Airbus Order Could Be Worth $3.6 Billion : TWA Agrees to Buy Up to 40 European-Made Jets
Trans World Airlines, in a major move to upgrade its aging fleet, said Tuesday that it has ordered up to $3.6 billion worth of long-range European-made airliners.
TWA, which has one of the oldest jet fleets in the U.S. aviation industry, said it had signed a memorandum of understanding to buy up to 40 Airbus Industrie A330-300 twin-engine widebody planes. But because the planes are just entering production, Airbus Industrie, which is a consortium of manufacturers in West Germany, France, Britain and Spain, will not start delivering the 301-seat planes to TWA until late 1994 or early 1995.
TWA said it has placed firm orders for 20 aircraft and taken options on another 20. The airline will have the right to convert up to 10 of the firm orders and 10 of the options to Airbus’ A340-300 model, which is a four-engine, very long-range widebody aircraft. If TWA opts for the A340-300, it would obtain the planes a little earlier.
The first flight of the A330-300 is not scheduled until June, 1992, and it will not be ready for commercial service until September, 1993. The A340-300, which will have a range of 7,600 miles, is expected to make its initial flight in May, 1991, and to enter service in May, 1992.
The A330 and A340 models look very similar and both seat 301 passengers. The principal difference is the number of engines.
Carl C. Icahn, TWA’s chairman, said the order “concludes an aircraft evaluation study begun more than two years ago and reaffirms our commitment to TWA’s long-term growth and prosperity. The equipment purchased in our fleet renewal program will efficiently replace our L-1011 and 747-100 aircraft, and generate greater profits for TWA.”
TWA said it plans to operate the new planes on North American and trans-Atlantic routes. The A330 was said to be 33% cheaper to operate than the L-1011. Lockheed manufactured L-1011s between 1969 and 1983, when it withdrew from the commercial airliner business.
“This is not a quick fix. TWA won’t be getting the planes very soon,” said Paul Turk, an official of Avmark Inc., an aviation consulting firm in Arlington, Va. “But it underscores the airline’s commitment to continuing its international routes.
“And it is a long-awaited first step in deciding what to do about the airline,” Turk continued. “If you are going to sell the airline or dismantle it, as had been predicted, you would not be doing this.”
Turk added that the airline must still take another step toward modernization by purchasing smaller planes for its domestic routes, retiring its older Boeing 727s and DC-9s.
Turk said that, as of July 1, 1988, TWA’s 218-plane fleet had an average age of 15.29 years, the second-oldest in the industry after Northwest Airlines, whose planes had an average age of 15.47 years. Northwest, however, has new planes on order and, until now, TWA did not. Of TWA’s present airliners, 64.2% are 15 years or older and 39.5% are 20 years or older.
Ray Neidl, an airline analyst with the investment firm of McCarthy, Crisanti & Maffei, said the airplane order should help Icahn’s relationships with TWA’s unions. They had been unhappy because the financier last year bought up TWA’s outstanding shares and took the company into private ownership. They maintained that he was milking the carrier without investing in it.
Icahn took control of TWA in 1986 and instituted tough cost cutting in an effort to return the airline to profitability.
In the third quarter of 1988, TWA, the nation’s eighth-largest airline, reported earnings of $88 million, up from $57.1 million a year earlier, while its revenue rose to $1.27 billion from $1.21 billion. The company has not yet released fourth-quarter figures.
Ordering the new airliners “puts Icahn back in the good graces of the pilots and the machinists,” Neidl said. “It is the first step of what they hope will be multiple steps of modernizing the fleet.”
Turk said Airbus Industrie undoubtedly gave TWA a good price on the new airliners. TWA is “a launch customer,” he said. “They will get the some of the first planes off the assembly lines.”
Mark Buckstein, TWA’s general counsel, said no firm decision has been made on the financing of the new planes. Deposits will be paid over the next few years, he said, adding that there are many possibilities open to the airline for financing.
