TWA Still Wants to Buy an Airline, Icahn Says
Although Trans World Airlines Chairman Carl C. Icahn last month broke off talks to acquire troubled Eastern Airlines, TWA is still in the market for an airline, Icahn said Monday.
A company statement quoted Icahn as saying that TWA “must grow to thrive, and by far the most preferable way for the airline to grow is through acquisitions.” In a letter to employees, quoted by Reuters news service, Icahn said: “While we are now out of the financial storm, we are still far from clear skies. Competition, especially in the North Atlantic, is getting tougher, and new capacity in the industry is coming on stream every day.”
Buying another airline would give TWA more planes and add one or several “badly needed” domestic hubs to improve its competitiveness, he said.
Although his talks with Eastern have broken off, Eastern would still be the acquisition that Icahn “is licking his chops at the most,” said Raymond E. Neidl, an airline analyst with the New York brokerage of McCarthy, Crisanti & Maffei.
He explained that Eastern is the most logical choice for TWA because of its strength in the Southeast--where TWA is weak--and because of the potential for TWA to become a worldwide airline by picking up Eastern’s South American routes.
Other acquisition possibilities include USAir or its Piedmont Airlines unit, or Braniff, “if it proves itself with its Kansas City hub,” Neidl said.
Icahn, who turned TWA into a private company late last month after the firm repurchased its shares, also announced a reorganization of top management.
Company President D. Joseph Corr has resigned, effective at the end of the month, the announcement said. Additionally, Icahn has created an “office of the chairman,” consisting of himself, company director Alfred Kingsley and Jerry Nichols, a senior vice president for ground operations, who has been promoted to executive vice president.
About 15 line vice presidents will report directly to the office of the chairman.
“This structure will do away with unnecessary layers of mangement and will give much more autonomy and responsibility to the vice presidents in the field,” Icahn said.
A company spokesman said no decision has been made on whether to keep the position of company president. Corr, whom Icahn credited with playing a major role in the turnaround of TWA, intends to purchase a company in which Icahn expects to be an investor, TWA said.
Icahn also said TWA is planning to order 30 to 60 new narrow-body aircraft over the next three to six months, although those plans could be scrapped if the company makes a major acquisition.
The new aircraft, in the short term, could be a vehicle to expand TWA’s domestic routes, Neidl said. However, he added, TWA does not have a modern fleet and is probably looking long term at its need for replacement aircraft.
TWA’s fleet of 220 planes is among the oldest in the industry, a fact that has been the subject of dispute between the company and its pilots union. The union has sued Icahn for $500 million in damages, charging that he violated agreements to upgrade the fleet.
Some analysts saw Monday’s announcement as Icahn’s attempt to soothe union fears that the airline will become a secondary interest of Icahn. The TWA board had agreed in principle in July to lease or buy up to 60 aircraft worth $1.5 billion.
