DOJ Sets TWA Merger In Motion

<B>DOJ Sets TWA Merger In Motion</B>

By David Jonas

Trans World Airlines inched closer to extinction when the U.S. Department of Justice antitrust division said it will not challenge an acquisition by American Airlines parent AMR Corp. An appeals process, set in motion by the Delaware District U.S. Bankruptcy Court following its decision to award TWA's assets to American Airlines parent AMR Corp., was scheduled to end late last week with the next court hearing scheduled for April 6. Should the decision stand, American then would be free to begin integrating TWA into its network.

Meanwhile, congressional hearings on airline competition continued last week in both the House and the Senate. Several proposed bills seek to limit airline dominance and, if approved, could delay or even derail the proposed United Airlines/US Airways merger.

The House commerce, trade and consumer protection subcommittee, for example, heard testimonials on the possible consequences of industry consolidation. Among the speakers were Reps. Louis Slaughter (D-N.Y.) and Peter DeFazio (D-Ore.), who earlier introduced the Airline Moratorium Act of 2001, which would enact a one-year moratorium on airline mergers. Slaughter, particularly outspoken against United/USAirways because of potential monopolization in her upstate New York district, said DOJ's approval of AA-TWA "should be a wake-up call" leading to further scrutiny of additional consolidation.

US Airways chairman Stephen Wolf also testified, reaffirming that absent the United merger, US Airways would be in serious trouble. "With foresight, we can prevent this proud airline from following in the path of other pre-deregulation, midsize carriers, such as Braniff, Eastern, Pan Am and now TWA," he said.

In the Senate, the judiciary subcommittee on antitrust, business rights and competition, held hearings on hub domination related to two pending pieces of legislation. One, the High-Density Airport Competition Act would help smaller carriers by preventing larger ones from "gaining a stranglehold" on slots at New York LaGuardia and Washington Reagan National. The subcommittee found that a successful United/USAirways merger would give the combined entity roughly two-thirds of all available slots at those two airports.

Meanwhile, the Aviation Competition Restoration Act, introduced by Sens. Fritz Hollings (D-S.C.) and John McCain (R-Ariz.), narrowly passed through the Senate Commerce Committee in an amended form and has been sent to the full Senate for consideration. A section of the bill that would have created a serious roadblock for the United/US Airways merger was removed, but the legislation still calls for enhanced competition at the nation's 35 largest airports by prohibiting the "hoarding of slots, gates and other facilities." Dissenting senators cited fears over potentially diminished service to smaller communities, though McCain said further revisions would protect against such developments.

Regarding TWA's takeover by American, DOJ's antitrust division said the decision followed a "comprehensive investigation" that included consideration of TWA's bankruptcy.

Though a 10-day appeals period initiated by the bankruptcy court was set to expire late last week, a TWA spokeswoman said motions have been filed by certain parties to push back the deadline, "making it hard to nail down an exact date." On April 6, federal bankruptcy judge Peter Walsh will settle several items, including any appeals filed and TWA's request to modify collective bargaining agreements with its unions. The modifications would remove conflicts with American Airlines' existing labor agreements

American hopes to close the $742 million transaction--topping $4.2 billion when leases and other obligations are added--sometime next month.