DALLAS — American Airlines agreed Wednesday to buy most of TWA for about $500 million in a complex deal that will reshape the industry and retire one of the most storied names in aviation history.
American chairman and chief executive Donald Carty said the airline jumped at the chance to scoop up financially troubled Trans World Airlines and also buy a piece of US Airways and a stake in a new Washington-based airline.
The acquisitions give American “a level of growth that would otherwise take us years to achieve,” Carty said.
United set off the buying spree last year when it agreed to acquire most of US Airways. Analysts said No. 2 American wanted to keep up with United, the nation’s largest airline.
If regulators approve the United and American deals, the two airlines will control half the U.S. market, with No. 3 Delta far behind with 15 percent.
“This is a turning point,” said Mark Cooper, research director of the Consumer Federation of America. “Consumers will pay higher prices and lower services.”
In addition to the regulatory hurdles, American’s purchase of TWA could still be challenged by creditors or another bidder. And American’s unions could also stand in the way.
The deals could prompt more industry mergers. The nation’s fourth- and fifth-largest airlines, Northwest and Continental, already have an alliance.
“I think the carrier that will be under the most pressure is Delta,” said William Franke, chairman and chief executive of America West Airlines. “If it does nothing, it’ll be significantly smaller than the other two.”
While others plot their next moves, the end appears near for one of the grandest names in aviation, TWA, which filed for Chapter 11 bankruptcy protection earlier Wednesday as part of its agreement with American.
TWA, which traces its roots to the 1925 founding of Western Air Express, once catered to popes and movie stars and was owned at one time by Howard Hughes. It held the world’s attention during a 1985 hijacking in Beirut and the 1996 crash of a flight from New York to Paris.
But the airline hasn’t turned a profit since 1988 and has filed for bankruptcy twice before.
It lost $115.1 million in the first nine months of 2000 and $353 million in 1999. TWA said an increase in oil prices pushed it into bankruptcy this time.
TWA has 20,000 employees, and Carty said American would offer jobs to all 17,600 unionized workers, including about 2,300 pilots.
American hopes to sell the deal to its famously fractious pilots – who conducted a sickout the last time American bought another airline, much-smaller Reno Air in 1998 – by promising it will need more pilots to fly the planes it will acquire.
The Allied Pilots Association, which represents American’s 10,700 pilots, said it is withholding judgment on the deal.
Under the multipart deal, American agreed to pay $500 million for most of TWA’s assets, including up to 190 planes, TWA’s hub in St. Louis and hundreds of prized gates and takeoff spots. If the bankruptcy court approves, TWA passengers could earn American frequent-flier miles on TWA flights before the airline’s name disappears.
American also will pay $82 million for a 49 percent stake in DC Air, a start-up of United and US Airways controlled by Black Entertainment Television founder Robert Johnson. DC Air, to be based at Reagan Washington National Airport, would use some American planes and crews.
Finally, in an effort to win regulatory approval for its blockbuster purchase of US Airways, United has agreed to sell US Airways assets to American, including 86 planes and half of US Airways’ Washington-New York-Boston shuttle. American would pay United $1.2 billion in cash and assume $300 million in aircraft leases.
Many air travelers predicted higher prices, worse service and fewer choices.
“The consumer isn’t going to have much say,” said Helena Yancey, 42, at Minneapolis-St. Paul International Airport. “It’s like the gas and power people. You buy it from them and that’s it. There’s no competition.”
In afternoon trading Wednesday, American’s parent company, AMR Corp., fell 44 cents to $38.50, United parent UAL rose 19 cents to $42.19 and Delta climbed 19 cents to $48.56. Shares of TWA, which haven’t traded since last week, remained at $1.32 on the American Stock Exchange.
On the Net:
US Airways: http://www.usairways.com/corporate/uaus/index.htm
Consumer federation: http://www.consumerfed.org