Transcontinental and Western Air, Inc – Howard Hughes and TWA Part Seven – April 15, 2011

Transcontinental and Western Air, Inc

Howard Hughes and TWA

Part Seven

Carl Icahn and TWA

In 1983 TW Corp. decided to spin off the airline. The reasons were numerous but primarily focused on TWA’s aging fleet and its inability to compete in a deregulated environment. As the wolves began to gather, to divide up the spoils of a failed airline, it was Frank Lorenzo and Carl Icahn that led the pack.

Lorenzo was fist in line and TWA executives leaned toward him because they considered him and airline man and not a corporate raider. However, TWA’s unions dug in their heels and said no. Anyone but Lorenzo was their cry and the unions began to pursue Carl Icahn. The unions offered Icahn numerous contract concessions and in turn Icahn promised to keep TWA intact.

It was not long before the workers of TWA realized that they had made a big mistake and the first to show their anger were the flight attendants who struck in 1986. Icahn immediately hired low-wage replacements and he was delighted with the new cost savings and profits. As far as Icahn was concerned, all flights, regardless of the airline, were pretty much the same. However, a poorly-trained, bad-mannered flight attendant or a surly customer service agent can bleed an airline of passengers. Still, Icahn was not concerned with such trivial matters.

As Icahn declared war on the workers, and the workers struck back by alienating the travelling public, there were a sting of terrorist incidents that caused passengers to shun TWA. These events in turn created cash problems, forcing Icahn to sell off slots and gates at Chicago, as well as TWA’s routes to London. The next step in the Icahn debacle was a prepackaged bankruptcy plan. This would have brought TWA to its end had it not been for the Pilots and Machinist Unions stepping in to stop the process.

As part of the deal to salvage the airline, Icahn had to go. He cashed out in 1992 leaving the airline in the hands of its creditors and employees. The story has a bittersweet ending because without Icahn, the airline began to move forward and achieve some success in the marketplace. As we all know, TWA flight 800 destroyed all hope and the airline was doomed. A great airline went down fighting and although they are gone they are not forgotten.

Next week we will wrap up our series on TWA and the following week will begin an eight part series on Eastern Airlines. Until then take care and fly safe.

Robert Novell
April 15, 2011