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CNN Today

American Airlines to Buy Flagging TWA

Aired January 8, 2001 - 1:01 p.m. ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

LOU WATERS, CNN ANCHOR: One of the world's biggest airlines may get bigger, and one of the world's oldest airlines may disappear. Published reports today indicate American Airlines will purchase TWA.

Susan Lisovicz of our CNN Financial News unit is standing by now with the details.

Susan, what's it all about?

SUSAN LISOVICZ, CNN CORRESPONDENT: Well, it's something we've seen in a lot of industries, Lou, the sense that bigger is better. You get a better control of costs and, in the particular case of airlines, that you can cut better deals with your corporate customers because it is, after all, business travel that makes the most profits for airlines.

But in American's case -- American is No. 2 to No. 1 United. United is in the process of merging with US Airways -- so there was pressure on American to do the same. And here you have TWA, one of the best-known names in aviation, but really just a skeleton of its old self. It's filed for Chapter 11 twice before. And as one analyst put it, it's a dog with flees. It hasn't reported a profit in 12 years. American Airlines looking for a third hub in addition to O'Hare in Chicago and Dallas-Fort Worth. And TWA can offer St. Louis, which is right in the center of the country.

WATERS: Susan, we have a local reporter here in Atlanta who was talking about TWA having the best on-time record in the business. What is it that TWA did so wrong to put it in this mess?

LISOVICZ: Oh gosh. Well, it goes way back to deregulation in the 1970s, and it's really never recovered, Lou. As I mentioned, it filed for Chapter 11 a couple of times, and it had to sell off some of its very lucrative overseas routes. And while it has made some recovery in terms of service, the bottom line is still very weak.

And, I'll tell you, you know, covering airlines, I can tell you that so many analysts said TWA was ripe for a takeover. And right now, American Airlines seems to be eying it pretty heavily.

And I talked to one source just in the last 15 minutes who said that what TWA will do is file for Chapter 11 a third time this Wednesday, and that American Airlines then will buy most of its assets. By filing for Chapter 11, this source was telling me that American will be able to bypass some of the regulatory issues that come when one big airline takes over another, because TWA still remains one of the biggest airlines in the country.

Of course, this all remains to be scene. Neither TWA or American say that they are in these talks.

WATERS: Good or bad for customers, Susan? You'd think with fewer options, it would not be as good for the consumer.

LISOVICZ: Well, there's no question, there's no debate you're going to have fewer choices. You're going to have fewer choices on which carrier you choose and the types of fares you pay. So I think that consumer groups will be watching this very carefully just as they're watching United and US Air.

And it comes at a very difficult time for the airlines in terms of service: cancellations, types of -- you know, crowded flights, the type of service you get, the meals that you're served. Passengers have been complaining now for several years that the service keeps going down and that the fares keep going up. So I think that consumers will be watching this one very carefully. In terms of shareholders, that could be a different story, and that's usually what drives these deals.

WATERS: All right, Susan, we'll watch it too. Susan Lisovicz in New York.

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