Icahn, America West Meet Over TWA U.S. Operations


Trans World Airlines said Thursday that Chairman Carl C. Icahn met with America West this week to discuss turning over to the Phoenix-based airline TWA’s debt-laden domestic operations, including its lone U.S. hub in St. Louis.

Word of the meeting surfaced in the St. Louis Post-Dispatch and was confirmed later by TWA’s general counsel, Mark Buckstein. He said Icahn met Wednesday at TWA headquarters in Mount Kisko, N.Y., with America West President Mike Conway and union officials representing TWA pilots and machinists.

According to the newspaper, Icahn said he arranged the meeting to explore a contingency plan should the unions refuse to make the additional wage and work concessions he seeks. Those are necessary, he maintained, to provide the capital needed to expand the airline as the pilots and machinists have urged.

TWA lost about $300 million in 1989, Buckstein said.


Under the plan discussed, Icahn said, no money would change hands. “They would not be purchasing anything; we would not be getting any cash,” the Post-Dispatch quoted him as saying. America West would merely “take over” TWA’s U.S. business, including its domestic hub in St. Louis, to reduce TWA’s operating costs.

That would leave TWA’s profitable international routes without a domestic system to feed them, analysts noted. “What you’d have is a Pan Am No. 2, and Pan Am No. 1 isn’t working too well,” commented analyst Hans Plickert of Transportation Group in New York. So any deal would probably include a joint-marketing plan to mesh the two timetables, said Daniel Hersh of Bateman Eichler, Hill Richards in Los Angeles.

But America West would also have to assume much of TWA’s $1.6 billion in debt, and the fast-growing firm is far from debt-free, the analysts noted.

The Post-Dispatch quoted a union official who attended the meeting as calling the proposals “quite wacky.” Tim Connolly of the International Assn. of Machinists, said he and fellow union members left the meeting “shaking our heads.”

Icahn paid $469 million for 90% of TWA’s common stock in October, 1988, against the wishes of shareholders and the unions, which own the remaining 10%. His refusal to invest in modernizing aircraft and expanding service have since further soured the unions, leading analysts to speculate on Icahn’s motives in meeting with America West.

Hersh speculated that Icahn had more than a single strategy in mind in calling the meeting. He might--as Icahn suggested--be threatening to sell to a non-union company to scare the unions into accepting concessions. Or he might be “softening them up” so they would make concessions to another buyer “just to get rid of” Icahn.

“Everyone knows TWA can be bought for the right price,” Plickert said. “He’s certainly more than got his own investment back, plus he still owns TWA, so his return is good by any standard.”

Icahn initially returned TWA to profitability by slashing expenses and reorganizing the company. “But that was a one-shot lifting of the profitability, and he has run out of that kind of improvement,” Plickert said. “Now he’s left with the same problems everyone else has in the airline business. If you want to stay profitable, you’ve got to grow.”


America West Airlines, founded in 1983, has hubs in Phoenix and Las Vegas. It achieved major airline status last year when revenue topped the $1-billion standard.