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American Airlines Holds News Conference on Proposed Buyout of TWAAired January 10, 2001 - 10:07 a.m. ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
DARYN KAGAN, CNN ANCHOR: Here's Don Carty of American Airlines. We go back live to New York City.
(JOINED IN PROGRESS)
DON J. CARTY, CEO, AMERICAN AIRLINES: Obviously we're very appreciative of you joining us here this morning. It's particularly fun to be doing this in the American Airlines theater, which, for those of you who haven't been in here, is really a beautiful, beautiful facility. And we're just delighted to be associated with it.
This morning, American Airlines announced three important transactions that together are going to dramatically increase the scope, the efficiency and the desirability of our domestic network. They're going to create broad customer choice and provide broad, significant growth opportunities for all of our employees.
And I'm very excited about these transactions because they provide, really, immediate, significant benefits to American Airlines, to all of our employees, and to the flying public. I'm particularly pleased that our agreement to purchase substantially all of the assets of TWA means that TWA is going to be integrated into American with continued opportunity for TWA employees and a continued hub operation in St. Louis.
Before I get to that, let me explain briefly exactly what we announced. There are three separate, strategic transactions. First, we've agreed to purchase substantially all the assets of Trans World Airlines for approximately $500 million, and the assumption of aircraft operating leases. And we have included in the transaction up to 190 airplanes, 175 gates and 173 slots. And this agreement, which excludes certain TWA contracts, is, of course, contingent upon bankruptcy court approval.
Second, we have agreed to purchase key strategic assets from United Airlines and US Airways. And that includes 86 aircraft, 14 gates and 36 slots, as well as to lease the gates and the slots that are necessary to operate half of the so-called Northeast shuttle. We're going to pay United approximately $1.2 billion in cash, and we're going to assume an additional $300 million in aircraft operating lease. Now, this agreement is contingent on the closing of the proposed merger between United and US Airways. And finally, we're going to purchase a 49 percent stake in DC Air, the first significant new airline at Washington/Reagan Airport in more than 10 years. And we're going to do that for $82 million. And as part of the transaction, American will be entering into an exclusive marketing agreement with DC Air and add it to American's frequent flyer program. And we're also going to wet lease 11 F-100 aircraft at DC Air.
And what a wet lease means is that American crews and American employees will be flying and maintaining American aircraft. And for those of who you don't know, that means that American is going to lease those aircraft and then provide the crews that will actually fly them. And we're also, as part of this transaction, going to end up with the right of first refusal to acquire the remaining 51 percent of DC Air should our new partner in DC Air, Bob Johnson, decide to sell it.
Now, taking together these transactions not only allow us to increase the scope, the efficiency and the desirability of our network, they also allow us to build on our position as a leading airline which is going to allow us to provide greater customer choice and more growth and more transfer opportunities for the existing employees of American Airlines.
The addition of approximately 300 aircraft and 200 gates across the country allows us to achieve a level of growth that would otherwise take our company literally years to achieve.
Now, it's important to note that these transactions don't increase industry capacity. They rather redistribute it into the hands of a carrier that can use it more efficiently and more effectively. And all of that is important to preserving the economics in the industry.
Now, since these transactions are a little bit complicated, before we get to question and answer, I'd like to spend just a few more minutes discussing the strategic rationale for American of each one of these transaction, and try to explain, at least briefly, why they create value for American.
Let me say first...
KAGAN: We've been listening to Don Carty -- he is the chairman of American Airlines -- as he announces that American Airlines is now planning to buy out Trans World Airlines, TWA. It will mean the end of the name of TWA as you know it, but they're going to try to save the 20,000 jobs of the people who currently work for that airline.
It's actually kind of a complicated deal that involves three transactions, and it's contingent upon the United and US Air merger going through. It means 300 more planes and 200 more gates for American Airlines.
We expect another news conference from TWA later in the day. And you'll also see that live here on CNN.
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