TWA filed for its second bankruptcy and was bought by American Airlines for $742M

Trans World Airlines (TWA), founded in 1930 as Transcontinental Air Transport, was one of the oldest and most storied airlines in American aviation history. By the late 1990s, however, the airline was struggling under the weight of two decades of financial mismanagement. In January 2001, TWA filed for Chapter 11 bankruptcy protection for the second time — the first had been in 1992 — with mounting losses, aging aircraft, and a workforce that had been reduced through multiple rounds of cost-cutting.

The 2001 bankruptcy was triggered by a combination of factors: the high debt load carried over from the 1992 bankruptcy, the failed 1995 acquisition of TWA by investor Carl Icahn, and a punishing discount deal with the Karabu Corporation that cost the airline an estimated $150 million per year in lost revenue. TWA had been locked into the agreement, which forced it to sell tickets at below-market prices, as a condition of its 1995 bankruptcy exit. The airline was losing money on every flight and had no way to renegotiate the deal.

In April 2001, American Airlines parent AMR Corporation acquired TWA’s assets in a bankruptcy court-approved deal valued at $2 billion, including the assumption of $742 million in debt. American paid $742 million in cash and assumed liabilities. The acquisition gave American TWA’s hub at St. Louis Lambert International Airport and its slots at key airports. TWA’s brand was retired, and about 20,000 employees were absorbed into American or laid off. The 9/11 attacks five months later devastated the industry, and American later cut thousands of the TWA employees it had just acquired.