London

In 1990, TWA was in bankruptcy (along with Pan Am, Midway, and several other carriers). They had negotiated a $195M deal with AA in December 1989 to sell their Chicago-London route authority as well as some gates and a hangar in Chicago (ORD), however the UK government would not grant permission to use the route authority into London-Heathrow (LHR), citing restrictions in the US/UK bilateral agreement which limited US/Heathrow flights to just Pan Am, TWA, and their corporate successors. Regardless, this was a coup for American, as only one carrier was permitted to serve London from Chicago, and Chicago was headquarters to rival United Airlines.

In October 1990, United upped the stakes by announcing it had agreed to purchase Pan Am’s entire Heathrow operation and route authorities for $400M. American quickly approached TWA to negotiate a similar transaction for $445M.

Routes Included:

UA/PA:  JFK/EWR, IAD, LAX, SFO, SEA, MIA*

AA/TW:  JFK/EWR, BOS, LAX, ORD, BWI, PHL, STL

Both transactions involved taking over the ground employees and facilities in London. UA’s transaction also involved several aircraft and a proportionate number of pilots and flight attendants. But since both were only acquiring specific assets, the UK took the position that AA and UA were not true corporate successors, therefore they would not be able to fly into LHR under the terms of the current bilateral. Meanwhile, Pan Am was slipping further towards a financial death.

Pan Am’s financial situation placed further pressure on the US to find a way of renegotiating the bilateral, but the UK government was also under pressure, as British Airways was used to having two lesser competitors in PA and TW, and did not relish the idea of having equals, if not stronger competitors, on their home turf. The price they were demanding -- unlimited codesharing on any US carrier – did not sit well with the US carriers, including American, whose rights to serve Heathrow hung in the balance.

When Pan Am filed for bankruptcy in January, the DOT gave approval for the route transfers to United, pending an agreement with the UK. Eventually, a compromise was reached in March 1991 which allowed both UA and AA to replace PA and TW as the designated LHR carriers, and BA was granted unlimited codesharing rights.

With DOT approval already in hand, United started preparations, however the DOT still had not given approval to American to take over TWA’s routes. In fact, they still had not approved the ORD-LHR more than a year earlier.

Under pressure from Congress, AA was told in March 1991 that they would not permitted to take over the STL, BWI and PHL services. To add insult to injury, Carl Icahn (TW’s owner) refused to lower the purchase price for AA. The BWI and PHL services were subsequently sold to USAir for $50M, and TW was permitted to maintain service from STL, but all three of these were to LGW instead of LHR.

United took over the Pan Am routes in April 4, 1991, followed by American on July 1, 1991 from JFK, BOS, ORD, MIA, and EWR. On July 21, service from LAX was launched. AA had also launched ORD-LGW and JFK-LGW during June, with the ORD service being discontinued on July 1. JFK-LGW was discontinued later that summer.

In 1994, after USAir gave up their London route authorities in exchange for a codesharing partnership with British Airways, AA was given approval for PHL-LHR, and on the same day, started up RDU-LGW and BNA-LGW service. Just over a year later, the only route which remained was RDU-LGW (still operated as late as of January 2002).

* United was given emergency authority to operate MIA-LHR from April thru June, but the route was planned to be transferred to American in July. American had purchased MIA-LGW authority from Frank Lorenzo as part of purchase of Eastern’s Latin America routes, and that authority was transferred to LHR when AA commenced operations.
When Pan Am ceased operations in December 1991, United was granted permanent authority.