AMERICAN AIRLINES ANNOUNCES THREE TRANSACTIONS THAT DRAMATICALLY INCREASE THE SCOPE OF ITS NETWORK

American To Buy Substantially All the Assets of Trans World Airlines, Key Strategic Assets From United Airlines/US Airways And a 49 Percent Stake in DC Air

TWA To Be Integrated Into American With Continued Hub Operation In St. Louis And Continued Opportunities for TWA Employees



AMR Corporation (NYSE: AMR) and its wholly owned subsidiary, American Airlines Inc., today announced three transactions that dramatically increase the scope, efficiency and desirability of American's domestic network, creating broader customer choice and providing exciting growth and transfer opportunities for American's employees.

American announced today that it has agreed to purchase substantially all the assets of Trans World Airlines Inc. (AMEX: TWA) for approximately $500 million in cash and the assumption of aircraft operating leases. TWA will be integrated into American with continued opportunities for its employees and a continued hub operation in St. Louis. As part of the transaction, American will acquire up to 190 aircraft, 175 gates and 173 slots. The combination with TWA will also provide American with an important new hub in St. Louis, improving its position as an east/west carrier. TWA passengers who are AAdvantage members will soon be able to accrue AAdvantage miles on TWA flights. More details regarding additional frequent flyer benefits will be forthcoming. This transaction, which excludes certain TWA contracts, is contingent on bankruptcy court approval. ·

American also announced that it has agreed to acquire certain key strategic US Airways assets, including 14 gates, 36 slots, 66 owned aircraft and an additional 20 leased aircraft, as well as to lease the gates and slots necessary for American to operate half of the northeast Shuttle with United Airlines. Under the terms of the agreement, American has agreed to pay $1.2 billion in cash to United Airlines and assume approximately $300 million in aircraft operating leases. The consummation of this transaction is contingent on the closing of the proposed merger between United Airlines and US Airways.

In addition, American has agreed to acquire a 49 percent stake in, and to enter into an exclusive marketing agreement with, DC Air, the first significant new entrant at Ronald Reagan Washington National Airport in over a decade. American has agreed to pay approximately $82 million in cash to DC Air. Under the marketing agreement, DC Air will participate in American's frequent flyer program. American has also agreed to provide to DC Air eleven F100 aircraft in a wet lease arrangement, which means that American personnel will be flying and maintaining American aircraft marketed as DC Air service. American Airlines will also have a right of first refusal on the acquisition of the remaining 51percent of DC Air.

"These are strategic and exciting transactions for American Airlines - for our employees, our customers and our shareholders," said Donald J. Carty, chairman and CEO of American Airlines. "These transactions dramatically increase the scope, efficiency and desirability of American's network, creating broader customer choice and providing exciting growth and transfer opportunities for our employees.

"Our acquisition of TWA provides continued opportunity for its employees and a continued hub operation in St. Louis," continued Carty. "Over the last several years, Bill Compton, TWA's president and CEO, and his management team have done a tremendous job of improving the operations of the airline, especially in modernizing its fleet. The result is a perfect fit with American. The addition of TWA will not only give us an important new hub in St. Louis for the multi-directional flow of traffic but also significantly improve our position as an east/west carrier. American is also uniquely positioned to fully utilize TWA's excess maintenance capacity, which will enhance our operations and allow us to better serve our customers.

"The United/US Airways transaction will bring to American a large number of valuable gates and slots in key business travel markets. In addition, from an industry standpoint, the transaction will redistribute capacity by putting it into the hands of an airline that can more efficiently and extensively utilize it. Also, by jointly operating the Shuttle and aligning ourselves with DC Air, we can generate a level of customer loyalty and achieve a level of growth for American Airlines, American Eagle and DC Air that would otherwise take years to achieve. We are also extremely pleased to be joining forces with Bob Johnson, who has a proven track record of building successful businesses," Carty said.

"From an employee, operating and financial standpoint, these three deals -- both individually and taken together -- make tremendous sense," Carty said. "The resulting growth will create an enormous number of new job and transfer opportunities across virtually every work group at American and allow our employees to serve an ever-increasing share of the valuable business travel market."

As announced separately, TWA and certain operating subsidiaries have voluntarily filed petitions in the U.S. District Court in Wilmington, Delaware for protection under Chapter 11 of the U.S. Bankruptcy code. In conjunction with the Chapter 11 filing, American will provide TWA with $200 million in debtor-in-possession financing to ensure TWA's ability to maintain its operations throughout the completion of this transaction.

Specifically, as part of its transaction with TWA, American will acquire:

173 jet and commuter slots, including 84 at JFK, 51 at New York LaGuardia Airport and 33 at Ronald Reagan Washington National Airport.

175 gates, including 57 at St. Louis, 17 at JFK and four at New York LaGuardia Airport. Also included are airport holding areas and terminal facilities to support the acquired gates.

Up to 190 aircraft, including approximately 100 MD-80s, 30 DC-9s, 25 Boeing 757s, 15 Boeing 717s and 10 Boeing 767s.

Significant maintenance facilities at Kansas City International Airport, Los Angeles International Airport and St. Louis International Airport.

>From United/US Airways, American will:

Acquire 36 jet and commuter slots at New York LaGuardia Airport.

Acquire five gates at New York LaGuardia, three gates at Ronald Reagan Washington National Airport, three gates at Boston Logan International Airport, and one gate each at Newark International Airport, Philadelphia International Airport and Atlanta Hartsfield International Airport. Also included are airport holding areas and terminal facilities to support the acquired gates.

Lease sufficient additional gates and slots necessary to operate 50 percent of the departures of the US Airways Shuttle, which includes Boston-New York, New York-Washington DC, and Boston-Washington DC.

Acquire up to 86 aircraft, consisting of 66 acquired outright and the leases of an additional 20, all of which are complementary to American's current fleet, including 34 B757-200s, 12 MD82s and 40 F100s, as well as spare engines, parts, inventory and other equipment necessary to support the aircraft. The transaction contemplates that a number of US Airways pilots sufficient to operate approximately 40 percent of the aircraft would join American Airlines, with the additional capacity being filled by existing American pilots and through the creation of new jobs. Should fewer pilots join American Airlines, United may elect to retain a commensurate number of B757-200s.

In addition, to ensure competition on United/US Airways hub-to-hub routes, American Airlines will guarantee that the following routes will be served by at least two roundtrips a day for the next 10 years: Philadelphia-Los Angeles, Philadelphia-San Jose, Philadelphia-Denver, Charlotte-Chicago (O'Hare), and Washington DC-Pittsburgh.

All three transactions are conditioned on customary approvals.