Twa Weathers Turbulence, May Reach Clear Skies In ‘98

Even cats don’t have as many lives as Trans World Airlines.

After surviving its latest downturn, which began in the summer of 1996, TWA again appears to be on the upswing heading into 1998. The carrier recently raised more than $200 million in cash through private placement financing. That money erased doubts in many analysts’ minds about whether TWA can last through the winter.

The St. Louis-based airline is still trying to put the Flight 800 explosion behind it. Despite a hearing last month by the National Transportation Safety Board that revived public scrutiny of the blast, TWA has experienced some positive developments recently.

Several Wall Street transportation analysts have upgraded their rating on TWA’s common stock. Most analysts have raised expectations of TWA’s future earnings and revenues, forecasting that its common stock will outperform the market.

Standard & Poor’s, a credit rating agency, has revised TWA’s outlook to “stable” from “negative.” S&P noted that TWA had improved its liquidity and its overall financial performance.

TWA’s operations have improved to the point that it is now among the industry leaders in customer service measures, such as on-time performance, baggage handling and complaints. All employees received a $100 bonus in November after the carrier finished high in all three categories in October.

TWA had its best November in terms of passengers boarded in seven years. Moreover, the percentage of seats filled for the month was the highest in 20 years.

TWA, which operates its jet maintenance base at Kansas City International Airport, also has replaced older, inefficient planes with newer ones. And the airline has decreased its dependence on trans-Atlantic business while focusing on its St. Louis hub. Known for years as a carrier for leisure travelers, TWA now is making moves to attract more business travelers.

Such steps have several analysts encouraged about TWA’s prospects.

“Right now, the airline is in complete overdrive for success and possibly expansion,” said Joseph Berman, senior aviation analyst with Avmark Inc., a consulting firm that has TWA for a client.

However, it’s not all blue skies for TWA. Experts say the carrier has several issues to contend with in 1998 that could determine its viability for the long term.

One of the airline’s major issues will be labor-management relations. Contracts with the Machinists union and the Air Line Pilots Association both expired last year, and talks to reach new agreements have progressed slowly.

That concerns Keith Nelson, president of Machinists Local 1650 in Kansas City. The Machinists represent a majority of TWA’s employees, including mechanics, flight attendants and baggage handlers. A federal mediator met with the two sides once in December. Future bargaining sessions have not yet been scheduled.

Because of financial problems that have plagued TWA since the mid-1980s, TWA’s employees have accepted wage cuts and taken equity in the company to keep the enterprise going. There’s a feeling among many workers now that they need to be getting wages more comparable to industry standards.

“TWA’s put a lot of effort into improving on-time performance and other aspects of the operation,” Nelson said. “Yet, they still have not addressed the needs of the employees.”

And there’s evidence that employees are getting impatient. Last month, flights were delayed and diverted from Lambert-St. Louis International Airport when mechanics and baggage handlers engaged in a work slowdown.

Nelson said the union remained worried that TWA could continue making cutbacks in its maintenance operations. About 400 workers at TWA’s overhaul base in Kansas City were laid off last year, and some of the work the base had handled was sent elsewhere.

Negotiations continue, but analysts agree that TWA cannot afford a strike. Whether the unions would shut down the airline if agreements cannot be reached remains to be seen.

“That’ll be determined by the employees,” Nelson said. “The problem of getting through the winter with enough cash has been resolved. But the company has to address its labor-management problems in 1998.”

Regardless of what happens, Berman said he could not envision U.S. commercial aviation without TWA existing in some form.

“They’re a key part of the aviation industry,” he said. “The TWA name is too recognizable to go away. Between the American public, the Department of Transportation and the actual traveling public itself, TWA is here to stay.”