Trans World Airlines announced today, January 10, 2001 that it has reached an agreement with American Airlines in which American Airlines will acquire a substantial quantity of TWA’s assets.
The asset purchase agreement includes TWA’s jet aircraft as well as numerous routes and gates throughout the TWA system and significant maintenance facilities. TWA currently operates approximately 190 aircraft and approximately 800 daily flights.
Part of the agreement calls for American Airlines to offer employment to almost all of TWA’s 20,000 employees.
Concurrently, TWA announced that it and certain subsidiaries had voluntarily filed petitions in court for relief under Chapter 11 of the US Bankruptcy Code.
TWA has received a commitment from American Airlines for $200 million in Debtor in Possession (DIP) financing and anticipates receiving prompt approval for that financing from the Bankruptcy Court.
The DIP financing will be substantiated by security interests in the company’s assets, and is intended to enable TWA’s continued operation during the transition period.
‘This is both a sad and exciting day for TWA. It is sad because we are starting a process that will culminate in the retirement of the oldest and proudest name in the U.S. airline industry,’ said William F Compton, president and chief executive officer of TWA. ‘I am, however, heartened by the fact that we have been able to work out a solution with American.’
‘American has agreed to protect the jobs of substantially all of our thousands of employees in St Louis, Kansas City, New York and elsewhere. And, this agreement will be beneficial for our customers, who will enjoy uninterrupted service,’ added Compton.
In making the filing to the Bankruptcy Court, TWA noted that its steadily deteriorating financial condition, which was exacerbated by recent staggering increases in jet fuel costs, had prevented the company from capitalising on the significant progress made in recent years to improve its operating efficiencies.
Fleet improvement efforts and improvements to TWA’s route system, as well as productivity improvements helped to improve revenue and reduce controllable costs.
However, the timing of the company’s recent capital investments coupled with the unanticipated fuel increases are said to have caused a drain on cash flow and made it necessary for TWA to seek the protection of the Bankruptcy Code in order to sustain operations.