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Justice signs off on TWA takeover

Investigators say they will not stop American Airlines' acquisition, citing TWA's bankrupt condition.

The Justice Department announced Friday that it would not challenge the bid by American Airlines to take over troubled Trans World Airlines, eliminating the proposed deal's last major hurdle.

The Justice Department released a statement saying it made its decision "after a comprehensive investigation that included consideration of TWA's bankrupt condition."

The clearance begins the last chapter for TWA, which was founded 75 years ago and became synonymous with the romance of air travel. It also marks the ascension of American, which as a result of the acquisition will become the world's largest airline, surpassing its archrival United Airlines.

The decision came only four days after a federal bankruptcy court judge approved American's $742-million plan to acquire most of TWA's assets and retain most of its 20,000 employees. The troubled airline filed for bankruptcy protection for the third time Jan. 10 as part of an agreement with American, which is owned by AMR Corp.

American said Friday it plans to close the deal next month. It must still fight off an expected appeal of the bankruptcy judge's decision by Carl Icahn, TWA's former chairman. He backed an eleventh-hour, $1.1-billion proposal to reorganize the airline that was rejected by the court.

American also must reach accords with two of TWA's unions to waive sections of their contracts that conflict with American's labor agreements. Friday, TWA filed a motion in bankruptcy court seeking permission to modify its labor contracts unilaterally if talks with the unions fail.

TWA will give American 190 jets, a hub in St. Louis and some valuable gates and takeoff and landing permits at Kennedy Airport, La Guardia Airport and Washington Reagan National Airport.

American also agreed to spend $1.3-billion to buy about 20 percent of US Airways' assets and a 49 percent interest in DC Air, a new airline to be based at Reagan National. United, which plans to buy US Airways, agreed to sell the assets to American to address antitrust concerns raised by the Justice Department.

Should that deal be approved, American would end up being slightly smaller than United, which is the case today. But the US Airways transaction has been criticized by some lawmakers and consumer groups.

Friday's announcement does not necessarily mean the Justice Department is more likely to approve the United-US Airway deal. Several of the opponents of that deal came out in favor of American's takeover of TWA because of TWA's precarious financial condition.

TWA has not earned a profit since 1988 and has been on the block for years. Indeed, the fact that so many airlines passed up the opportunity to buy TWA in the past raises the question of whether American will be able to make the purchase work if the Justice Department ends up killing the United-US Airways deal.