American Airlines, said today it would spend $1.7 billion in cash to buy beleaguered Trans World Airlines (TWA) and some assets of United Airlines, in deals which give it a quarter of the US air travel market.
The deals by American, the world's second-largest airline, would keep it almost even in US market share with UAL, the world's biggest airline, if UAL completes its planned $4.3 billion purchase of US Airways Group, the number six US airline.
American said it agreed to buy almost all of TWA's assets for $500 million in cash and the assumption of aircraft operating leases and debt. TWA, the number eight US airline, said it would make its third Chapter 11 bankruptcy protection filing under the plans.
TWA has more than $3.6 billion in aircraft lease and debt obligations, according to Standard & Poor's credit rating agency. It was not immediately clear whether American will assume all of that figure.
The TWA deal, which is subject to bankruptcy court approval, includes the troubled airline's fleet of 190 aircraft and 173 landing slots.
The Fort Worth, Texas-based airline also agreed to buy some assets of United for $1.2 billion in cash and assume some $300 million in aircraft operating leases.
The deals will help UAL - parent company to United Airlines - and US Airways' campaign to win regulatory approval for their merger. American would also agree to compete with United, after its merger is completed, on routes where only United and US Airways now offer flights.
In exchange, American will acquire 36 new landing slots at airports including New York's La Guardia, Boston's Logan and Washington's Reagan National. It will also get 66 new aircraft and 20 leased aircraft.
American and United also agreed to a 20-year joint venture in which they will each fly an equal amount of daily shuttles between Washington, New York and Boston.
American will also buy a 49 per cent in stake in fledgling airline DC Air for $82 million in cash. The company said it has the right of first refusal for the rest of DC Air, a venture by entrepreneur Robert Johnson.
As part of the TWA agreement, American will offer jobs to most of TWA's 20,000 employees. United said American will make job offers to 1,100 US Airways pilots as part of their deal.
Reuters