TRANS WORLD Airlines (TWA)has been dogged by further poor financial news, with a warning from the group's auditors over the carrier's future in the light of mounting losses and falling cash reserves.
The warning from KPMG Peat Marwick accompanies TWA's official filing of its annual results with the US Securities and Exchange Commission. "The company's recurring losses from operations and its limited sources of additional liquidity raise substantial doubt about the entity's ability to continue as a going concern," say KPMG.
The airline unveiled a $285 million net loss for 1996 and admits that there are further losses to come in the first quarter of this year. In the filing it says that losses over the quarter will "significantly exceed" the $37 million over the first three months of last year.
TWA also admits that cash balances at the end of the first quarter will be "significantly below" the already depleted year-end total of only $181.6 million. The airline concedes that its ability to raise fresh capital is "constrained", saying that it has no unused lines of credit and that the bulk of its assets are already secured against debts.
The group warns that capital constraints could limit the airline's ability to forge ahead with the latest strategic restructuring, which it says are now being "accelerated" in an attempt to turn around the losses.
A key plank of the plan, instituted by the new senior management team which arrived in mid-1996, is to replace the ageing fleet of 14 Boeing 747s and 11 Lockheed L-1011s with a mix of smaller and more efficient Boeing 757s, 767s and McDonnell Douglas MD83s.
London-based aircraft trader Fortis Aviation is already offering the TWA widebodies for sale with the aim of having the bulk out of service "within the year".
TWA's capital expenditure for 1997 is being estimated at $107 million, with the bulk being spent on aircraft, including stage payments and spares.
The group has already raised $47 million through a secured share issue in March and in February it received $26 million from businesses in its St Louis, Missouri, base as up-front payment for future air travel.
Source: Flight International
