country's new No. 1 carrier.

''Gradually, over the span of several months, American will begin the extremely complicated task of merging work forces and working through all the other issues associated in joining two service companies in a dynamic industry,'' American spokesman John Hotard said Monday.

The airlines will operate independently at first, with separate payrolls, reservation systems, aircraft and policies. Eventually, St. Louis-based TWA will be fully integrated into American's operations. It was not clear Monday how long the transition would take.

The deal between American and TWA was completed Monday with the purchase of bankrupt TWA by American's parent company.

American, the No. 2 carrier before the deal, swapped spots with United Airlines as the No. 1 carrier. But American's newfound supremacy could be short-lived if United succeeds in its bid to obtain most of US Airways.

More than 300 cities worldwide will be served by more than 900 aircraft from TWA and American.

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.

A federal appeals court cleared the way 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-based AMR Corp.'s deal does not include funds for TWA's unsecured creditors. American will pay $742 million for the airline, plus the assumption of $3.5 billion in debt.

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. The U.S. Department of Justice granted regulatory approval the same day.

The American-TWA deal still has some other obstacles ahead. 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.

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.

TWA, based in St. Louis, was formed in 1930 from the merger of Western Air Express and Transcontinental Air Transport. That same year, the combined company became the first airline to offer coast-to-coast air service.

But toward the end of its storied history, TWA fell on hard times and had not posted an annual profit since 1989. The company filed for Chapter 11 bankruptcy protection three times, the latest on Jan. 10, the day the merger with American was announced.

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