Group backed by Icahn ups bid for TWA

Alan Clendenning

Friday, March 9, 2001 | 11:20 a.m.

NEW YORK -- On the eve of a bankruptcy hearing at which a federal judge could decide which bidder gets the troubled Trans World Airlines Inc.'s assets, a group backed by billionaire financier Carl Icahn increased its offer for the bankrupt airline to $1.1 billion.

TWA Acquisition Group's move came one day after AMR Corp.'s American Airlines sweetened its bid for Trans World Airline Inc's assets to $772 million from $500 million.

TWA Acquisition Group's first offer was $650 million.

"This represents a feasible plan for a viable, stand-alone, competitive airline which would exit Chapter 11 (bankruptcy reorganization proceedings) with cash in excess of $350 million," said TWA Acquisition Group chairman Brian Freeman.

But American said Freeman admitted to a different motive in a deposition taken Thursday. Freeman said the Icahn-backed bid has no intention of running the airline, but rather is a means to force American to reach a settlement over a lucrative ticket deal between TWA and Icahn, American said.

Furthermore, Freeman said Icahn has promised to compensate him if such a settlement is reached, according to American.

Freeman did not return a call to The Associated Press on Thursday seeking comment on the deposition.

The ticket contract allows the billionaire financier's Las Vegas company Lowestfare.com to buy certain TWA tickets at 55 cents on the dollar. Icahn resells the tickets on the Internet. Airline experts have said the deal is partly to blame for TWA's financial failure.

American has said it does not plan to honor the ticket contract if and when it takes over most of TWA's assets.

TWA selected American's offer as its preferred bid on Wednesday, and a TWA spokeswoman said Thursday that the latest offer from the Icahn-backed group changed nothing.

"Mr Icahn's group received due consideration for their proposal, which was tardy and proved to be inadequate," said spokeswoman Julia Bishop-Cross. "TWA is moving forward with the highest and best offer, which is from American Airlines."

At the bankruptcy court hearing, the spurned bidders will have a chance to object and present their bids to the court. Two other bidders are considered long shots by analysts.

It's possible U.S. Bankruptcy Judge Peter Walsh could rule from the bench, meaning TWA -- the longest flying carrier in American commercial aviation -- could have a new owner in place by week's end.

Freeman said the selection process TWA used to pick American "was a sham since the result had been predetermined in an unfair and biased manner."

Icahn was chairman of TWA from 1985 to 1993, and is widely loathed by many of TWA's unionized workers. They say he pocketed handsome profits while they went years without raises, made other concessions to keep TWA afloat and became owners of company stock now worth nothing.