American Airlines seals jumbo deal

The deal will create a major force in US aviation

American Airlines has sealed its $742m merger with Trans World Airlines, creating the world's largest airline, after it received the all-clear from a US court.

The approval comes hours after a US Appeals court stayed the deal over a claim by the General Federation of Jewish Labor in Israel that the purchase of TWA would strip the 100 Israeli workers of their pension benefits.

But the delay proved temporary after a judge lifted the stay, leaving American's parent, AMR Corp. free to acquire TWA. AMR will also assume $3.5bn in debt.

"It's done, the deal's closed," said TWA spokesman Mark Abels. "We feel great. This is a great solution for TWA."

He added thousands of TWA workers were "yelling and screaming and cheering" as the deal closed.

The deal has the backing of the US regulatory authorities - the Department of Justice and Department of Transport - and the TWA's unions, though American's unions have not given their support.

Airbus snub

But as American Airlines closes the deal, it is set to snub Airbus by cancelling a $1.8bn order.

Once the takeover is completed, American is expected to cancel an order placed by TWA with Airbus in favour of planes made by Boeing.

TWA had ordered 45 small A318 and A319 jets for delivery in 2003 but American is expected to now take at least 30 of Boeing's competing 717 jets.

Airbus does not fit into American's picture

In February, American said that it would only accept leases or debt on TWA aircraft that fitted its fleet mix and maintenance capabilities.

American has already made the decision to cancel TWA's planned purchase of engines from Pratt & Whitney, which would be used to power the Airbus planes.

American has been one of Boeing's most reliable customers. In 1996 it agreed to buy at least 103 Boeing planes as part of a plan to replace its entire fleet.

Labour talks

Although TWA's unions have agreed to the takeover, unions representing American staff are balking at the deal because of the difficulty in merging the airlines' two different pay awards.

American's pilots want guarantees that the pilots moved down by aircraft type or flight hours will not have their pay cut.

The Allied Pilots Association is holding talks with American but if a deal is not reached by April 10 the union will apply for mediation.

American Airlines has said it expects to offer jobs to most of TWA's 20,000 employees.

World leader

American's acquisition of TWA means it will control about a quarter of the US aviation market.

The end of an era

Under the deal, American acquires most of TWA's assets, including most of the 190 planes but also $3.5bn of debt from aircraft leases.

It will absorb TWA's hub in St. Louis, its domestic routes as well as its service to Canada, the Caribbean, Mexico, the Middle East, Paris, and London.

American, the second largest carrier before the deal, will take the number one spot from United Airlines, but that could be short-lived if United succeeds in its bid to buy most of US Airways.

TWA's history

St. Louis based TWA was formed in 1930 and was once considered the airline of choice for the rich and famous.

Movie mogul Howard Hughes once owned a controlling interest, baseball star Joe DiMaggio flew TWA to visit wife Marilyn Monroe in Hollywood, and the pope flew the carrier four times on visits to the US.

It was the first airline to offer non-smoking sections on all aircraft.

But TWA fell on hard times and has not posted an annual profit since 1989. It has filed for bankruptcy protection three times in the last decade, most recently on 10 January this year, the day the merger with American was announced.

Shares of TWA have not traded since the bankruptcy filing in January.