WILMINGTON, Del. -- American Airlines' bid to take over the assets
of financially troubled TWA was approved by TWA's bankruptcy court
here.
The court also rejected a motion to maintain the so-called
Karabu agreement that allows financier and former TWA owner Carl
Icahn to purchase and resell deeply discounted tickets from
TWA.
The ruling by Judge Peter Walsh, which becomes final after 10
days, also allows American to pay, on behalf of TWA, some $92
million in aircraft lease fees that became due on March 12. In
addition, American takes over TWA's 26.4% stake in Worldspan.
"This is really a great day for TWA," William Compton, TWA's
president and chief operating officer, said during a telephone
press conference. "It is a great day for our customers who don't
have to worry about any interrupted service. They now know they
will be part of the American Airlines family."
Under the deal, American will pay $742 million to acquire TWA's
assets, including its hub in St. Louis and most of its routes. Most
TWA employees would be retained.
American also assumes certain debt and financial
responsibilities, such as covering TWA's retired employees.
The ruling follows two days of testimony during which lawyers
for Icahn, who during his stint as owner of TWA in the 1980s sold
off many of the carrier's prized assets, argued the tight bidding
process didn't allow for other bids to be properly considered.
Icahn proposed to keep TWA as a going concern after gaining
significant union concessions and selling off certain assets. But
Walsh reject the argument and denied a motion that would have
allowed Icahn's representatives to testify about his bid.
Other bids by Global Airlines and Jet Acquisitions, a
Phoenix-based group, were rejected by TWA and the court because
they did not adhere to the bidding procedure.
Similarly, a move by the Galileo CRS to take over TWA's stake in
Worldspan was rejected.
Compton conceded it is possible Icahn may appeal the judge's
decision to allow American to acquire TWA.
Indeed, certain aspects of Icahn's Karabu agreement, which
effectively ends in 10 days, have to be worked out. TWA said the
Karabu deal cost the airline as much as $100 million a year. The
American-TWA deal still has to pass muster with the Justice
Department.
Sen. Christopher Bond (R-Mo.) called in during the press
conference to say he would send a letter to the DOJ and to
Transportation asking for an expedited review of American's
acquisition of TWA.
If the deal is approved, TWA could begin transitioning into
American beginning in April. After several months, the TWA name
would cease to exist.