- The Washington Times - Tuesday, March 13, 2001

WILMINGTON, Del. (AP) American Airlines won a federal judge's approval yesterday of its $742 million bid for bankrupt Trans World Airlines Inc., to the relief of TWA workers who feared the company might be reacquired by billionaire financier Carl Icahn.

The decision by U.S. Bankruptcy Judge Peter Walsh moves the TWA name one step closer to disappearing after a storied 70-year history. He said he approved the bid in part because of fears the airline would be forced to liquidate its assets if the deal with American's parent AMR Corp. did not go through.

"I think it is in the best interests of the estate for that not to happen," Judge Walsh said.

The purchase still must be approved by the U.S. Justice Department, which is conducting an expedited review. American has said it expects to offer jobs to most of TWA's 20,000 workers, and TWA's unions are expected to approve the deal.

Analysts predicted federal regulators would approve the sale, in part because of the massive job losses that would happen with a liquidation of TWA.

"I think it helps when American makes a commitment to saving a lot of the jobs," said Robert Milmore, an airlines analyst with Arnhold and S. Bleichroeder in New York. "That should carry some weight with the regulators."

TWA's name will eventually disappear as the company and its employees are folded into American, said American spokesman John Hotard.

TWA was formed in 1930 through the merger of Western Air Express and Transcontinental Air Transport. The combined company was the first to offer coast-to-coast air service, which started that year, took 36 hours and included an overnight stop in St. Louis, where TWA is based.

"There is value [to the TWA name], but we want everyone to be part of one big family," Mr. Hotard said. "You're better off from an employees' standpoint and marketing standpoint to have everyone under a single name."

Observers had predicted Judge Walsh would select American's bid because he said in a hearing last week that three competing bids including Mr. Icahn's were not valid.

American, which will also assume $3.5 billion in TWA debt, could close the sale by early April. Mr. Icahn's group, TWA Acquisition Group, plans to appeal the decision, said Edward Weisfelner, Mr. Icahn's attorney.

"We are obviously disappointed, if not surprised," he said.

Brian Freeman, an investment banker who headed the effort for Mr. Icahn, said travelers would pay higher prices for plane tickets if the American deal to buy TWA is approved.

"We thought that the American proposal was anti-competitive and monopolistic, whereas ours would keep TWA alive as a separate, independent and viable carrier," Mr. Freeman said.

Judge Walsh was under pressure to rule quickly because creditors who hold the leases for most of TWA's jets could have moved to seize the planes if payments were not made yesterday.

After Judge Walsh issued his ruling, he approved a plan by American to provide $130 million in emergency financing to TWA so $95 million could be wired to the planes' creditors by this afternoon. The rest will be used to pay future TWA plane-lease payments.

What appeared to be the main competition to American's offer, the $1.1 billion bid by former TWA owner Mr. Icahn, was dismissed Friday by Judge Walsh as a "joke." He refused to allow Mr. Icahn's attorneys to call witnesses or present evidence in support of the bid.

Mr. Icahn's business plan for TWA was dependent on large job cuts, $100 million in labor concessions and the renegotiation of TWA aircraft leases to much more favorable terms.

The judge also said he plans to void the lucrative ticket contract Mr. Icahn has with TWA that allows him to buy certain tickets at 55 cents on the dollar.

Mr. Icahn resells the tickets on the Internet at steep discounts. Airline experts have said the deal is partly to blame for TWA's financial failure.

Capt. Robert A. Pastor, chairman of the Airline Pilots Association, applauded the day's developments and said the decision to cancel the ticket deal was particularly satisfying.

"What the judge did was take the monkey of Carl Icahn off the back of the employees of TWA that had been there for 16 years," Mr. Pastor said.

TWA President and CEO William F. Compton, a former TWA pilot who still holds the title of captain, said he was happy that the judge approved the sale, but sad that the airline's name will go into the history books.

"I've been here a long time at TWA and it is a sad situation with reference to losing the TWA name and that heritage," Mr. Compton said.


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