TWA Sale, Merger Called Likely
Buyer Could Be Investor, Airline
Saturday, March 29, 1997
By Christopher Carey
Of The Post-Dispatch Staff
Although civic leaders are optimistic about Trans World Airlines Inc.'s turnaround effort, some industry
experts said Friday that a sale or merger is likely.
"Their best hope is that somebody will take advantage of the low stock price and buy the company," said
Morten Beyer, a retired airline executive who now works as a consultant in McLean, Va.
The buyer could be an investor with enough money to overhaul TWA, such as Prince Waleed Bin Talal
of Saudi Arabia, who just bought 5 percent of the airline.
Or, TWA could wind up as part of another airline looking to add size and market strength, Beyer said.
USAirways is Beyer's best bet, while other industry watchers favor Northwest, Continental or dark horse
Delta.
TWA posted an unexpectedly large loss of $284.8 million last year, up from a loss of $227.5 million in
1995.
TWA attributed the additional red ink to the crash of Flight 800, higher maintenance and fuel costs, and
operational problems caused by rapid expansion.
TWA's auditors, KPMG Peat Marwick, say the troubles raise "substantial doubt" about the airline's
survival.
TWA's backers have dismissed the warning as boilerplate.
"TWA's auditors have taken a responsible and customary approach to their report," said William E.
Maritz, chairman of Maritz Inc. and Civic Progress. "However, the public should not misinterpret their
statements."
Companies belonging to Civic Progress recently pumped $26 million into TWA, buying prepaid travel to
boost reserves.
"We commissioned our own third-party evaluation and came to the conclusion that there is very little risk
in the financial commitment we have made to the airline," Maritz said.
No one is suggesting that TWA will have any trouble making it through the year. The airline had $181.6
million in cash on Jan. 1 and has been taking steps to build or maintain that surplus.
TWA's Machinists union and its investment banker, Brian M. Freeman, also have been looking for ways
to pump new capital into the airline.
The Machinists have three seats on TWA's 15-member board. Employees own just over 30 percent of
the company, a stake obtained through concessions.
The pay increases the unions are likely to seek in contract talks this year will complicate the airline's
efforts to bring costs in line with revenue, Beyer said.
"Nobody has given more than TWA's labor," he said. "But there's nothing to
give back. TWA cannot realistically consider giving raises unless they want to
go to bankruptcy court the next day." |
