TWA auction delayed by last-minute bid

Airline Industry Information, March 7, 2001

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An auction of Trans World Airlines' (TWA) assets scheduled for 5 March was postponed by the carrier after a late USD650m bid was submitted by TWA Acquisition Corp.

The new bid is financed by Carl Icahn, a former TWA executive, and is said to be a competitive bid against American Airlines' USD500m offer, which was expected to be successful.

TWA has now postponed its decision about the sale until today (7 March). Even though the late bid missed deadlines for the bidding process and has to receive approval from TWA's board, it can still be considered at a 9 March hearing in a US Bankruptcy Court, FWN Financial reported.

TWA officials are expected to meet with TWA Acquisition Corp before the auction resumes this evening.

Despite the new bid, lawyers for the airline have apparently stated that American Airlines' bid is still the only 'competing and conforming' proposal for the carrier, according to The Associated Press. TWA unions have expressed apathy towards the Icahn-backed bid, with a spokesperson for the International Association of Machinists and Aerospace Workers stating: 'I would expect, unless the sun starts coming up in the west, we'll have nothing to do with Icahn.'

Analysts meanwhile have expressed doubt about any bid - such as the Icahn-backed offer - that attempts to keep TWA as a stand-alone airline. Robert Milmore from Arnold & S Bleichroeder stated: 'I'm a little sceptical of any of these organisations looking to continue TWA as a stand-alone because it hasn't worked for 12 years. What makes you think it is going to change now?'

Brian Freeman, a New York-based investment banker who heads the Icahn-backed bid, has said that Icahn will not be running the airline and that Icahn was only involved because Freeman had wanted him to lend him the money.

In related news, Worldspan, a travel reservation service owned jointly by Delta Air Lines, Northwest Airlines and TWA, has accused Galileo International, a rival company, of trying to disrupt its business by bidding for TWA's share in the alliance.

Galileo has submitted a USD220m bid for TWA's 26% stake in Worldspan, which Galileo says is more than the USD200m that American Airlines values the share to be worth.

Worldspan's CEO stated on 5 March: 'Galileo's offer is merely an attempt to introduce confusion into the marketplace in hope of undermining Worldspan's growing success at winning travel agency customers - success that has come largely at Galileo's expense,' The Associated Press reported.

Finally, TWA employees have criticised a plan by American Airlines to cease service to Tel Aviv, Israel if it acquires control of TWA.

American Airlines said on 5 March that the route was unprofitable and would not be continued. TWA workers claim the carrier's argument is incorrect and suspect political motives behind the planned move according to Reuters.

The TWA Workers' Committee has stated that the move 'raises serious questions as to why Israel has been singled out for changes in TWA service, since the economic facts demonstrate clearly that the JFK daily flight has been and remains profitable... certainly more profitable than flights to Egypt and Saudi Arabia, which will not be suspended or cancelled.'

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