Air Transport World

TWA begins to flex its muscles.

It is a little over a year since TWA, the airline, was spun off in February 1984 as an independent company by its parent, Trans World Corp. The spinoff was perceived at the time as more for the benefit of the parent corporation than the airline. It brightened Trans World's financial statements by removing TWA's continuing losses from the books. It also aborted the campaign by Odyssey Partners, a group attempting to take over the company in order to break it up and sell off its separate parts. And there was the hope that the airline, standing on its own feet, could manage a return to profitability.

Now, after a year of independence, it looks as if the hope for TWA has a good chance of becoming a consistent reality. The airline's St. Louis and JFK hub strategies seem to be working; both domestic and international traffic are up, the latter sharply. The airline is turning a profit. Its cash position is strong, "better than it's ever been," says Richard D. Pearson, appointed last July as executive VP and chief operating officer. There is even an outside chance that the perennially unprofitable domestic services will wind up in the black this year.

The only major problem is the failure to get cost-saving wage and work rule agreements from the mechanics and flight attendants. Speaking of the mechanics and ground personnel represented by the IAM, Pearson told ATW, "We operate under the most restrictive work rules in the industry." At presstime, negotiations with the IAM (9,000 members) were continuing under federal mediation. A strike is always a possibility, but assuming no strike, a robust economy and no widespread fare wars, TWA should have a strong 1985.

Profit in 1984

For the full year 1984, income before taxes and extraordinary items showed an upswing of about $70 million from 1983--a profit of $34.4 million, compared with a loss of $35.9 million. This was the first profit before extraordinary items since 1978, points out President and CEO Charles E. Meyer, Jr. International services turned in an exemplary performance as usual--a profit of $156.3 million, a shade above 1983. Domestic lost $121.9 million, a considerable improvement over the 1983 loss of $191.2 million.

Operating income was $77.1 million, compared with an operating loss of $65.8 million. Net income was $29.9 million, compared with a net loss of $12.4 million. The improvement is even better than it looks, since the 1983 results were bolstered by gains of $64.3 million from the sale of tax benefits on aircraft and $21 million from disposition of proprty. In 1984, sale of tax benefits was no longer available and disposition of property produced a gain of only $9.7 million.

Before the impact of a slow last quarter in 1984, TWA's financial results for the first nine months were even better than for the full year. Income before taxes was $66.1 million compared with a $33.4 million loss for the first three quarters of 1983. Operating income was $96.3 million, compared with an operating loss of $40.2 million. Net income was $59.3 million, compared with a net loss of $33.4 million.

Traffic and load factors were up dramatically this January and February, compared with 1984. Domestic operations, usually a drag on TWA's overall results, produced 2.26 billion RPMs, a 20.4% gain, and a load factor of 56.6%, a 10.5-point gain. This continued a trend that began in November. International produced 1.5 billion RPMs, a brisk 41.1% gain, and a load factor of 62.4%, a 14.2-point gain.

A weak first half, largely the result of the concentration of operations at the St. Louis domestic hub and the consequent alteration of flight schedules and traffic patterns, held back traffic growth in 1984. For the full year, TWA reported systemwide traffic of 28.3 million scheduled RPMs, a 3.8% gain over the previous year. Scheduled passenger load factor dropped to 62.2% from 64.1%, but this was more than balanced by a drop in the breakeven load factor, to 60.4% from 64.4%.

In a recent presentation to a group of securities analysts, Senior VP and Treasurer Robert A. …

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