American Airlines to Buy TWA

W A S H I N G T O N, Jan. 8 -- American Airlines is about to buy Trans World Airlines, the longest continuously flying carrier in U.S. aviation history, in a deal that will leave half of the country’s air travel in the hands of just two airlines.

Sources in the airline industry told ABCNEWS American is expected to announce plans this week to buy the financially troubled TWA for about $2 billion.

The Washington Post reported American would purchase all of TWA’s assets and keep all 20,000 of the carrier’s employees. The deal would make the Fort Worth, Texas-based American a comparable sizecarrier to the one that would be created proposed United-US Airways merger.

The Post also reported that part of the American-TWA combinationcould include a deal with United to operate jointly the US Airwaysshuttle between Washington, New York and Boston.

Chapter 11 and Higher Fares Predicted

Under the proposed buyout, American would take over TWA’s St. Louis hub, which should help passengers by easing congestion and delays at American’s hubs in Dallas and Chicago.

But the deal would spell the demise of TWA, the longest continuously flying name in U.S. commercial aviation. The airline is short on cash with big debt payments due this week.

“TWA in all probability is very close to going into their third Chapter 11 bankruptcy,” says Ray Neidl, an airline industry analyst.

The fact that American and United would control more than half the commercial flights in the country makes higher fares inevitable, consumer advocates said.

“The historical record in the airline industry is quite clear about that,” says Bill McGee of the Consumer Reports Travel Letter. “We cannot anticipate that if United and American were to further dominate key markets throughout the country, particularly in the Northeast, that that would somehow lead to lower fares.”

Another travel-industry watcher, Tom Parsons of Bestfares.com, agrees, saying that if the deal goes through, American Airlines would have less incentives to discount fares.