Air Transport World

The oldest start-up. (Trans World Airlines) (includes related articles on TWA's survival, fleet, and senior vice president marketing Mark Coleman)

By rights, Trans World Airlines should have joined Eastern and Pan Am in the graveyard of U.S. aviation legends a long time ago. A victim of the leveraged-buyout craze of the mid-1980s, the airline has not managed an annual operating profit since 1989, nor a net profit from continuing operations since 1988. Eight years under corporate raider Carl Icahn (1986-93), a pair of bankruptcies, a succession of leaders and strategies, boardroom feuds, poor labor-management relations and spotty customer service: These ingredients add up to enough to kill any airline, let alone one aptly described as "struggling," for most of the deregulated era.

Somehow, however, TWA survived its near-death experiences and the long-awaited obituary never appeared. Now, owing to a 1995 restructuring agreement with its creditors, TWA is in better shape than at any time in this decade.

Sure, the fleet is antiquated and the shrunken international network belies its proud heritage and strong image abroad. Today's TWA may have little in common with the airline made famous by Howard Hughes. No one is going to mistake a worn-out Boeing 727 for a Connie. But after a decade in the business wilderness, TWA has a sense of purpose, rising pride in its product and a confidence born of having survived the worst that man and nature could throw at it.

President and CEO Jeffrey Erickson has assembled a team of experienced airline managers who are determined to build on TWA's natural strengths at St. Louis and New York JFK Airport. They have an immensely loyal and dedicated work force that wants to believe in them; $200 million per year in labor and financial savings and a balance sheet that arguably is not much weaker than those of most other U.S. major airlines. And they have something intangible: A quality that kept TWA going where Pan Am and Eastern could not (see box, page 00).

"There is a core group of people who love this company," Executive VP and CFO Robert A. Peiser tells ATW. Peiser knows, because he is one of them. He can't stay away, no matter how hard he tries. This is his third stint at TWA. "I have a strong emotional attachment to this company," he explains.

Peiser joined TWA straight out of business school in the early 1970s, left briefly and returned to rise to the position of CFO. Driven out by Icahn in 1986, he became a turnaround specialist, fixing broken companies. He returned to TWA in 1994, partly out of loyalty, partly for the "ultimate challenge" of trying to save it and partly because he saw a new spirit of cooperation between management and labor, and a "story that you could really build on."

Much of that story hinges on key achievements of the past 18 months: The 1994 labor restructuring and the "pre-packaged" Chapter 11 bankruptcy reorganization completed last August. Under the labor restructuring, the airline's three main unions agreed to contribute $130 million per year in wage and productivity improvements, as well as to have their ownership in the airline reduced from 45% to 30% so that the creditors could receive a bigger part of the airline in exchange for debt forgiveness.

The subsequent financial reorganization stripped $500 million in debt from the balance sheet and roughly $60 million per year in interest expenses. …

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