A new president, a new injection of capital and a new feeling of confidence seem to be gearing Trans World Airlines up for what could be its turnaround year in 1998.
TWA has named William Compton, a former MD-80 captain and a member of the Air Line Pilots Association's executive board, as its president and chief operating officer. His appointment is viewed as an attempt to dissipate the friction between the airline's management and its unions. In 1997, unions placed a no confidence vote in TWA's chairman and chief executive, Gerald Gitner but tensions between the two seemed to have eased towards the end of the year.
Compton has made his priorities clear. 'What is required is sustainable profitability and we're on the road to achieving that goal,' he says. The airline predicts a 10 per cent yield improvement in 1998 over last year's 11.24 cents per revenue passenger mile.
As well as a new president, TWA is set to receive new cash. In December 1997, TWA completed an $86.3 million private placement of 1.725 million shares, representing 16 per cent of its total equity, to net the airline $83.2 million after placement fees. TWA says it will mainly use the proceeds from the placement to increase working capital and capital expenditure for its fleet modernisation programme.
On Wall Street, meanwhile, confidence levels in TWA appear to be at their highest for some two years and share prices are rising. With its cost-reduction programme now underway, including a streamlined fleet plan and retrenchment away from New York back to its hub in St Louis, analysts predict that in 1998 TWA's efforts will start to show up on its balance sheet.
Karen Walker
Source: Airline Business
