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American and Jet Acquisitions enter bids for bankrupt TWA

Airline is confident $500 million offer will prevail

ST. LOUIS — There were no surprise bidders for bankrupt Trans World Airlines Wednesday, but AMR Corp.'s American Airlines still thinks it will come out ahead in the bidding over rival Jet Acquisitions Group Inc.

The bidders will meet with TWA in New York on Monday for an "auction," where they can sweeten their original bids.

U.S. Bankruptcy Court Judge Peter Walsh will select the "highest and best" bid on March 9.

AMR, which bid $500 million, plus the assumption of $3.5 billion in debt and lease obligations, said it can keep the company's thousands of workers employed and enhance its own airline operations.

"Our proposal, if approved by the court, will benefit the public, thousands of employees and many communities by keeping virtually all of TWA's people working and airplanes flying by enhancing American Airlines network," said Donald J. Carty, American's chairman and CEO.

Jet Acquisitions Group Inc. bid $889 million for substantially all of TWA's assets.

In a statement, the company, based in Scottsdale, Ariz., said it believes "that TWA will be a very viable and successful airline." The company has released few details about itself and requested few records from TWA before submitting its offer.

"I have a feeling this Jet Acquisitions brought a knife to a gunfight," said Michael Boyd, president of the Boyd Group consulting firm in Evergreen, Colo.

TWA, the longest-flying carrier in American commercial aviation, filed for bankruptcy on Jan. 10 after more than a decade without turning an annual profit. On the same day, American announced it would provide TWA with $200 million in debtor-in-possession financing as a precursor to its $500 million bid for most of the airline's assets.

There were no surprises in American's bid, which included a reiteration of the carrier's commitment to offer employment to all of TWA's U.S.-based union employees.

American's bid does not include leases TWA holds in 10 cities where the carrier said its facilities are large enough to handle the additional operations.

American also declined to bid for 10 of TWA's existing aircraft.

American said it will not immediately assume TWA's current labor contracts because they conflict with the bargaining agreements it has with its own unions.

John Hotard, a spokesman for American, said the carrier is waiting for TWA's unions to waive the conflicting portions.

The International Association of Machinists and Aerospace Workers, which represents the vast majority of TWA's employees, filed a formal objection to American's bid. The union said TWA and American have failed to provide complete answers to its members' questions.

"We need to nail down the employment offer by American Airlines," said Robert Roach, Jr., the union's vice president of transportation. "We cannot afford to wait until after the sale agreement is approved to understand what it does or does not include."

The second union at TWA, the Air Line Pilots Association, filed a "limited objection" to American's bid, but the union said the filing actually expressed the union's support for American's offer and its belief the contract conflicts can be resolved.

Illinois-based Galileo International LLC also submitted a $220 million bid for TWA's stake in the Worldspan, a computer reservation system owned jointly by TWA, Northwest and Delta airlines.

"Worldspan was essentially the crown jewel that TWA had," said Robert Milmore, an analyst at Arnhold and S. Bleichroeder in New York. "I think that was a key asset."

TWA's partnership agreement with Northwest and Delta requires that whoever buys Worldspan hold an airline operating certificate and not own an interest in a competing reservation system. Galileo fails both tests.

"That issue would have to be resolved before they can be the winning bidder," said TWA spokesman Mark Abels.

Under the bidding procedure approved by a federal court in Delaware, American's bid was the starting point. Other bidders had to offer at least $75 million more, $65 million of which would be paid to American by TWA if its bid is not accepted.

TWA and its creditors committee will submit recommendations to Walsh following Monday's auction.

Abels said TWA will consider all the offers and recommend what it feels is the "highest and best," a criteria not entirely dependent on price.

Regardless of which bid is approved by Walsh, it will bring an end to TWA, an airline that traces its roots to the 1925 founding of Western Air Express and catered to popes and movies stars.

But the carrier has failed to turn a profit since 1988. It's possible that if fuel prices had not nearly doubled last year, the airline might have finally made money.

Instead, TWA lost $115.1 million through the first three quarters of 2000. That comes after 1999, when the carrier's $353 million loss made it the only major airline not to show a profit.