Can A `Labor Of Love' End Twa's Tailspin?

Call it the new Spirit of St. Louis. No, it's not a copy of Charles Lindbergh's plane. It's the new attitude at Trans World Airlines Inc. In recent years, the carrier had so deteriorated that it became known as a backpacker's airline--tickets were cheap but flights were often late and service typically lousy. But last December, TWA's owner and chairman of seven years, Carl C. Icahn, left. The very next month, TWA posted the nation's best on-time performance. And employees, long alienated by Icahn's imperious manner, changed their tune. TWA's pilots donated $18,000 to buy billboard ads. Another 5,000 or so union employees plunked down $30,000 to buy ads in a major newspaper.

TWA's management, too, is charting a new course. A new group of professional airline managers led by Co-Chief Executives Robin Wilson and Glenn R. Zander has devised a plan to steer TWA out of bankruptcy by June. Labor has already agreed to swap $660 million in concessions for 45% of the airline. Creditors will exchange $1 billion in debt for the remaining equity. The carrier may move its headquarters from Mount Kisco, N.Y.--near Icahn's home--to St. Louis, its domestic base of operations. It has launched a new marketing push. Not long ago, Wilson admits, it seemed TWA might go the way of Pan American World Airlines Inc. Now, he says, "the airline is here to stay."

If enthusiasm were the key, there'd be no doubt. But the carrier has problems that could foil the best managers. Despite a restructuring since entering bankruptcy in January, 1992, TWA still has $943 million in debt supported by a paltry $81 million in equity. Its cash hovers around $150 million, a thin cushion against an industry fare war. And access to capital is severely limited. One banker calls TWA "rotten to the bone."

'A STRUGGLE.' TWA's route structure is no great asset either. Its St. Louis hub competes with United Airlines Inc. in Chicago and American Airlines Inc. in Dallas. And while it still has some good routes to Europe, Icahn sold off its crown jewel, the hub in London. That's one reason industry wags now call the downsized TWA "Teeny-Weeny." The airline is also saddled with a costly, fuel-guzzling fleet. Its reputation for poor service lingers, while frequent-flier programs bind travelers to the stronger carriers. "It's going to be a struggle," says George Pearson, vice-president for information services at Avitas Inc.

But Wilson and Zander were handpicked by employees and creditors to take on that struggle. Wilson, a native of Ireland and graduate of Cambridge University, rose to senior vice-president for operations at TWA before leaving to run the Long Island Rail Road in 1981. There, he earned a reputation as a turnaround expert after forging close ties with labor and overhauling operations. Zander, a career TWA finance executive, is the money man. Together, they've rehired eight former TWA senior executives. Turning TWA around, says Zander, will be "a labor of love."

Central to that labor is upgrading TWA's image. Recognizing that many travelers have lost faith in the airline, Wilson and Zander are aiming their marketing at leisure travelers and business executives looking for more comfort on trips. The airline has removed seats on all 168 TWA jets to give passengers 30% more legroom, while spending big to advertise that fact. The two are also going after travel agents. Senior Vice-President for Marketing Robert Cozzi has boosted commission rates to 18%, two points above the industry average and far above Icahn's miserly 10% rate.

Keeping labor on board is another key. Icahn's union relations were dismal, says William Compton, the Air Line Pilots Assn.'s representative at TWA. Now, ALPA committees are examining ways to cut costs. And pilots, along with flight attendants, have begun making calls on travel agents with executives to show their support.

RENTERS' MARKET. The co-CEOs also believe they have an easy remedy for their aged fleet. As many airlines have begun downsizing, more than 800 aircraft are grounded worldwide. Roughly 25% of those are fuel-efficient models that meet noise standards set to take effect in 1999. Leasing companies are scrambling to get the planes in the sky. Manufacturers Boeing, Airbus, and McDonnell Douglas are also eager to strike deals at attractive rates. So TWA won't have to commit huge capital for planes. It can simply lease. "We're in the right place at the right time," says Zander.

The duo claims it can keep TWA running indefinitely without a cash infusion. TWA is taking in 10% to 15% more per ticket domestically than last year, when fare wars hit. Along with fuller planes, that puts the company on firmer ground. TWA will also sell part of its interest in its computer-reservations system. And with cost cuts, that should "more than satisfy the cash required to be an ongoing entity," Zander says.

But TWA can't survive long term without a major investment, experts say. Earlier, USAir Inc. had made noises about buying all or part of TWA after concluding its deal with British Airways PLC, but those plans have apparently been dropped. Analyst Robert Mann at consultant Simat Helliesen & Eichner Inc. figures the airline needs $1 billion in fresh capital to train personnel and upgrade its systems. Wilson counters that the airline can run on its own for now but adds that once TWA restores confidence, "we'll be looking for alliances on a strategic basis."

Confidence may be building. Jean Epping, president of Santa Cruz Travel Inc. in California, says bookings on TWA are up 30% so far this year and predicts a "revitalization of TWA." And TWA has one expert betting on its survival: Robert L. Crandall. In February, 1992, at his annual press dinner, the chairman of American Airlines bet a Miami Herald reporter $50 that TWA would endure. Crandall won. This February, he bet double or nothing on at least another year.