News that a Saudi Prince has taken a 5%stake in Trans World Airlines (TWA)did little to lift the gloom surrounding the struggling airline's heavy losses posted for 1996.
Prince al-Waleed bin Talal, a member of the Saudi royal family, picked up the stake for $14 million and helped a slight rally in TWA's share price following its report of a net $285 million loss for the year.
The Prince has stepped in to help with the rescue of prestige projects, including Euro Disney in Paris and the Canary Wharf development in London's docklands. He was also recently reported to be interested in bankrupt Fokker.
The investment did little to lift the concern surrounding TWA's efforts to re-organise its fleet while struggling to recover from the fall-out of the July Flight 800 crash. Debt-rating agency Standard &Poor's issued a warning that the airline's liquidity and financial condition leave "little room for error or adverse developments". TWAended the year with cash of $182 million, down by 40%. The group's losses follow a round of record results from the other major US airlines, which posted a collective profit of $3.6 billion for 1996 (Flight International, 12-18 February, P36).
Much of the damage was done in the fourth quarter, when TWA posted a massive $257 million loss, including a charge of nearly $54 million largely to cover retirement of the ageing Lockheed L-1011 and Boeing 747 fleets. Ayear ago, the loss had been held to less than $28 million. Yields fell and load factors edged down.
Chairman Gerald Gitner, who arrived after the mid-year management shake-up, concedes that the Flight 800 tragedy has had an "unquantified but significant" impact, but blames part of the losses on mistakes made in the first half of the year.
TWA had attempted to keep its expansion going by flying used aircraft to tide it over pending new deliveries. "This turned out to be a mistake which led to operational-reliability problems that in turn drove increased maintenance and crew expense," says Gitner. He says that the "bad situation" was further compounded by a steep rise in fuel and maintenance costs, which hit TWA's ageing fleet more heavily than most.
Gitner pledges, however, that TWA will refocus domestic services on its major hub at St Louis, Missouri, and international services at New York's JFK. He says that "new marketing strategies" will be launched later this year to try to recapture business traffic.
Source: Flight International
