Trans World Airlines hopes to shake off Icahn takeover turbulence

He's done it again. By making unwanted advances toward Trans World Airlines, financier Carl Icahn has driven the airline to seek a ``white knight'' to rescue it.

Just a few weeks ago, Mr. Icahn was seeking control of Uniroyal Inc. His hostile takeover bid propelled the company into a leveraged buy-out.

Now it's TWA that wants to be rescued from Mr. Icahn. The airline's management and employees are reported to be considering making a leveraged buy-out -- which would mean they would have to borrow enough to buy all the company's stock.

Eastern Airlines officials have acknowledged that they are considering a merger offer. Continental Airlines was also rumored to be a potential white knight or merger partner for TWA.

Icahn began acquiring TWA stock in March. Last week, with a 25 percent stake in the company, he made a $600 million tender offer for the remaining shares, at $18 a share. It is feared that he is intending to liquidate at least parts of the airline.

When a federal judge refused Tuesday to block Mr. Icahn's efforts to buy TWA stock, the airline's board voted unanimously to put the airline on the block and seek a buyer at a price higher than Icahn is offering.

``It's been on the block for a while,'' says Paul R. Schlesinger, airline analyst at Donaldson, Lufkin & Jenrette, in New York. ``What this [the court decision and the subsequent vote] has done for [TWA] is give them a lot of free publicity.

``They've taken Icahn seriously for a while,'' he adds. ``Now they're looking for alternatives. What became clear [Tuesday] is that they need a white knight, not just that they'd listen to a white knight.''

The question is who and where the money would come from. ``Cash is cash, and anything else pales by comparison,'' says Mr. Schlesinger, referring to Icahn's cash-on-the-barrelhead offer.

He further notes that ``if the Icahn deal goes through, it could take time, and the deal could fall apart.

He says he doesn't expect a ``bidding war'' but says it's ``probable that something would happen.''

The whole business has Wall Street analysts, usually fast-talking masters of the 10-second quote for broadcast, reduced to comments like ``It remains to be seen.''

Part of the big puzzle has been Icahn's offer to buy all of TWA's shares; before, he has focused on merely gaining control of a company. So Wall Street has wondered, What does Icahn want with a whole airline, anyway?

``I wish I knew,'' says Charles H. Hanneman, airline industry analyst for Thomson McKinnon Securities in New York. ``He says he wants to operate TWA as a regular airline and that he can do better than the current management.

``It's conceivable that a different strategy could bring better results at TWA,'' he adds, philosophically; ``but whether someone with no experience could do better than an experienced airline management remains to be seen.''

Mr. Hanneman does note that Icahn seems to have changed his mind about what he wants to do with the airline, should he get control of it. ``He started out with the notion that big chunks of the airline could be disposed of.'' Under discussion were such properties as its major maintenance facility in Missouri. ``But now he says he no longer wants to liquidate the airline.''

``One would doubt that that's his intent if one looks at his track record,'' says Robert Joedicke, airline analyst at Shearson Lehman Brothers.

Mr. Joedicke doubts that Icahn would be allowed to liquidate TWA, even if it were technically and legally feasible to do so. ``If a small airline were liquidated, the rest of the industry could pick up the slack.'' But TWA is too big to be allowed to fold up. ``Anything that discommodes the traveling public to such an extent is bound to attract the attention of the bureaucracy of Washington.''

On the other hand, Joedicke is skeptical that legislative efforts to forestall Icahn will prove effective, at least anytime soon. Sens. John Danforth (R) and Thomas Eagleton (D), both of Missouri, where many jobs would be lost if TWA folded, have introduced a bill to block transfers of international airlines for the purpose of liquidating them.

``Senator Danforth is from Missouri, and that has many meanings,'' Joedicke observes wryly; but, he adds, at a time of other pressing concerns in Congress, ``It would be unique to have Congress concentrate on a bill'' addressing such a particular concern.

Is the airline industry ready for some sort of ``restructuring'' as we've seen the oil industry go through lately? Some observers have looked at Pan American's sale of its Pacific routes to United, then watched Icahn charging TWA, and concluded that the answer is yes.

``But as a general proposition it doesn't make sense,'' says Hanneman. ``The airlines historically have not been that attractive from an earnings point of view.''

Airlines tend to be highly leveraged, saddled with heavy debts from the purchase of planes.

The assets of an airline are a bit tricky to calculate. ``Most airlines carry their planes on the books at X value; well, they're worth more than that, but not if you have to sell them all at once.'' Moreover, gate space, landing slots, and the like are valuable, ``but it's difficult to turn these things into money.''

TWA's rights to fly its international routes are another asset, ``But whether they are freely tradable remains to be seen.''

(Meanwhile, the ``Transworld'' name has been in the news lately for other reasons: Transworld Corporation, which spun off Trans World Airlines in February 1984, has announced that it is putting its Century 21 real estate operation on the block. Transworld chairman L. Edwin Smart said that move would help focus the company clearly in the food and lodging industries.)