Icahn may buy, start airline

Jennifer Brown

Monday, March 12, 2001 | 11:23 a.m.

WILMINGTON, Del. -- A federal judge today accepted a $742 million bid by AMR Corp.'s American Airlines for the assets of bankrupt Trans World Airlines Inc., pleasing TWA workers who feared their company might be acquired again by billionaire financier Carl Icahn.

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 20,000 workers, and TWA's unions are expected to approve the deal.

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

"We want everyone to be part of one big family," Hotard said. "You're better off from an employees' standpoint and marketing standpoint to have everyone under a single name."

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

American, which will also assume $3.5 billion in TWA debt, could close the sale by early April. Icahn's group, TWA Acquisition Group, and the other bidders have 10 days to appeal Walsh's ruling.

Walsh was under pressure to make a decision because creditors who hold the leases for most of TWA's jets could have moved to seize the planes if payments were not made Monday.

American planned to wire $130 million in emergency financing to the planes' creditors Monday afternoon.

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

The judge has not yet ruled on a lucrative ticket contract Icahn has with TWA which allows him to buy certain tickets at 55 cents on the dollar.

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.

Icahn had proposed keeping TWA alive as an independent carrier, although his business plan was dependent on large job cuts, $100 million in labor concessions and the renegotiation of TWA aircraft leases to much more favorable terms.

TWA's two unions dislike Icahn and repeatedly said they would have nothing to do with him. Icahn ran TWA from 1985 to 1993, and many union workers blame him for pocketing handsome profits while their wages stayed the same.

Icahn has said he was forced to make unpopular business decisions to keep TWA afloat, and that workers should be thankful they managed to keep their jobs during his tenure.