<PAGE> 1
===============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-7815
TRANS WORLD AIRLINES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 43-1145889
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
ONE CITY CENTRE
515 N. SIXTH STREET
ST. LOUIS, MISSOURI 63101
(Address of principal executive offices, including zip code)
(314) 589-3000
(Registrant's telephone number, including area code)
-----------------------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes /X/ No / /
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
OUTSTANDING AS OF
CLASS MAY 1, 1997
- ----------------------- -----------------
Common Stock, par value 44,342,834
$0.01 per share
In addition, as of May 1, 1997 there were 6,220,792 shares of Employee
Preferred Stock outstanding.
===============================================================================
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TRANS WORLD AIRLINES, INC. AND SUBSIDIARIES
<TABLE>
STATEMENTS OF CONSOLIDATED OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------
1997 1996
-------- --------
<S> <C> <C>
Operating revenues:
Passenger.............................................. $671,845 $677,932
Freight and mail....................................... 31,489 35,904
All other.............................................. 58,972 68,597
-------- --------
Total.......................................... 762,306 782,433
-------- --------
Operating expenses:
Salaries, wages and benefits........................... 315,308 296,323
Earned stock compensation.............................. 1,280 4,984
Aircraft fuel and oil.................................. 129,946 129,396
Passenger sales commissions............................ 57,571 63,940
Aircraft maintenance materials and repairs............. 43,743 47,758
Depreciation and amortization.......................... 38,770 39,613
Operating lease rentals................................ 85,823 70,305
Passenger food and beverages........................... 20,452 25,541
All other.............................................. 168,899 158,764
-------- --------
Total.......................................... 861,792 836,624
-------- --------
Operating loss............................................. (99,486) (54,191)
-------- --------
Other charges (credits):
Interest expense....................................... 28,397 33,547
Interest and investment income......................... (2,951) (6,086)
Disposition of assets, gains and losses--net........... (9,350) 214
Other charges and credits--net......................... (10,389) (7,588)
-------- --------
Total.......................................... 5,707 20,087
-------- --------
Loss before income taxes and extraordinary items........... (105,193) (74,278)
Provision (credit) for income taxes........................ (35,161) (37,171)
-------- --------
Loss before extraordinary items............................ (70,032) (37,107)
Extraordinary items, net of income taxes................... (1,532) --
-------- --------
Net loss................................................... (71,564) (37,107)
Preferred stock dividend requirements...................... 3,869 23,998
-------- --------
Loss applicable to common shares........................... $(75,433) $(61,105)
======== ========
Per share amounts:
Loss before extraordinary item and special dividend
requirement.......................................... $ (1.51) $ (.98)
Extraordinary item and special dividend requirement.... (.03) (.48)
-------- --------
Net loss................................................... $ (1.54) $ (1.46)
======== ========
See notes to consolidated financial statements
</TABLE>
2
<PAGE> 3
TRANS WORLD AIRLINES, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1997 AND DECEMBER 31, 1996
(AMOUNTS IN THOUSANDS)
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
--------- ------------
<S> <C> <C>
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents.............................. $ 136,522 $ 181,586
Receivables, less allowance for doubtful accounts,
$12,357 in 1997 and $12,939 in 1996.................. 257,744 239,496
Spare parts, materials and supplies, less allowance for
obsolescence, $12,556 in 1997 and $11,563 in 1996.... 104,134 111,239
Prepaid expenses and other............................. 98,294 54,121
---------- ----------
Total.......................................... 596,694 586,442
---------- ----------
Property:
Property owned:
Flight equipment................................... 387,351 339,150
Prepayments on flight equipment.................... 33,767 39,072
Land, buildings and improvements................... 59,457 59,879
Other property and equipment....................... 62,222 60,750
---------- ----------
Total owned property........................... 542,797 498,851
Less accumulated depreciation...................... 82,949 71,810
---------- ----------
Property owned--net............................ 459,848 427,041
---------- ----------
Property held under capital leases:
Flight equipment................................... 172,812 172,812
Land, buildings and improvements................... 49,443 54,761
Other property and equipment....................... 6,943 6,570
---------- ----------
Total property held under capital leases....... 229,198 234,143
Less accumulated amortization...................... 56,026 46,977
---------- ----------
Property held under capital leases--net........ 173,172 187,166
---------- ----------
Total property--net........................ 633,020 614,207
---------- ----------
Investments and other assets:
Investments in affiliated companies.................... 112,674 108,173
Investments, receivables and other..................... 232,348 188,331
Routes, gates and slots--net........................... 393,717 401,659
Reorganization value in excess of amounts allocable to
identifiable assets--net............................. 772,638 783,127
---------- ----------
Total.......................................... 1,511,377 1,481,290
---------- ----------
$2,741,091 $2,681,939
========== ==========
See notes to consolidated financial statements
</TABLE>
3
<PAGE> 4
TRANS WORLD AIRLINES, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1997 AND DECEMBER 31, 1996
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
--------- ------------
<S> <C> <C>
(UNAUDITED)
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Current maturities of long-term debt................... $ 81,213 $ 92,447
Current obligations under capital leases............... 40,995 42,501
Advance ticket sales................................... 328,605 241,516
Accounts payable, principally trade.................... 231,830 216,675
Accounts payable to affiliated companies............... 3,345 4,894
Accrued expenses:
Employee compensation and vacations earned......... 112,740 116,846
Contributions to retirement and pension trusts..... 14,766 14,091
Interest on debt and capital leases................ 28,530 39,420
Taxes.............................................. 24,233 19,018
Other accrued expenses............................. 218,182 203,184
---------- ----------
Total accrued expenses..................... 398,451 392,559
---------- ----------
Total...................................... 1,084,439 990,592
---------- ----------
Long-term liabilities and deferred credits:
Long-term debt, less current maturities................ 650,223 608,485
Obligations under capital leases, less current
obligations.......................................... 211,080 220,790
Postretirement benefits other than pensions............ 472,841 471,171
Noncurrent pension liabilities......................... 30,781 30,716
Other noncurrent liabilities and deferred credits...... 105,908 122,080
---------- ----------
Total...................................... 1,470,833 1,453,242
---------- ----------
Shareholders' equity:
8% cumulative convertible exchangeable preferred stock,
$50 liquidation preference; 3,869 shares issued and
outstanding.......................................... 39 39
Employee preferred stock, $0.01 liquidation preference;
special voting rights; shares issued and outstanding;
1997--5,659; 1996--5,681............................. 57 57
Common stock, $0.01 par value, shares issued and
outstanding: 1997--44,083; 1996--41,763.............. 441 418
Additional paid-in capital............................. 571,799 552,544
Accumulated deficit.................................... (386,517) (314,953)
---------- ----------
Total...................................... 185,819 238,105
---------- ----------
$2,741,091 $2,681,939
========== ==========
See notes to consolidated financial statements
</TABLE>
4
<PAGE> 5
TRANS WORLD AIRLINES, INC. AND SUBSIDIARIES
<TABLE>
STATEMENTS OF CONSOLIDATED CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------
1997 1996
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss............................................... $(71,564) $(37,107)
Adjustments to reconcile net loss to net cash used
by operating activities:
Employee earned stock compensation............. 1,280 4,984
Depreciation and amortization.................. 38,770 39,613
Amortization of discount and expense on debt... 3,556 2,405
Extraordinary loss on extinguishment of debt... 1,532 --
Interest paid in common stock.................. 4,125 11,332
Equity in undistributed earnings of affiliates
not consolidated............................. (4,704) (1,521)
Revenue from Icahn ticket program.............. (24,202) (16,112)
Net (gains)-losses on disposition of assets.... (9,350) 214
Change in operating assets and liabilities:
Decrease (increase) in:
Receivables.................................... (14,684) (68,540)
Inventories.................................... 5,917 8,528
Prepaid expenses and other current assets...... (44,173) (33,432)
Other assets................................... (8,658) (7,197)
Increase (decrease) in:
Accounts payable and accrued expenses.......... 19,614 (2,687)
Advance ticket sales........................... 80,305 92,431
Other noncurrent liabilities and deferred
credits...................................... (14,112) (17,918)
-------- --------
Net cash used.............................. (36,348) (25,007)
-------- --------
Cash flows from investing activities:
Proceeds from sales of property........................ 14,300 324
Capital expenditures, including aircraft pre-delivery
deposits............................................. (13,602) (46,687)
Net increase in investments, receivables and other..... (26,509) (18,535)
-------- --------
Net cash used.............................. (25,811) (64,898)
-------- --------
Cash flows from financing activities:
Net proceeds from long-term debt and warrants issued... 47,175 --
Repayments on long-term debt and capital lease
obligations.......................................... (31,546) (25,894)
Refund due to retirement of 1967 bonds................. 5,318 --
Net proceeds from sale of preferred stock.............. -- 186,163
Cash dividends paid on preferred stock................. (3,869) (15)
Net proceeds from exercise of warrants................. 17 26
-------- --------
Net cash provided.......................... 17,095 160,280
-------- --------
Net increase (decrease) in cash and cash equivalents....... (45,064) 70,375
Cash and cash equivalents at beginning of period........... 181,586 304,340
-------- --------
Cash and cash equivalents at end of period................. $136,522 $374,715
======== ========
See notes to consolidated financial statements
</TABLE>
5
<PAGE> 6
TRANS WORLD AIRLINES, INC. AND SUBSIDIARIES
<TABLE>
STATEMENTS OF CONSOLIDATED CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
SUPPLEMENTAL CASH FLOW INFORMATION
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------
1997 1996
------- -------
<S> <C> <C>
Cash paid during the period for:
Interest............................................................... $34,624 $33,116
======= =======
Income taxes........................................................... $ 6 $ 35
======= =======
Information about noncash operating, investing and financing activities:
Promissory notes issued to finance aircraft acquisition................ $37,340 $ --
======= =======
Promissory note issued to finance aircraft predelivery payments........ $ 1,532 $ 1,523
======= =======
Common Stock issued in lieu of cash dividends.......................... $ -- $ 3,255
======= =======
Property acquired and obligations recorded under new capital
transactions......................................................... $ 373 $ --
======= =======
Exchange of long-term debt for common stock:
Debt cancelled including accrued interest,
net of unamortized discount...................................... $ 9,330 $ --
======= =======
Common Stock issued, at fair value................................. $10,862 $ --
======= =======
Extraordinary loss................................................. $ 1,532 $ --
======= =======
</TABLE>
ACCOUNTING POLICY
For purposes of the Statements of Consolidated Cash Flows, TWA considers
all highly liquid debt instruments purchased with a maturity of three months or
less to be cash equivalents.
See notes to consolidated financial statements
6
<PAGE> 7
TRANS WORLD AIRLINES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
(UNAUDITED)
1. BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Trans World
Airlines, Inc. ("TWA" or the "Company") and its subsidiaries. The results
of Worldspan, L.P. ("Worldspan"), a 25% owned affiliate, are recorded under
the equity method and are included in the Statements of Consolidated Operations
in Other Charges (Credits).
The unaudited consolidated financial statements included herein have been
prepared by the Company pursuant to the rules and regulation of the Securities
and Exchange Commission but do not include all information and footnotes
required by generally accepted accounting principles pursuant to such rules and
regulations. The consolidated financial statements include all adjustments,
which are of a normal recurring nature and are necessary, in the opinion of
management, for a fair presentation of the results for these interim periods.
These consolidated financial statements and related notes should be read in
conjunction with the consolidated financial statements and related notes
contained in the Company's Annual Report on Form 10-K for the year ended
December 31, 1996. The consolidated balance sheet at December 31, 1996 has been
derived from the audited consolidated financial statements at that date.
Certain amounts previously reported have been reclassified to conform with the
current presentation.
The airline industry generally, and TWA specifically, has historically
experienced seasonal changes between quarterly periods, with the second and
third quarters usually out-performing the first and fourth. Accordingly, the
results for the three months ended March 31, 1997 should not be read as an
indicator of future results for the full year.
2. INCOME TAXES
The income tax benefit recorded for the three months ended March 31, 1997
reflects a quarterly effective tax rate and management's current expectation of
full year 1997 pre-tax profits. Considering the high level of non-deductible
expenses in relation to expected 1997 annual income (which results in both a
high effective tax rate and the potential for significant changes in the
effective rate from relatively small changes in pretax income levels), the
income tax benefit recorded for the first quarter of 1997 was based upon the
quarterly allocable portion of certain non-deductible expenses, primarily
amortization of reorganization value in excess of amounts allocable to
identifiable assets, and statutory tax rates. The 1996 first quarter tax
benefit was determined using an estimated annual effective rate. Had an
estimated quarterly effective rate been used, the tax benefit for the first
three months of 1996 would have been $23.6 million.
3. EXTRAORDINARY ITEM
In the three months ended March 31, 1997 the Company continued a series of
privately negotiated exchanges with a significant holder of its 12% Senior
Secured Reset Notes which resulted in the return to the Company of $10.3
million in 12% Senior Secured Reset Notes and approximately $69,000 in accrued
interest thereon in exchange for the issuance of approximately 1.7 million
shares of Company Common Stock. All 12% Senior Secured Reset Notes returned
will be canceled leaving an outstanding principal balance of such notes of
approximately $114 million. As a result of the exchange of the 12% Senior
Secured Reset Notes, the Company incurred an extraordinary non-cash charge of
$1.5 million in the first quarter of 1997 representing the difference between
the fair value of the Common Stock issued (based upon the trading price of the
Company's Common Stock on the dates of the exchanges) and the carrying value of
the 12% Senior Secured Reset Notes retired.
4. LOSS PER SHARE
In computing the loss applicable to common shares for the three months
ended March 31, 1997, the net loss has been increased by dividend requirements
on the 8% Cumulative Convertible Exchangeable Preferred Stock (the "8%
Preferred Stock"). In computing the related net loss per share, the loss
applicable to common shares has been divided by the average aggregate number of
outstanding shares of Common Stock (43.1 million for the three months
7
<PAGE> 8
TRANS WORLD AIRLINES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ended March 31, 1997) and Employee Preferred Stock (5.9 million for the three
months ended March 31, 1997) which, with the exception of certain special
voting rights, is the functional equivalent of Common Stock. No effect has been
given to stock options, warrants or potential issuances of additional Common
Stock or Employee Preferred Stock in the three month period ended March 31,
1997 as their impact would have been anti-dilutive.
The loss applicable to common shares for the three months ended March 31,
1996 was similarly computed with the net loss being increased by dividend
requirements on the Mandatorily Redeemable 12% Preferred Stock (the "12%
Preferred Stock") (including amortization of the difference between the fair
value of the 12% Preferred Stock on the date of issuance and the redemption
value plus, with respect to the March 22, 1996 call for the redemption, a
special dividend requirement of approximately $20.0 million to reflect the
excess of the early redemption price over the carrying value of the 12%
Preferred Stock) and on the 8% Preferred Stock issued in March 1996. In
computing the related net loss per share, the loss applicable to common shares
was divided by the average aggregate number of outstanding shares of Common
Stock (36.3 million) and Employee Preferred Stock (5.5 million). No effect was
given to stock options, warrants or potential issuances of additional Common
Stock or Employee Preferred Stock as the impact would have been anti-dilutive.
5. SENIOR SECURED NOTES AND REDEEMABLE WARRANTS
In March 1997, the Company offered 50,000 Units ("Units"), with each Unit
consisting of (i) one 12% Senior Secured Note due 2002 (a "Note"), in the
principal amount of $1,000, and (ii) one Redeemable Warrant (a "Warrant") to
purchase 126.26 shares of Common Stock at an exercise price of approximately
$7.92 per share (the "Offering"). The Notes are secured by a lien on certain
assets of the Company, including 1) the Company's beneficial interest in its
FAA designated take-off and landing slots at three high-density,
capacity-controlled airports, 2) currently owned and hereafter acquired defined
ground equipment of the Company used at certain domestic airports and 3) all of
the issued and outstanding stock of (a) a wholly-owned subsidiary of TWA
holding the leasehold interest in a hangar at Los Angeles International Airport
and (b) three wholly-owned subsidiaries of TWA holding leasehold interests in
gates and related support space at certain domestic airports served by the
Company. The Company realized approximately $47.2 million (net of discounts and
commissions and estimated expenses) in proceeds from the Offering. The Company
used approximately $0.5 million of the proceeds from the Offering to release
certain of the collateral to be used to secure the Notes from a prior existing
lien and the remainder of the proceeds for general corporate purposes.
The Offering was made pursuant to Rule 144A of the Securities Act of 1933,
as amended (the "Securities Act"), and, accordingly, the Units, Notes and
Warrants and underlying shares of Common Stock issuable upon exercise of the
Warrants are not registered under the Federal and state securities laws. The
Company has agreed to use its best efforts to file registration statements with
respect to (i) an offer to exchange registered Notes for any and all
outstanding Notes, and (ii) the Warrants and underlying shares of Common Stock,
and to thereby register the Notes and the Warrants under the Securities Act.
6. PREFERRED STOCK
In March 1996, the Company completed an offering, pursuant to Rule 144A of
the Securities Act, of 3,869,000 shares of its 8% Preferred Stock, with a
liquidation preference of $50 per share. Each share of the 8% Preferred Stock
may be converted at any time, at the option of the holder, unless previously
redeemed or exchanged, into shares of Common Stock at a conversion price of
$20.269 per share (equivalent to a conversion rate of approximately 2.467
shares of Common Stock for each share of 8% Preferred Stock), subject to
adjustment. Pursuant to the registration rights agreement between the Company
and the initial purchasers of the 8% Preferred Stock, the Company filed a shelf
registration statement effective August 16, 1996 to register resales of the 8%
Preferred Stock, the Debentures (as defined below) and the underlying shares of
Common Stock issuable upon conversion thereof.
The 8% Preferred Stock may not be redeemed prior to March 15, 1999. On or
after March 15, 1999, the 8% Preferred Stock may be redeemed, in whole or in
part, at the option of the Company, at specified redemption prices.
8
<PAGE> 9
TRANS WORLD AIRLINES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The 8% Preferred Stock may be exchanged at the option of the Company, in
whole but not in part, for the Company's 8% Convertible Subordinated Debentures
Due 2006 (the "Debentures") on any dividend payment date beginning March 15,
1998 at the rate of $50 principal amount of Debentures for each share of 8%
Preferred Stock outstanding at the time of exchange; provided that all accrued
and unpaid dividends on the 8% Preferred Stock to the date of exchange, whether
or not earned or declared, have been paid or set aside for payment and certain
other conditions are met.
On March 22, 1996, the Company announced a call for redemption on April 26,
1996 (the "Redemption Date") of all of its issued and outstanding 12%
Preferred Stock. Such shares were redeemed at a redemption price per share
equal to $75.00, plus accrued dividends to and including the Redemption Date,
of $2.8667 per share. On April 26, 1996, the Company paid an aggregate of $84.9
million in redemption of the 12% Preferred Stock.
7. STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 128
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings Per Share" which revises the calculation and presentation
provisions of Accounting Principles Board Opinion 15 and related
interpretations. While statement No. 128 is effective for the Company's fiscal
year ending December 31, 1997, retroactive application will be required. The
Company believes that the adoption of Statement No. 128 will not have a
significant effect on its reported earnings per share.
8. CONTINGENCIES
There has not been any significant change in the status of the
contingencies reflected in the Notes to consolidated financial statements
included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1996, which, among other matters, described various contingencies
and other legal actions against TWA, except as discussed in Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Certain statements made below relating to plans, conditions, objectives,
and economic performance go beyond historical information and may provide an
indication of future results. To that extent, they are forward-looking
statements within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and each is subject to risk,
uncertainties, and assumptions that could cause actual results to differ from
those in the forward-looking statement. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those anticipated, estimated or
projected. Some of, although not all, the uncertainties that might adversely
impact TWA's future results of operations are described below.
Following its emergence from bankruptcy in August 1995 (the "'95
Reorganization"), the Company experienced improved operating performance
through the end of the second quarter of 1996. However, beginning in the third
quarter of 1996, the Company's operating performance substantially
deteriorated, which management now believes was largely due to an overly
aggressive increase in capacity, resulting in excessive levels of flight
cancellations and deterioration in on-time performance. The Company believes
that this has adversely affected its unit revenues (principally yields) and
costs. In response to this deterioration in operating performance, management
has taken action to improve on-time performance and, also, schedule completion
rates by, among other things, accelerating the maintenance for its narrow-body
aircraft. Additionally, the Company has elected to phase out its wide-body
B-747 and L-1011 fleets, reduce low yield domestic JFK feed service,
consolidate for the near term most of its JFK operations into a single terminal
and eliminate historically unprofitable international routes. These actions are
designed to improve the Company's financial performance and make its product
more competitive to the business segment which offers higher yields. The
Company also took action to curtail maintenance services provided to third
parties and to refocus those resources to its own maintenance operation.
Management believes the above actions, initiated and performed during the
latter part of 1996 and the first quarter of 1997, have already resulted in
improved operational performance and schedule reliability; however, the
Company's unit revenues, yields and cash position continue to be adversely
affected by the negative impact on consumer demand created by the previous
deterioration in operating performance, particularly in the higher-yield
business traveler segment of the market. As a result of these factors, the
Company anticipates that its 1997 second quarter financial performance will be
worse than those reported for the second quarter of 1996.
GENERAL
The airline industry is both cyclical and seasonal in nature. The Company's
operating results are also significantly affected by competitive factors in the
airline industry. Significant variations in annual operating revenues and
operating expenses have been experienced historically by TWA and are expected
to continue in the future. Numerous uncertainties concerning the level of
revenues and expenses always exist and it is not possible to predict the
potential impact of such uncertainties upon TWA's results of operations. Among
the uncertainties that might adversely impact TWA's future results of
operations are: (i) competitive pricing and scheduling initiatives; (ii) the
availability and cost of capital; (iii) increases in fuel and other operating
costs; (iv) insufficient levels of air passenger traffic resulting from, among
other things, war, threat of war, terrorism or changes in the economy; (v)
governmental limitations on the ability of TWA to service certain airports
and/or foreign markets; (vi) regulatory requirements requiring additional
capital expenditures; (vii) the outcome of certain upcoming labor negotiations;
(viii) the possible reduction in yield due to a discount ticket program entered
into by the Company with Karabu Corporation, an entity affiliated with Carl C.
Icahn ("Karabu"), in connection with the '95 Reorganization and (ix) the
impact of the public's perception of the crash of TWA Flight 800.
The Company's operating results for any interim period are not necessarily
indicative of those for the entire year due to seasonal fluctuations. The
second and third quarter results have historically been more favorable for the
Company due to increased leisure travel on both domestic and international
routes during the spring and summer months.
TWA has no unused credit lines and must satisfy substantially all of its
working capital and capital expenditure requirements from cash provided by
operating activities or from external capital sources. TWA has relatively few
non-strategic assets which it could monetize, substantially all of such assets
being subject to various liens and security interests which would restrict
and/or limit the ability of TWA to realize any significant proceeds from the
sale thereof.
10
<PAGE> 11
To the extent that the Company's access to capital is constrained, the Company
may not be able to make certain capital expenditures or implement certain other
aspects of its strategic plan, and the Company may therefore be unable to
achieve the full benefits expected therefrom.
The Company's ability to continue to improve its financial position and
meet its financial obligations will depend upon a variety of factors,
including: improved operating results, favorable domestic and international
airfare pricing environments, absence of adverse general economic conditions,
continued operating cost controls, and the Company's ability to attract new
capital. No assurance can be given that the Company will be successful in
generating the operating results required for future viability.
TWA's passenger traffic data, for scheduled passengers only and excluding
TWE, are shown in the table below for the indicated periods(1):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------- --------------------------------
1997 1996 1996 1995 1994
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
TOTAL SYSTEM
Passenger revenues ($ millions)................................ $672 $678 $3,078 $2,836 $2,818
Revenue passenger miles (millions)<F2>......................... 5,673 5,847 27,111 24,902 24,906
Available seat miles (millions)<F3>............................ 8,558 9,188 40,594 37,905 39,191
Passenger load factor <F4>..................................... 66.3% 63.6% 66.8% 65.7% 63.5%
Passenger yield (cents)<F5>.................................... 11.84 11.59 11.35 11.39 11.31
Passenger revenue per available seat mile (cents)<F6>.......... 7.85 7.38 7.58 7.48 7.19
Operating cost per available seat mile (cents)<F7>............. 9.86 8.82 8.76 8.12 8.45
Average daily utilization per aircraft (hours)<F8>............. 8.95 9.63 9.63 9.45 9.30
Aircraft in service at end of period........................... 185 183 192 188 185
<FN>
- --------
<F1> Excludes subsidiary companies.
<F2> The number of scheduled miles flown by revenue passengers.
<F3> The number of seats available for passengers multiplied by the number of
scheduled miles those seats are flown.
<F4> Revenue passenger miles divided by available seat miles.
<F5> Passenger revenue per revenue passenger mile.
<F6> Passenger revenue divided by available seat miles.
<F7> Operating expenses, excluding special charges, earned stock compensation
and other nonrecurring charges, divided by available seat miles.
<F8> The average block hours flown per day in revenue service per aircraft.
</TABLE>
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THE
THREE MONTHS ENDED MARCH 31, 1996
The Company's operating loss of $99.5 million and net loss of $71.6 million
for the three months ended March 31, 1997 increased from the operating loss of
$54.2 million and net loss of $37.1 million for the first quarter of 1996. This
decline was the result of a $20.1 million (2.6%) decrease in operating revenues
and a $25.2 million (3.0%) increase in operating expenses, while net
non-operating charges decreased by $14.4 million (71.6%).
The operating loss of $99.5 million for the quarter ended March 31, 1997
was $45.3 million greater than the operating loss of $54.2 million in the first
quarter of 1996. The net loss of $71.6 million for the first quarter of 1997
was $34.5 million greater than TWA's net loss of $37.1 million for the first
quarter of 1996. Additionally, the 1997 net loss included $1.5 million in
extraordinary losses related to the early extinguishment of debt.
Operating revenues of $762.3 million during the first quarter of 1997 were
$20.1 million (2.6%) less than the comparable 1996 period primarily because of
decreases in revenues from contract work ($9.2 million), passenger revenue
($6.1 million) and cargo revenue ($4.4 million).
Capacity and traffic decreased in the first quarter of 1997 from the
comparable period of 1996. System capacity, as measured by total available seat
miles (ASMs), decreased by 7.1% during the first quarter of 1997 (representing
decreases in domestic and international ASMs of 3.4% and 21.3%, respectively).
The decrease in capacity was
11
<PAGE> 12
primarily attributed to the ongoing replacement of B-747 and L-1011 aircraft
with smaller B-767 and B-757 aircraft and the reduced number of narrow-body
aircraft operated in the schedule to move more aircraft through required
scheduled maintenance prior to the peak travel season. Passenger traffic
volume, as measured by revenue passenger miles (RPMs) in scheduled service,
during the first quarter of 1997 decreased 3.0% compared to the same period of
1996. Passenger load factor for the quarter ended March 31, 1997 was 66.3%
compared to 63.6% in the same period of 1996. TWA's yield per passenger mile
increased to 11.84 cents in 1997 from 11.59 cents in 1996.
Operating expenses of $861.8 million in the first quarter of 1997 reflected
an increase of $25.2 million (3.0%) over the operating expenses of $836.6
million for the three months ended March 31, 1996, representing a net change in
the following expense groups:
* Employment costs of $315.3 million for the first quarter of 1997 were
$19.0 million (6.4%) more than the same period in 1996, primarily due to
an increase in the average number of employees and overtime costs related
to the accelerated maintenance schedules for the Company's narrow-body
fleet and crew retraining in connection with changes in fleet
composition. The Company had an average of 24,468 full-time equivalent
employees in the first quarter of 1997 as compared to 23,450 in the first
quarter of 1996.
* Earned stock compensation charges of $1.3 million for the first quarter
of 1997 and $5.0 million for the first quarter of 1996 represents
primarily the non-cash compensation charge recorded to reflect the
expense associated with the distribution of shares of stock on behalf of
employees as part of the '95 Reorganization. A substantial portion of the
decrease is attributable to the lower trading price of the Common Stock
during the first quarter of 1997 as compared to the first quarter of
1996.
* Aircraft fuel and oil expense of $129.9 million for the first quarter of
1997 was $0.5 million greater than the expenses of $129.4 million for the
three months ended March 31, 1996. Although total expenses increased only
slightly the average cost of fuel per gallon increased from 66.58 cents
in 1996 to 74.02 cents in 1997, but was offset, in large part, by a
reduction in gallons consumed (175.5 million gallons in 1997 versus 194.3
million gallons in 1996).
* Passenger sales commission expense of $57.6 million for the first quarter
of 1997 was $6.4 million (10.0%) less than the comparable period in 1996
primarily due to a decrease in international passenger revenues related
to the reduction in international capacity and reduced sales development
commissions.
* Aircraft maintenance materials and repairs expense of $43.7 million for
the first three months of 1997 represented a decrease of $4.1 million
(8.6%) from $47.8 million for the same period of 1996. The decrease was
primarily the result of a 7.6% decrease in flying hours and a reduction
in contract maintenance work.
* Depreciation and amortization expense decreased $0.8 million in the first
quarter of 1997 compared to the same period of 1996. Special charges
recorded in the fourth quarter of 1996, related to international route
authorities and aircraft to be disposed of, reduced depreciation and
amortization in the first quarter of 1997 by approximately $3.2 million.
The remaining increase is primarily attributed to the acquisition of
additional aircraft.
* Operating lease rentals of $85.8 million for the first quarter of 1997
were $15.5 million (22.0%) more than the rentals of $70.3 million for the
first three months of 1996. The increase was primarily due to an increase
in the average number of leased aircraft from 120 in 1996 to 132 in 1997
and higher lease rates attributable primarily to the addition of B-757
and MD-80/83 aircraft to the fleet.
* Passenger food and beverage expense of $20.4 million during the first
three months of 1997 represented a decrease of $5.1 million (20.0%) from
$25.5 million during the first three months of 1996. The decrease is
primarily due to the 21.9% reduction in the number of passengers boarded
for international flights resulting from a 21.5% reduction in
international scheduled ASMs and savings derived from changes and
improved efficiencies in food and beverage service.
* All other operating expenses of $168.9 million during the first three
months of 1997 increased by $10.1 million (6.4%) from $158.8 million for
the three months ended March 31, 1996. The increase was primarily due to
additional crew accommodation expenses related to flight simulator
training for pilots and an increase in computerized reservation system
fees.
Other charges (credits) were a net charge of $5.7 million for the first
quarter of 1997 as compared to $20.1 million for the same period in 1996.
Interest expense decreased $5.2 million in 1997 over 1996 as a result of the
reduction of
12
<PAGE> 13
debt during 1996. Interest income decreased by $3.1 million in 1997 primarily
as a result of lower levels of invested funds. Net gains from the disposition
of assets were $9.4 million in the first quarter of 1997 as compared to a net
loss of $0.2 million in the same period of 1996. The net gain in 1997 included
gains of $7.3 million related to the sale of three gates at Newark
International Airport and $2.1 million related to the sale of spare flight
equipment. Other charges and credits-net improved $2.8 million in 1997 compared
to 1996, primarily due to a $3.2 million improvement in the Company's share of
earnings of Worldspan.
LIQUIDITY AND CAPITAL RESOURCES
The following is a discussion of the impact of significant factors
affecting TWA's liquidity position and capital resources.
Liquidity
The Company's consolidated cash and cash equivalents balance at March 31,
1997 was $136.5 million (including approximately $20.9 million in cash and cash
equivalents held in its international operations and by its subsidiaries which,
based upon various foreign monetary regulations and other factors, might not be
immediately available to the Company), a $45.1 million decrease from the
December 31, 1996 balance of $181.6 million. In February 1997, in order to
improve its liquidity, the Company entered into an agreement with and received
approximately $26 million from certain St. Louis business enterprises,
representing the advance payment for tickets for future travel by such
enterprises and in March 1997, the Company raised approximately $47.2 million
in net proceeds from the issuance of the Notes and Warrants (see Note 5 to the
consolidated financial statements). The Company continues to pursue other
projects intended to increase its cash balances.
The net decrease in cash and cash equivalents during 1997 was due, in part,
to the fact that cash used in operating activities in 1997 was $36.3 million as
compared to 1996 when $25.0 million was used by operating activities. Pursuant
to the eight-year Karabu Ticket Program Agreement between the Company and
Karabu (the "Ticket Agreement") net discounted sales from tickets sold under
the agreement are excluded from cash provided by operating activities as the
related amounts were applied as a $20.6 million reduction to the outstanding
balance of financing provided to TWA by Karabu (the "Icahn Loans"). Cash used
in investing activities decreased $39.1 million from $64.9 million in 1996 to
$25.8 million in 1997. A large part of this decrease was related to the
reduction in capital expenditures and new aircraft predelivery deposits ($13.6
million in 1997 versus $46.7 million in 1996) and an increase of $14.0 million
in proceeds from asset sales. Gross proceeds from assets sold during the first
quarter of 1997 included $10.0 million for three gates at Newark International
Airport and $4.3 million for spare flight equipment. Financing activities
provided $17.1 million of cash in 1997, while such activities provided cash of
$160.3 million in 1996. Proceeds from the issuance of the Notes and Warrants,
as described in Note 5 to the consolidated financial statements, was $47.2
million in 1997. Repayments of long-term debt and capital leases required $5.7
million more cash in 1997 than in 1996. In 1996, net proceeds from the sale of
8% Preferred Stock were $186.2 million.
As previously described, management has indicated that it is focusing on
the improvement of TWA's schedule reliability and on-time performance and that
it plans to accelerate the replacement of it's L-1011 and B-747 fleets with
B-757, B-767 and MD-80 aircraft. Management believes that such operational
changes have resulted in improvements to the Company's operating performance.
However, the Company's unit revenues, yields and cash position continue to be
adversely affected by the negative impact on consumer demand created by the
previous deterioration in operating performance, particularly in the
higher-yield business traveler segment of the market. As a result, it is
anticipated that as a result of these factors, the Company's cash balances at
June 30, 1997 will be a level significantly below that reported as of December
31, 1996. The Company believes that a substantial improvement in its operating
results is necessary for TWA to maintain adequate liquidity to meet its
obligations throughout the remainder of 1997. The achievement of these improved
operating results are subject to significant uncertainties, including the
Company's ability to achieve higher revenue yields and load factors, the cost
of aircraft fuel, the Company's ability to finance or lease suitable
replacement aircraft at reasonable rates and the containment of operating
costs. No assurance can be given that any of the initiatives already
implemented or any new initiatives, if implemented, will be successful, or if
successful, that such initiatives will produce sufficient results for the
Company to be successful in generating the operating revenues and cash required
for profitable operations or future viability.
In March 1997, the Company offered 50,000 Units, with each Unit consisting
of (i) one 12% Senior Secured Note due 2002, in the principal amount of $1,000,
and (ii) one Redeemable Warrant to purchase 126.26 shares of Common Stock at an
exercise price of approximately $7.92 per share. The Notes are secured by a
lien on certain assets of the Company, including 1) the Company's beneficial
interest in its FAA designated take-off and landing slots at three
13
<PAGE> 14
high-density, capacity-controlled airports, 2) currently owned and hereafter
acquired defined ground equipment of the Company used at certain domestic
airports and 3) all of the issued and outstanding stock of (a) a wholly-owned
subsidiary of TWA holding the leasehold interest in a hangar at Los Angeles
International Airport and (b) three wholly-owned subsidiaries of TWA holding
leasehold interest in gates and related support space at certain domestic
airports served by the Company. The Company realized approximately $47.2
million (net of discounts and commissions and estimated expenses) in proceeds
from the Offering. The Company used approximately $0.5 million of the proceeds
from the Offering to release certain of the collateral to be used to secure the
Notes from a prior existing lien and the remainder of the proceeds for general
corporate purposes.
In March 1996 the Company completed the sale of 3,869,000 shares of its 8%
Preferred Stock for gross proceeds of approximately $193.5 million and net
proceeds to the Company of approximately $186.2 million, after commissions and
expenses. A portion of the net proceeds from the sale of the 8% Preferred Stock
were used to redeem the Company's outstanding 12% Preferred Stock, pursuant to
the terms thereof, at an aggregate redemption price of approximately $81.7
million, plus accrued dividends from February 1, 1996 to the redemption date of
April 26, 1996. The Company utilized the balance of the net proceeds for
general corporate purposes, including but not limited to, capital expenditures
and increasing working capital.
Pursuant to the '95 Reorganization, the Company issued 600,000 ticket
vouchers, each with a face value of $50.00, which may be used for up to 50%
discount off the cost of a TWA airline ticket for transportation on TWA
("Ticket Vouchers"). Pursuant to certain agreements, the Company repurchased
approximately 236,000 of the Ticket Vouchers at an aggregate cost of $8.8
million. Payments in respect of these Ticket Vouchers were approximately
$700,000 in 1995 and approximately $8.1 million in 1996. Concurrently, the
Company undertook aircraft lease payment deferrals to increase liquidity and
improve the Company's financial condition. Gross deferrals of lease and
conditional sale indebtedness payments aggregated approximately $91.0 million
with a weighted average repayment period of approximately two years. The
aircraft lease payment deferrals contemplated by the '95 Reorganization
generally anticipated six month deferrals with various payback periods,
extending in some instances over the remaining life of the lease, and in other
cases over a specified period. Cash repayments of lease deferrals, including
interest, were approximately $9.5 million in the fourth quarter of 1995, $23.8
million in 1996 and are expected to approximate $8.7 million in 1997.
On June 14, 1995, the Company signed an agreement with Karabu pursuant to
which the term of the Icahn Loans was extended from January 8, 1995 to January
8, 2001. Karabu and certain other affiliates of Mr. Icahn (the "Icahn
Entities") consented to certain modifications to promissory notes (the "PBGC
Notes") issued to a settlement trust on behalf of the Pension Benefit and
Guaranty Corporation (the "PBGC") in connection with the Company's 1993
Chapter 11 Reorganization (the "'93 Reorganization") and the Icahn Entities
agreed to refrain from exercising the right during 1995 to terminate certain
pension plans covering employees of the Company as to which Mr. Icahn and the
Icahn Entities assumed certain obligations in the '93 Reorganization. Any such
termination would not increase the obligations of TWA on the PBGC Notes or
other obligations of TWA to Mr. Icahn, the Icahn Entities or the PBGC.
Collateral for the Icahn Loans includes a number of aircraft, engines and
related equipment, along with substantially all of the Company's receivables.
At March 31, 1997, the outstanding balance of the Icahn Loans was approximately
$104.5 million (excluding approximately $2.5 million in accrued and unpaid
interest). The notes evidencing the Icahn Loans have been pledged by Mr. Icahn
and certain affiliated entities as security for certain obligations of the
Icahn Entities to the PBGC and/or in respect of funding obligations on the
Company's pre-'93 Reorganization pension plans.
On June 14, 1995, in consideration of, among other things, the extension of
the Icahn Loans, TWA and Karabu entered into the Ticket Agreement. There are
two categories of tickets under the Ticket Agreement: (1) "Domestic
Consolidator Tickets," which are subject to a cap of $610 million, based on
the full retail price of the tickets ($120 million in the first 15 months and
$70 million per year for seven consecutive years through the term of the Ticket
Agreement) and (2) "System Tickets," which are not subject to any cap
throughout the term of the Ticket Agreement.
Tickets sold by the Company to Karabu pursuant to the Ticket Agreement are
priced at levels intended to approximate current competitive discount fares
available in the airline industry. The Ticket Agreement provides that no ticket
may be included with an origin or destination of St. Louis, nor may any ticket
include flights on other carriers. Tickets sold by Karabu pursuant to the
Ticket Agreement are required to be at fares specified in the Ticket Agreement,
net to TWA, and exclusive of tax. No commissions will be paid by TWA for
tickets sold under the Ticket Agreement, and TWA believes that under the
applicable provisions of the Ticket Agreement, Karabu may not
14
<PAGE> 15
market or sell such tickets through travel agents. Karabu, however, has been
marketing tickets through travel agents. TWA has demanded that Karabu cease
doing so and Karabu has stated that it disagrees with the Company's
interpretation concerning sales through travel agents. In December 1995, the
Company filed a lawsuit against Karabu, Mr. Icahn and affiliated companies
seeking damages and to enjoin further violations. Mr. Icahn countered
threatening to attempt to declare a default on the Icahn Loans on a variety of
claims related to his various interpretations of the security documents related
to such loans as well as with respect to alleged violations of the Ticket
Agreement by the Company. A violation of the Ticket Agreement by the Company
could result in a cross-default under the Icahn Loans. Mr. Icahn also alleged
independent violations of the Icahn Loans, including, among other things, that
the Company has not been maintaining, as required by the terms of the Icahn
Loans, certain aircraft which TWA has retired from service and stored which are
pledged as security for the Icahn Loans.
To endeavor to eliminate this issue from the various disputes with Mr.
Icahn, the Company has deposited an amount equal to the appraised fair market
value with a security trustee and requested the release of the liens on such
aircraft. To date, the Trustee has not released such liens. The parties
negotiated a series of standstill agreements pursuant to which TWA's original
lawsuit was withdrawn, while the Company and Mr. Icahn endeavored to negotiate
a settlement of their differences and respective claims. Those negotiations
reached an impasse and the Company re-filed its suit on March 20, 1996 in the
St. Louis County Circuit Court. Also on March 20, 1996, Karabu and certain
other companies controlled by Mr. Icahn filed suit against the Company alleging
violations by the Company of the Ticket Agreement and federal anti-trust laws.
On March 24, 1997, the Federal District Court for the Southern District of New
York, on the Company's motion, dismissed the suit in its entirety. If Karabu's
interpretation as to sales of discount tickets to the general public through
travel agents was determined by a court or otherwise to be correct and the
Company did not otherwise take appropriate action to mitigate the effect of
such sales, the Company could suffer significant loss of revenue so as to
reduce overall passenger yields on a continuing basis during the term of the
Ticket Agreement. In addition, any default by the Company under the Ticket
Agreement or directly on the Icahn Loans which resulted in an acceleration of
the Icahn Loans could result in a cross-default to the Company's other
indebtedness and leases and otherwise have a material adverse effect on the
Company.
Domestic Consolidator Tickets sold under the Ticket Agreement are limited
to certain origin/destination city markets in which TWA has less than a 5%
market share limit except for New York where there is a 10% limit. These
restricted markets will be reviewed from time to time to determine any change
in TWA's market share, and other markets may be designated as necessary.
The purchase price for the tickets purchased by Karabu are required to
either, at Karabu's option, be retained by Karabu and the amount so retained
credited as prepayments against the outstanding balance of the Icahn Loans, or
be paid over by Karabu to a settlement trust established in connection with the
'93 Reorganization for TWA's account as prepayments on the PBGC Notes. At March
31, 1997, approximately $85.5 million of such proceeds had been applied to the
principal balance of the Icahn Loans and $6.4 million had been applied to the
PBGC Notes.
The Company elected to pay all the interest due August 1, 1995 and February
1, 1996, and half the interest due February 1, 1997, on its 12% Senior Secured
Reset Notes, in shares of Common Stock. The amount of such interest aggregated
approximately $10.4 million, $10.2 million and $3.7 million, respectively, and
resulted in the issuance of approximately 1.9 million, 1.1 million and 0.6
million shares of Common Stock on the respective dates. The Company elected to
pay dividends due February 1, 1996 on its 12% Preferred Stock for the period
from November 1, 1995 to and including January 31, 1996, in the amount of
approximately $3.3 million, in shares of Common Stock.
Capital Resources
TWA has no unused credit lines and must satisfy all of its working capital
and capital expenditure requirements from cash provided by operating
activities, from external borrowings or from the sale of assets. Substantially
all of TWA's strategic assets, including its owned aircraft, ground equipment,
gates, slots and overhaul facilities, have been pledged to secure various
issues of outstanding indebtedness of the Company. Sales of such assets which
are not replaced would, under the terms of applicable financing agreements,
generally require payment of the indebtedness secured thereby, which
indebtedness in many cases would likely exceed the immediately realizable value
of such assets. TWA has relatively few non-strategic assets which it could
monetize, substantially all of such assets being subject to various liens and
security interests which would restrict and/or limit the ability of TWA to
realize any significant proceeds from the sale thereof. To the extent that the
Company's access to capital is constrained, the Company may not be able to make
certain capital expenditures or implement certain other aspects of its
strategic plan, and the Company may therefore be unable to achieve the full
benefits expected therefrom.
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<PAGE> 16
Commitments
In February 1996, TWA executed definitive agreements providing for the
operating lease of 10 new B-757 aircraft to be delivered in 1996 and 1997.
Although individual aircraft rentals escalate over the term of the leases,
aggregate rental obligations are estimated to average approximately $50 million
per annum over the lease terms after all 10 aircraft have been delivered. These
aircraft have an initial lease term of 10 years. As of March 31, 1997, the
Company has taken delivery of six leased B-757 aircraft. The Company also
entered into an agreement in February 1996 with Boeing for the purchase of ten
B-757 aircraft and related engines, spare parts and equipment for an aggregate
purchase price of approximately $500 million. The agreement requires the
delivery of the aircraft in 1997, 1998 and 1999, and provides for the purchase
of up to ten additional aircraft. As of April 7, 1997 TWA has taken delivery of
two manufacturer financed aircraft. Furthermore, to the extent TWA exercises
its options for additional aircraft, the Company will have the right to an
equal number of additional option aircraft. TWA has obtained commitments for
debt financing for approximately 80% of the total costs associated with the
acquisition of eight of the original ten aircraft and obtained commitments for
100% lease financing of the total costs of the remaining two original aircraft.
Such commitments are subject to, among other things, so-called material adverse
change clauses which, given the Company's recent financial results, could make
the availability of such debt and lease financing dependent upon the lender's
and lessor's ongoing evaluation of and satisfaction with the financial
condition of TWA.
TWA has entered into agreements with AVSA, S.A.R.L. and Rolls-Royce plc
relating to the purchase of ten A330-300 twin-engine wide body aircraft and
related engines, spare parts and equipment for an aggregate purchase price of
approximately $1.1 billion. The agreements, as amended, require the delivery of
the aircraft in 1999 and 2000 and provide for the purchase of up to ten
additional aircraft. TWA has not yet made arrangements for the permanent
financing of the purchases subject to the agreements. In the event of
cancellation, predelivery payments of approximately $18 million would be
subject to forfeiture.
The Company has entered into an agreement to acquire fifteen new MD-83s
from the manufacturer. The long-term leasing arrangement provides for delivery
of the aircraft between the second quarter of 1997 and April 1999.
TWA has elected to comply with the transition requirements of the Noise Act
by adopting the Stage 2 aircraft phase-out/retrofit option, which requires that
50% of its base level (December 1990) Stage 2 fleet be phased-out/retrofitted
by December 31, 1996, 75% by December 31, 1998 and 100% by December 31, 1999.
To comply with the 1996 requirement, the Company has retrofitted, by means of
engine hush-kits, 32 of its DC-9 aircraft. The aggregate cost of these
hush-kits is estimated to be $52 million, most of which has been financed by
lessors with repayments being facilitated through increased rental rates.
Certain Other Capital Requirements
Expenditures for facilities and equipment, other than aircraft, generally
are not committed prior to purchase and, therefore, no such significant
commitments exist at the present time. TWA's ability to finance such
expenditures will depend in part on TWA's financial condition at the time of
the commitment.
Availability of NOLs
The Company estimates that it had, for federal income tax purposes, net
operating loss carryforwards ("NOLs") amounting to approximately $625 million
at December 31, 1996, which includes increases in the NOLs as originally filed.
Such NOLs expire in 2008 through 2011 if not utilized before then to offset
taxable income. Section 382 of the Internal Revenue Code of 1986, as amended
(the "Code"), and regulations issued thereunder, impose limitations on the
ability of corporations to use NOLs, if the corporation experiences a more than
50% change in ownership during certain periods. In connection with the change
of ownership caused by the '95 Reorganization, the Company elected to reduce
its NOLs in accordance with Section 382 of the Code and regulations issued
thereunder. If another ownership change were to occur prior to September 1997,
the annual limitation on the Company's utilization of its then existing NOLs
would be reduced to zero. Changes in ownership in periods thereafter could
substantially restrict the Company's ability to utilize its tax net operating
loss carryforwards. There can be no assurance that an ownership change will not
occur in the future. In addition, the NOLs are subject to examination by the
IRS, and thus, are subject to adjustment or disallowance resulting from any
such IRS examination. For financial reporting purposes, the tax benefits from
tax net operating loss carryforwards arising prior to the Company's emergence
from its '95 Reorganization on August 23, 1995 will, to the extent realized in
future periods, have no impact on the Company's operating results, but instead
be applied to reduce reorganization value in excess of amounts allocable to
identifiable assets.
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<PAGE> 17
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES. SALES OF UNREGISTERED SECURITIES
Pursuant to certain Exchange Agreements with Elliott Associates L. P. and
Westgate International L. P. reported on a Form 8-K filed on September 20,
1996, the Company exchanged 1,661,060 shares of Common Stock for $10.25 million
principal amount of its 12% Senior Secured Reset Notes (the "Notes") plus
approximately $0.07 million in accrued interest thereon in a series of
transactions in the first quarter of 1997. An additional 719,378 shares of
Common Stock were exchanged for an additional $4.5 million principal amount of
Notes in April 1997. The Common Stock was issued pursuant to the exemption
granted by Section 3(a)(9) of the Securities Act. The Notes were registered and
issued pursuant to the Company's registration statement on Form S-4 filed with
the Commission on May 12, 1995.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<S> <C>
(a) EXHIBITS
<F*>2.1 --Joint Plan of Reorganization, dated May 12, 1995 (Appendix B to Registrant's
Registration Statement on Form S-4, Registration Number 33-84944, as amended)
<F*>2.2 --Modifications to Joint Plan of Reorganization, dated July 14, 1995 and Supplemental
Modifications to Joint Plan of Reorganization dated August 2, 1995 (Exhibit 2.5 to 6/95
10-Q)
<F*>2.3 --Findings of Fact, Conclusions of Law and Order Confirming Modified Joint Plan of
Reorganization, dated August 4, 1995, with Exhibits A-B attached (Exhibit 2.6 to 6/95
10-Q)
<F*>2.4 --Final Decree, dated December 28, 1995, related to the '95 Reorganization (Exhibit 2.7 to
12/31/95 Form 10-K)
<F*>3(i) --Third Amended and Restated Certificate of Incorporation of Trans World Airlines, Inc.
(Exhibit 3(iv) to Registrant's Registration Statement on Form S-3,
Registration No. 333-04977)
<F*>3(ii) --Amended and Restated By-Laws of Trans World Airlines, Inc., effective May 24, 1996
(Exhibit 3(ii) to 6/96 10-Q)
<F*>4.1 --Voting Trust Agreement, dated November 3, 1993, between TWA and LaSalle National Trust,
N.A. as trustee (Exhibit 4.3 to 9/93 10-Q)
<F*>4.2 --IAM Trans World Employees' Stock Ownership Plan and related Trust Agreement, dated
August 31, 1993, between TWA, the IAM Plan Trustee Committee and the IAM Trustee
(Exhibit to 9/93 10-Q)
<F*>4.3 --IFFA Trans World Employees' Stock Ownership Plan and related Trust Agreement, dated
August 31, 1993, between TWA, the IFFA Plan Trustee Committee and the IFFA Trustee
(Exhibit 4.5 to 9/93 10-Q)
<F*>4.4 --Trans World Airlines, Inc. Employee Stock Ownership Plan, dated August 31, 1993, First
Amendment thereto, dated October 31, 1993, and related Trust Agreement, dated August 31,
1993, between TWA and the ESOP Trustee (Exhibit 4.6 to 9/93 10-Q)
<F*>4.5 --ALPA Stock Trust, dated August 31, 1993, between TWA and the ALPA Trustee
(Exhibit 4.7 to 9/93 10-Q)
<F*>4.6 --Stockholders Agreement, dated November 3, 1993, among TWA, LaSalle National Trust, N.A.,
as Voting Trustee and the ALPA Trustee, IAM Trustee, IFFA Trustee and Other Employee
Trustee (each as defined therein), as amended by the Addendum to Stockholders dated
November 3, 1993 (Exhibit 4.8 to 9/93 10-Q)
<F*>4.7 --Registration Rights Agreement, dated November 3, 1993, between TWA and the Initial
Significant Holders (Exhibit 4.9 to 9/93 10-Q)
<F*>4.8 --Indenture between TWA and Shawmut Bank, National Association, dated November 3, 1993
relating to TWA's 10% Senior Secured Notes Due 1998 (Exhibit 4.10 to 9/93 10-Q)
17
<PAGE> 18
<S> <C>
<F*>4.9 --Indenture between TWA and Harris Trust and Savings Bank, dated November 3, 1993 relating
to TWA's 8% Senior Secured Notes Due 2000 (Exhibit 4.11 to 9/93 10-Q)
<F*>4.10 --Indenture between TWA and American National Bank and Trust Company of Chicago, N.A.,
dated November 3, 1993 relating to TWA's 8% Secured Notes Due 2001
(Exhibit 4.12 to 9/93 10-Q)
<F*>4.11 --Indenture between TWA and Shawmut Bank Connecticut, National Association, dated November
3, 1993 relating to TWA's 11% Senior Secured Notes Due 1997
(Exhibit 4.13 to 9/93 10-Q)
<F*>4.12 --The TWA Air Line Pilots 1995 Employee Stock Ownership Plan, effective as of January 1,
1995 (Exhibit 4.12 to 9/95 10-Q)
<F*>4.13 --TWA Air Line Pilots Supplemental Stock Plan, effective September 1, 1994
(Exhibit 4.13 to 9/95 10-Q)
<F*>4.14 --TWA Air Line Pilots Supplemental Stock Plan Trust, effective August 23, 1995
(Exhibit 4.14 to 9/95 10-Q)
<F*>4.15 --TWA Air Line Pilots Supplemental Stock Plan Custodial Agreement, effective August 23,
1995 (Exhibit 4.15 to 9/95 10-Q)
<F*>4.16 --Form of Indenture relating to TWA's 8% Convertible Subordinated Debentures Due 2006
(Exhibit 4.16 to Registrant's Registration Statement on Form S-3, Registration No.
333-04977)
10.1 --Form of Letter Agreement between TWA and executive officers (continuing employment)
10.2 --Form of Letter Agreement between TWA and executive officers (new hire)
10.3 --Consulting Agreement between TWA and David M. Kennedy dated as of December 16, 1996
11 --Statement re computation of per share earnings
27 --Financial Data Schedule (submitted only in electronic format)
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed by the Company during the first quarter of 1997.
<FN>
- --------
<F*> Incorporated by reference
</TABLE>
18
<PAGE> 19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRANS WORLD AIRLINES, INC.
Dated: May 14, 1997 By: /s/ MICHAEL J. PALUMBO
-------------------------
Michael J. Palumbo
Senior Vice President and
Chief Financial Officer
19
<PAGE> 1
EXHIBIT 10.1
AGREEMENT, dated as of , 1997, between Trans World
-------------
Airlines, Inc. ("Company"), and ("Executive");
----------------------
WHEREAS, the Company's Board of Directors has determined that it is in
the best interest of the Company and its Shareholders, in order to assure
continuity in the management of the Company and to provide certain additional
benefits to the Company pursuant to the additional undertakings by you
hereinafter set forth, to amend and restate your existing employment agreement
with the Company by entering into this Agreement with you pursuant to which you
and the Company give certain contractual undertakings each to the other; and
WHEREAS, the parties desire to set forth the entirety of their
agreements and understandings;
NOW, THEREFORE, in consideration of the mutual promises contained
herein the parties agree as follows:
1. Employment. The Company hereby agrees to continue the employment
----------
of the Executive to render the services hereinafter described and the
Executive hereby accepts such employment and agrees to render such services,
upon and subject to the terms and conditions described in this Agreement.
2. Term. Executive's employment will continue for an indefinite
----
period until terminated at any time by Company or Executive with or without
cause. Nothing in this Agreement or otherwise shall be construed as entitling
Executive to employment for any definite term.
3. Duties.
------
(a) Executive shall serve at the pleasure of the Company in
such executive positions as Executive shall be assigned from time to time by
the Chief Executive Officer and/or the President, and shall perform such
executive, advisory and/or administrative and managerial assignments and
duties as may be assigned to Executive from time to time by the Chief
Executive Officer and/or the President or the Chief Executive Officer and/or
the President's designee, all according to the direction and control of the
Chief Executive Officer and/or the President. Executive will carry out and
perform all such duties and assignments and all directions of any officer to
whom Executive directly or indirectly reports. Executive also will comply
with and carry out all rules and policies of the Company, and will serve,
without additional compensation, as an officer and/or director or any
subsidiary, affiliated or related corporation or business, or of any company
in which Company may hold any interest.
(b) The Executive will, on an exclusive basis, devote his full
time during normal business hours to the business and affairs of the Company
and use his best efforts to promote the interests of the Company and to
perform faithfully and efficiently the responsibilities assigned to Executive
in accordance with the terms of this Agreement.
4. Compensation and Other Terms of Employment. During the period in
------------------------------------------
which
<PAGE> 2
Executive is employed by Company, the Executive shall receive the following:
(a) Salary. The Executive will continue to be paid at his
------
current annual rate of pay on a regular basis, not less frequently than one
time per month, on a regular Company pay day. This rate of pay ("Base
Salary") is subject to adjustment from time to time, and will be reviewed on
a regular basis. All such payments will be subject to withholding for taxes
and amounts owed by the Company, if any.
(b) Stock Incentive Plan. The Executive continues to be
--------------------
eligible to participate in the Company's Key Employee Stock Incentive Plan
("KESIP"). The Executive's current grant of shares is subject in its entirety
to the terms and conditions set forth in the KESIP Agreement between the
Executive and the Company. To the extent that there is any inconsistency
between the terms and conditions of this Agreement and those of the KESIP,
the terms and conditions of this Agreement shall control.
(c) Change of Control Agreement. In the event that the
---------------------------
Company's Board of Directors authorizes the Company to enter into "change of
control" severance agreements with one or more of its officers, the Executive
will be offered the opportunity to enter into such an agreement on terms and
conditions no less favorable in any material respect than those offered to
any other of the Company's officers serving at that time at the same level as
the Executive.
(d) Passes. The Executive and eligible family members will be
------
entitled to card-type Class xx "term" passes on the Company's routes
worldwide during the period of time that the Executive is employed by the
Company.
(e) Medical, Dental, Insurance and Accident Insurance. (i) The
-------------------------------------------------
Executive and his eligible dependents will be eligible to participate in the
Company-paid comprehensive Medical and Dental Plan and the Travel Accident
Insurance Program offered by the Company, on the same terms and conditions
applicable to other officers then serving as the same level as the Executive.
(ii) The Executive will be eligible for coverage under the Company's Group
Term Life Insurance Plan under which the Company currently provides Basic
Life Insurance of $50,000 at no cost to the Executive. Assuming that the
Executive is insurable at standard rates, the Executive will also have the
option to purchase Additional Group Life Insurance in an amount up to three
times the Executive's Base Salary, less the Basic $50,000 coverage. The
monthly cost of this Additional Life Insurance is currently $4.50 per $10,000
and such monthly cost may increase from time-to-time. (iii) The Executive
will be eligible to participate in the Company's Voluntary Personal Accident
Insurance Plan. The maximum coverage for this plan is currently $150,000 at
a monthly cost of $6.60 and such monthly cost may increase from time-to-time.
(iv) The Executive will be covered for Long-Term Disability protection
pursuant to plan provisions at standard rates and subject to standard
conditions. Nothing herein shall be construed to prevent the Company from
amending or altering any such plans or programs set forth herein so long as
the Executive continues to have the opportunity to receive in the aggregate
benefits at a level no less favorable than those set forth herein.
5. Vacation. The Executive will be eligible for xx weeks vacation
--------
per annum.
- 2 -
<PAGE> 3
6. Termination of Employment.
-------------------------
(a) Death/Permanent Disability. This Agreement shall terminate
--------------------------
automatically upon the Executive's death and/or permanent disability. All
benefits and compensation then accrued hereunder, and under any related
plans, shall be paid when due to the Executive's beneficiaries or legal
representatives, as appropriate.
(b) Termination Without Cause. The Company shall have the
-------------------------
right to terminate the Executive's employment without cause at any time and
without advance notice. In such event the Company shall pay to the Executive
............... (the "severance payment") plus any earned, unpaid salary,
earned unused vacation accrued from the calendar year(s) prior to the
calendar year in which the Executive's employment is terminated ("earned
unused vacation") and current earned unused vacation for the calendar year in
which the Executive's employment is terminated pro rated by month as of the
month in which the effective date of the Executive's termination occurs
("current earned unused vacation"). Such payment (other than earned unpaid
salary, earned unused vacation and current earned unused vacation which shall
be paid in a single lump sum) may be made at the Company's option in a single
lump sum or in equal installments payable over up to a twelve month period
("installment period"). Payments made during the installment period shall be
made from the active payroll. Any income from full or part time employment
or from services performed by the Executive as a consultant, advisor in any
similar such capacity during the installment period shall be promptly
reported by the Executive to the Company and shall be offset in full against
any subsequent payments due during the installment period. If the Executive
fails to report such income earned during the installment period, the Company
may recover from the Executive the full amount of the severance payment made
during the installment period. The Company shall have no further obligation
to the Executive under this Agreement and Executive accepts the Company's
agreement and obligation to make such payments in full satisfaction of all
claims against the Company.
(c) Termination For Cause. The Company shall have the right to
---------------------
terminate the Executive's employment at any time and without advance notice
for Cause. For the purposes of this Agreement, "Cause" shall mean that (i)
the Executive is convicted of or engages in conduct which constitutes a
felony, or a misdemeanor involving moral turpitude; or (ii) the Executive is
found by the Company's Board of Directors to have willfully engaged in
conduct which is demonstrably and materially injurious to the Company; or
(iii) the Executive is found by the Company's Board of Directors to have
failed or refused to in any material respect to competently perform his
duties and responsibilities (after notice and opportunity to cure if such
material failure or refusal can be cured); or (iv) the Executive has breached
his duty of loyalty to, or committed any act of fraud, theft or dishonesty
against or involving, the Company or any of its affiliated companies; or (v)
the Executive has breached any provision of this Agreement. If the
Executive's employment is terminated for Cause, the Company shall pay the
Executive his earned, unpaid, salary through the date of such termination at
the rate in effect at the time of such termination and any earned unused
vacation and current earned unused vacation through the effective date of such
- 3 -
<PAGE> 4
termination. Upon the making of such payment, the Company shall have no
further obligation to the Executive under this Agreement.
(d) Termination by the Executive. If the Executive voluntarily
----------------------------
terminates his employment, the Executive must give the Company thirty (30)
calendar days advance notice in writing. If the Executive fails to do so,
the Executive shall not be entitled to any accrued rights and benefits to
which the Executive might be entitled under this or any related agreement
including but not limited to the Key Employee Stock Incentive Program
Agreement and the Company will have no further obligation to the Executive
except for unpaid salary earned by the Executive up to and including the
effective date of such termination.
Upon termination of employment and otherwise upon demand, Executive
will turn over to Company all Company property and documents and all computer
passwords, and will (after copying the same to 3.5 disks and returning the
disks to the Company) delete all Company information from any computer which
is not Company property. Upon termination, all benefits and compensation
ceases except as described above.
7. Termination Obligations. The Executive agrees that during his
-----------------------
employment and following his termination under any of the circumstances set
forth herein:
(a) he shall not during his employment or for a period of two
years following the effective date of his termination, directly or indirectly
solicit (or assist or encourage the solicitation of) any employee of the
Company or any of its subsidiaries or affiliated companies or anyone who was
so employed at any time within twelve (12) months prior to termination of
Executive's employment by the Company to be employed by the Executive or by
any entity in which the Executive owns or expects to own any equity interest
in excess of five (5) percent of any class of the outstanding securities
thereof, or by any entity by which the Executive is employed or for which the
Executive serves or expects to serve in any capacity; nor (after his
employment ends and during such 2 year period) encourage or induce any
Company employee to terminate his or her Company employment. For the
purposes of this paragraph, the term "solicit" shall mean any contact by the
Executive with or providing information to others who may be expected to
contact any employees of the Company or of any of its subsidiaries or
affiliated companies regarding their employment status, job satisfaction,
interest in seeking employment with the Executive, with any person affiliated
with the Executive or by whom the Executive is employed but shall not include
print advertising for personnel or responding to any unsolicited request for
a personal recommendation for or evaluation of a Company employee or an
employee of any of the Company's subsidiaries or affiliated companies.
(b) he shall hold forever hereafter in a fiduciary capacity for
the benefit of the Company all secret or confidential information, knowledge
or data relating to the Company or any of its subsidiaries or affiliated
companies, including but not limited to commercial, operational, marketing,
pricing, or financial information including costs, strategies, forecasts or
trade secrets, acquisition strategies or candidates or personnel acquisition
plans ("confidential information") which shall have been obtained by the
Executive during or by reason of his employment by the Company or by any of
its subsidiaries or affiliated companies and which shall not be public
- 4 -
<PAGE> 5
knowledge. During and after the end of the term of employment, the Executive
shall not, without the prior written consent of the Company or unless
required to do so by reason of a court order or subpoena (in which case
Executive shall give Company prompt notice of any such other subpoena or
order, or request therefore, so as to provide Company the maximum opportunity
to contest the same), communicate or divulge any such confidential
information to anyone other than the Company or those designated by it,
except that while employed by the Company in the business of and for the
benefit of the Company the Executive may provide confidential information as
appropriate to those persons who in the Executive's judgment have a need to
know such confidential information.
(c) he shall not for a period of two years following the
effective date of his termination discuss or disclose to the media or Company
personnel the circumstances or terms of his termination of employment.
(d) he shall not publicly disparage or denigrate the Company or
any of its officers, directors or practices.
To the extent that any covenant or agreement contained in this Section
7 shall be determined by a Court to be invalid or unenforceable in any
respect or to any extent, the covenant or agreement shall not be rendered
void, but instead shall be automatically amended to such lesser scope or to
such lesser extent as will grant Company the maximum restriction on
Executive's conduct and activities permitted by applicable law in such
circumstances.
8. No Assignment. This Agreement is personal to the Executive and
-------------
without the Company's prior written consent it shall not be assignable by the
Executive other than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the legal
representatives of Executive's estate, and otherwise is freely assignable by
Company.
9. Assistance. For a period of three (3) years following
----------
termination of employment, Executive will, upon reasonable notice, make
himself available for consultation with Company counsel, to meet with Company
counsel and prepare to testify as a witness or deponent, and to testify as a
witness at a trial, deposition or proceeding, concerning any legal matter
involving or affecting the Company. The Company will pay for all reasonable
and necessary out of pocket travel and telephone costs and expense incurred
by Executive in connection with any such activity.
10. Miscellaneous.
-------------
(a) This Agreement shall be governed by and be construed in
accordance with the internal laws of the State of Missouri, without reference
to principles of conflicts of laws. The captions of this Agreement are not
part of the provisions hereof and shall have no force or effect. Neither
this Agreement nor any of its terms may be amended, waived, added to or
modified other than by written agreement executed by the parties hereto or
their respective successors and legal representatives.
- 5 -
<PAGE> 6
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by regular
or registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Executive:
[Name and address of Executive]
If to the Company:
Trans World Airlines, Inc.
One City Centre
515 North 6th Street
St. Louis, Missouri 63101
Attn: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) This Agreement contains the entire understanding between
the parties concerning the subject matter hereof and supersedes all prior
agreements, understandings, discussions, negotiations and undertakings,
whether written or oral, among the parties with respect thereto. The terms
of any employee manual, handbook, or any policy of the Company, shall not
modify, alter, or invalidate any term of this Agreement nor alter Employee's
at will status, and in case of any conflict between a term of this Agreement
and any such policy, handbook or manual, the terms of this Agreement control,
except for benefit plans and Stock option awards described herein (to the
extent not otherwise provided in this Agreement).
(e) Executive represents that or he is not a party to any
agreement, or under any legal obligation, which could preclude or in any way
impair Executive's performance of Executive's duties for the Company.
Executive has not provided, and will not provide, to Company any trade secret
of another person whose secrecy he is obligated to maintain.
(f) Notwithstanding any provision hereof to the contrary,
nothing in this Agreement shall be deemed to entitle the Executive to
employment beyond the Term hereof.
- 6 -
<PAGE> 7
IN WITNESS WHEREOF, the Company has caused this Agreement to be signed in its
corporate name, and the Executive has hereunto set his hand, all as of the
day and year first above written.
- ---------------------------------------
EXECUTIVE
- ---------------------------------------
TRANS WORLD AIRLINES, INC.
By:
- 7 -
<PAGE> 1
EXHIBIT 10.2
AGREEMENT, dated as of , 1997, between Trans World
--------------
Airlines, Inc. ("Company"), and ("Executive");
-------------------------
WHEREAS, the Company desires to employ and the Executive has accepted a
position as ; and
--------------------
WHEREAS, the parties desire to set forth the entirety of their
agreements and understandings;
NOW, THEREFORE, in consideration of the mutual promises contained
herein the parties agree as follows:
1. Employment. The Company hereby employs Executive to render the
----------
services hereinafter described, and Executive hereby accepts such employment
and agrees to render such services, upon and subject to the terms and
conditions described in this Agreement.
2. Term. Executive's employment commences as of the date of this
----
Agreement, and shall continue thereafter for an indefinite period until
terminated at any time by Company or Executive with or without cause.
Nothing in this Agreement or otherwise shall be construed as entitling
Executive to employment for any definite term.
3. Duties.
------
(a) Executive shall serve at the pleasure of the Company in
such executive positions as Executive shall be assigned from time to time by
the Chief Executive Officer and/or the President, and shall perform such
executive, advisory and/or administrative and managerial assignments and
duties as may be assigned to Executive from time to time by the Chief
Executive Officer and/or the President or the Chief Executive Officer and/or
the President's designee, all according to the direction and control of the
Chief Executive Officer and/or the President. Executive will carry out and
perform all such duties and assignments and all directions of any officer to
whom Executive directly or indirectly reports. Executive also will comply
with and carry out all rules and policies of the Company, and will serve,
without additional compensation, as an officer and/or director or any
subsidiary, affiliated or related corporation or business, or of any company
in which Company may hold any interest.
(b) The Executive will, on an exclusive basis, devote his full
time during normal business hours to the business and affairs of the Company
and use his best efforts to promote the interests of the Company and to
perform faithfully and efficiently the responsibilities assigned to Executive
in accordance with the terms of this Agreement.
4. Compensation and Other Terms of Employment. During the period in
------------------------------------------
which Executive is employed by Company, the Executive shall receive the
following:
(a) Salary. The Executive will be paid at an annual rate of
------
$ on a regular basis, not less frequently than one time per month,
----------
on a regular Company pay day. This
<PAGE> 2
rate of pay ("Base Salary") is subject to adjustment from time to time, and will
be reviewed on a regular basis. All such payments will be subject to
withholding for taxes and amounts owed by the Company, if any.
(b) Stock Incentive Plan. The Executive shall be eligible to
--------------------
participate in the Company's Key Employee Stock Incentive Plan ("KESIP").
The Executive's grant shall be for shares, subject in its entirety
----------
to the terms and conditions set forth in the KESIP Agreement dated as of this
date between the Executive and the Company. The Exercise Price shall be the
Fair Market Value, as that term is defined in the KESIP, of the Company's
Common Stock as of the date of this Agreement. To the extent that there is
any inconsistency between the terms and conditions of this Agreement and
those of the KESIP, the terms and conditions of this Agreement shall control.
(c) Change of Control Agreement. In the event that the
---------------------------
Company's Board of Directors authorizes the Company to enter into "change of
control" severance agreements with one or more of its officers, the Executive
will be offered the opportunity to enter into such an agreement on terms and
conditions no less favorable in any material respect than those offered to
any other of the Company's officers serving at that time at the same level as
the Executive.
(d) Passes. The Executive and eligible family members will be
------
entitled to card-type Class xx "term" passes on the Company's routes
worldwide during the period of time that the Executive is employed by the
Company.
(e) Medical, Dental, Insurance and Accident Insurance. (i) The
-------------------------------------------------
Executive and his eligible dependents will be eligible to participate in the
Company-paid comprehensive Medical and Dental Plan and the Travel Accident
Insurance Program offered by the Company, on the same terms and conditions
applicable to other officers then serving as the same level as the Executive.
(ii) The Executive will be eligible for coverage under the Company's Group
Term Life Insurance Plan under which the Company currently provides Basic
Life Insurance of $50,000 at no cost to the Executive. Assuming that the
Executive is insurable at standard rates, the Executive will also have the
option to purchase Additional Group Life Insurance in an amount up to three
times the Executive's Base Salary, less the Basic $50,000 coverage. The
monthly cost of this Additional Life Insurance is currently $4.50 per $10,000
and such monthly cost may increase from time-to-time. (iii) The Executive
will be eligible to participate in the Company's Voluntary Personal Accident
Insurance Plan. The maximum coverage for this plan is currently $150,000 at
a monthly cost of $6.60 and such monthly cost may increase from time-to-time.
(iv) The Executive will be covered for Long-Term Disability protection
pursuant to plan provisions at standard rates and subject to standard
conditions. Nothing herein shall be construed to prevent the Company from
amending or altering any such plans or programs set forth herein so long as
the Executive continues to have the opportunity to receive in the aggregate
benefits at a level no less favorable than those set forth herein.
5. Vacation. The Executive will be eligible for xx weeks vacation
--------
per annum.
- 2 -
<PAGE> 3
6. Termination of Employment.
-------------------------
(a) Death/Permanent Disability. This Agreement shall terminate
--------------------------
automatically upon the Executive's death and/or permanent disability. All
benefits and compensation then accrued hereunder, and under any related
plans, shall be paid when due to the Executive's beneficiaries or legal
representatives, as appropriate.
(b) Termination Without Cause. The Company shall have the
-------------------------
right to terminate the Executive's employment without cause at any time and
without advance notice. In such event the Company shall pay to the Executive
............... (the "severance payment") plus any earned, unpaid salary,
earned unused vacation accrued from the calendar year(s) prior to the
calendar year in which the Executive's employment is terminated ("earned
unused vacation") and current earned unused vacation for the calendar year in
which the Executive's employment is terminated pro rated by month as of the
month in which the effective date of the Executive's termination occurs
("current earned unused vacation"). Such payment (other than earned unpaid
salary, earned unused vacation and current earned unused vacation which shall
be paid in a single lump sum) may be made at the Company's option in a single
lump sum or in equal installments payable over up to a twelve month period
("installment period"). Payments made during the installment period shall be
made from the active payroll. Any income from full or part time employment
or from services performed by the Executive as a consultant, advisor in any
similar such capacity during the installment period shall be promptly
reported by the Executive to the Company and shall be offset in full against
any subsequent payments due during the installment period. If the Executive
fails to report such income earned during the installment period, the Company
may recover from the Executive the full amount of the severance payment made
during the installment period. The Company shall have no further obligation
to the Executive under this Agreement and Executive accepts the Company's
agreement and obligation to make such payments in full satisfaction of all
claims against the Company.
(c) Termination For Cause. The Company shall have the right to
---------------------
terminate the Executive's employment at any time and without advance notice
for Cause. For the purposes of this Agreement, "Cause" shall mean that (i)
the Executive is convicted of or engages in conduct which constitutes a
felony, or a misdemeanor involving moral turpitude; or (ii) the Executive is
found by the Company's Board of Directors to have willfully engaged in
conduct which is demonstrably and materially injurious to the Company; or
(iii) the Executive is found by the Company's Board of Directors to have
failed or refused to in any material respect to competently perform his
duties and responsibilities (after notice and opportunity to cure if such
material failure or refusal can be cured); or (iv) the Executive has breached
his duty of loyalty to, or committed any act of fraud, theft or dishonesty
against or involving, the Company or any of its affiliated companies; or (v)
the Executive has breached any provision of this Agreement. If the
Executive's employment is terminated for Cause, the Company shall pay the
Executive his earned, unpaid, salary through the date of such termination at
the rate in effect at the time of such termination and any earned unused
vacation and current earned unused vacation through the effective date of such
- 3 -
<PAGE> 4
termination. Upon the making of such payment, the Company shall have no
further obligation to the Executive under this Agreement.
(d) Termination by the Executive. If the Executive voluntarily
----------------------------
terminates his employment, the Executive must give the Company thirty (30)
calendar days advance notice in writing. If the Executive fails to do so,
the Executive shall not be entitled to any accrued rights and benefits to
which the Executive might be entitled under this or any related agreement
including but not limited to the Key Employee Stock Incentive Program
Agreement and the Company will have no further obligation to the Executive
except for unpaid salary earned by the Executive up to and including the
effective date of such termination.
Upon termination of employment and otherwise upon demand, Executive
will turn over to Company all Company property and documents and all computer
passwords, and will (after copying the same to 3.5 disks and returning the
disks to the Company) delete all Company information from any computer which
is not Company property. Upon termination, all benefits and compensation
ceases except as described above.
7. Termination Obligations. The Executive agrees that during his
-----------------------
employment and following his termination under any of the circumstances set
forth herein:
(a) he shall not during his employment or for a period of two
years following the effective date of his termination, directly or indirectly
solicit (or assist or encourage the solicitation of) any employee of the
Company or any of its subsidiaries or affiliated companies or anyone who was
so employed at any time within twelve (12) months prior to termination of
Executive's employment by the Company to be employed by the Executive or by
any entity in which the Executive owns or expects to own any equity interest
in excess of five (5) percent of any class of the outstanding securities
thereof, or by any entity by which the Executive is employed or for which the
Executive serves or expects to serve in any capacity; nor (after his
employment ends and during such 2 year period) encourage or induce any
Company employee to terminate his or her Company employment. For the
purposes of this paragraph, the term "solicit" shall mean any contact by the
Executive with or providing information to others who may be expected to
contact any employees of the Company or of any of its subsidiaries or
affiliated companies regarding their employment status, job satisfaction,
interest in seeking employment with the Executive, with any person affiliated
with the Executive or by whom the Executive is employed but shall not include
print advertising for personnel or responding to any unsolicited request for
a personal recommendation for or evaluation of a Company employee or an
employee of any of the Company's subsidiaries or affiliated companies
(b) he shall hold forever hereafter in a fiduciary capacity for
the benefit of the Company all secret or confidential information, knowledge
or data relating to the Company or any of its subsidiaries or affiliated
companies, including but not limited to commercial, operational, marketing,
pricing, or financial information including costs, strategies, forecasts or
trade secrets, acquisition strategies or candidates or personnel acquisition
plans ("confidential information") which shall have been obtained by the
Executive during or by reason of his employment by the Company or by any of
its subsidiaries or affiliated companies and which shall not be public
- 4 -
<PAGE> 5
knowledge. During and after the end of the term of employment, the Executive
shall not, without the prior written consent of the Company or unless
required to do so by reason of a court order or subpoena (in which case
Executive shall give Company prompt notice of any such other subpoena or
order, or request therefore, so as to provide Company the maximum opportunity
to contest the same), communicate or divulge any such confidential
information to anyone other than the Company or those designated by it,
except that while employed by the Company in the business of and for the
benefit of the Company the Executive may provide confidential information as
appropriate to those persons who in the Executive's judgment have a need to
know such confidential information.
(c) he shall not for a period of two years following the
effective date of his termination discuss or disclose to the media or Company
personnel the circumstances or terms of his termination of employment.
(d) he shall not publicly disparage or denigrate the Company or
any of its officers, directors or practices.
To the extent that any covenant or agreement contained in this Section
7 shall be determined by a Court to be invalid or unenforceable in any
respect or to any extent, the covenant or agreement shall not be rendered
void, but instead shall be automatically amended to such lesser scope or to
such lesser extent as will grant Company the maximum restriction on
Executive's conduct and activities permitted by applicable law in such
circumstances.
8. No Assignment. This Agreement is personal to the Executive and
-------------
without the Company's prior written consent it shall not be assignable by the
Executive other than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the legal
representatives of Executive's estate, and otherwise is freely assignable by
Company.
9. Assistance. For a period of three (3) years following
----------
termination of employment, Executive will, upon reasonable notice, make
himself available for consultation with Company counsel, to meet with Company
counsel and prepare to testify as a witness or deponent, and to testify as a
witness at a trial, deposition or proceeding, concerning any legal matter
involving or affecting the Company. The Company will pay for all reasonable
and necessary out of pocket travel and telephone costs and expense incurred
by Executive in connection with any such activity.
10. Miscellaneous.
-------------
(a) This Agreement shall be governed by and be construed in
accordance with the internal laws of the State of Missouri, without reference
to principles of conflicts of laws. The captions of this Agreement are not
part of the provisions hereof and shall have no force or effect. Neither
this Agreement nor any of its terms may be amended, waived, added to or
modified other than by written agreement executed by the parties hereto or
their respective successors and legal representatives.
- 5 -
<PAGE> 6
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by regular
or registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Executive:
[Name and address of Executive]
If to the Company:
Trans World Airlines, Inc.
One City Centre
515 North 6th Street
St. Louis, Missouri 63101
Attn: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) This Agreement contains the entire understanding between
the parties concerning the subject matter hereof and supersedes all prior
agreements, understandings, discussions, negotiations and undertakings,
whether written or oral, among the parties with respect thereto. The terms
of any employee manual, handbook, or any policy of the Company, shall not
modify, alter, or invalidate any term of this Agreement nor alter Employee's
at will status, and in case of any conflict between a term of this Agreement
and any such policy, handbook or manual, the terms of this Agreement control,
except for benefit plans and Stock option awards described herein (to the
extent not otherwise provided in this Agreement).
(e) Executive represents that or he is not a party to any
agreement, or under any legal obligation, which could preclude or in any way
impair Executive's performance of Executive's duties for the Company.
Executive has not provided, and will not provide, to Company any trade secret
of another person whose secrecy he is obligated to maintain.
(f) Notwithstanding any provision hereof to the contrary,
nothing in this Agreement shall be deemed to entitle the Executive to
employment beyond the Term hereof.
- 6 -
<PAGE> 7
IN WITNESS WHEREOF, the Company has caused this Agreement to be signed in its
corporate name, and the Executive has hereunto set his hand, all as of the
day and year first above written.
- -----------------------------------
EXECUTIVE
- -----------------------------------
TRANS WORLD AIRLINES, INC.
By:
- 7 -
<PAGE> 1
EXHIBIT 10.3
CONSULTING AGREEMENT
This Consulting Agreement (hereinafter "Agreement") is made and
entered into as of the 16th day of December, 1996, between David
Kennedy. (hereinafter "Consultant."), and Trans World Airlines,
Inc., a Delaware corporation (hereinafter "Company").
In consideration of the mutual covenants herein contained and
other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as
follows:
1. Consultant shall be retained by the Company as an independent
contractor and consultant to the Company and shall serve as
the Company's Acting Executive Vice President and Chief
Operating Officer. Consultant is presently a member of the
Company's Board of Directors. Consultant shall devote his
best efforts to performing consulting services for and on
behalf of the Company pursuant to this Agreement and will
devote such times as he deems to be necessary to performing
consulting services hereunder. This Agreement is on an
ongoing as needed basis, and will terminate one (1) day after
notice in writing of the termination of this Agreement by the
Company to the Consultant or from the Consultant to the
Company.
2. For the purposes of this Agreement, Consultant is and will act
at all times as an independent contractor. Nothing contained
in this Agreement establishes or constitutes or will be
construed as establishing or constituting an employment
agreement between the Company and Consultant or the
relationship of employer and employee. Further, the parties
acknowledge that this Agreement does not establish or
constitute a partnership or joint venture between the Company
and Consultant. Notwithstanding any other provision of this
Agreement, neither party to this Agreement has or may
interfere with or assume the right to direct or control the
time, manner, and method of executing the work of the other
party; provided, however, that this contract provision in no
way waives the right of either party to require definite
results from the other party in conformity with the terms of
this Agreement. The acceptance by either party of the work of
the other party under this Agreement shall in no way be
considered as a ratification by the accepting party of any act
of wrongdoing by the other party.
3. Consultant expressly represents and warrants to the Company
that he is not and shall not be construed to be an employee of
the Company and that his status shall be that of an
independent contractor. Consultant is not authorized to enter
into contracts or agreements on behalf of the Company which
create obligations of the Company to third parties except with
prior approval or authorization of (i) the Board of Directors,
or (ii) such Company officers and/or employees who have
authority to enter into such contracts or agreements.
4. Consultant shall perform duties and provide services,
rendering such advice and/or consultation as the Company may
reasonably request.
<PAGE> 2
5. Consultant shall be paid at the rate of $2725.00 for each full
working day ( hereinafter the "per diem rate") as a fee for
consulting services to the Company. Nothing herein contained
shall invalidate or change any compensation arrangement,
options or other contractual commitments between the Company
and the Consultant or Consultant's status as a member of the
Board of Directors provided, however that Consultant shall not
receive such compensation as a member of the Board of
Directors that would otherwise be payable to him for work
which he is performing in his capacity as a consultant for
services or participation in meetings or during periods where
Consultant is being compensated for services pursuant to this
Agreement. Consultant will be indemnified by the Company with
respect to his service as an officer of the Company as
provided in the corporate By-Laws of the Company and in the
Director's October 31, 1996 Indemnification Agreement to the
fullest extent permitted to law.
6. Consultant will be provided office space and administrative
support while working in the Company's St. Louis, Missouri
executive offices. Reasonable rental for said office space
and administrative support is included in Consultant's per
diem rate. Reasonable out-of-pocket expenses for any business
travel and business expenses incurred by Consultant in the
performance of above stated duties shall be reimbursed by the
Company upon submission of appropriate expense statements.
7. During the term of this Agreement, and for a period of twenty-
four months thereafter and except as may otherwise be required
under applicable provisions of, or rules or regulations under
applicable federal, state or local laws or in connection with
interrogatories, requests for information or documents,
subpoena, civil investigative demand for any formal or
informal investigation by any government or governmental
agency or authority, Consultant shall not disclose any
confidential or proprietary information relating to the
business presently being conducted, or presently proposed to
be conducted, by the Company or its subsidiaries or
affiliates, to any person, firm, corporation, association or
other entity, nor shall Consultant make use of any such
confidential or proprietary information for his own purpose or
for the benefit of any other entity except the Company or its
subsidiaries or affiliates. For the purpose of this
paragraph, the term "confidential or proprietary information"
shall mean all confidential or proprietary information which
is or becomes known regardless of form, to Consultant and
relates to matters of the business conducted or proposed to be
conducted by the Company or its subsidiaries or affiliates,
and relates, without limitation, to matters such as work
product, trade secrets, customers, pricing and credit
techniques, books and records, suppliers, private processes,
inventions, techniques, marketing plans, strategies,
forecasts, product cost/information, and financial data as may
exist from time to time but shall not include any information
which at the time of its disclosure is in the public domain or
which is required by law or in the performance of the duties
hereunder to be disclosed.
8. To the extent required, federal, state and local income tax
and payroll taxes shall be withheld or paid by the Company on
behalf of Consultant.
2
<PAGE> 3
9. The Company acknowledges that subject to the requirements of
his engagement hereunder, Consultant may continue engage in
such activities in which he is presently engaged or in which
he may choose to engage during the term of this Consulting
provided however that Consultant shall engage in no such
activity which is materially adverse to the Company's
interests and/or which interferes with Consultant's ability to
render services to the Company as provided hereunder.
10. For a period of twenty-four months from and after the
termination of this Agreement, Consultant shall not make any
derogatory statements (oral and written), or cause detriment
or damage concerning the Company or its subsidiaries or
affiliates or its management, business or prospects; provided,
however, that Consultant's truthful compelled testimony in a
judicial proceeding shall not be deemed to be a breach of this
Agreement.
11. This Agreement sets forth the entire agreement between the
parties. All prior agreements or understandings between the
parties hereof pertaining to the subject matter hereof are
superseded. This Agreement shall not be transferred or
assigned, in whole or in part, by Consultant.
12. Should any provision of this Agreement be determined by any
Court to be illegal or invalid, the validity of the remaining
provisions shall not be affected thereby and said invalid part
or provision shall be deemed not part of this Agreement.
13. In the event of any controversy, dispute or claim of whatever
nature between the parties hereto arising out of, in
connection with, or in relation to the interpretation,
performance or breach of this Agreement, including without
limitation, any claim based on contract, tort or statute, such
controversy, dispute or claim of whatever nature shall be
submitted to and resolved by binding arbitration before a
single arbitrator in New York, New York appointed and acting
in accordance with the Rules of the American Arbitration
Association then in force and effect, except to the extent
such Rules are modified by the express terms hereof. The
decision of the arbitrator submitted to arbitration pursuant
to this provision shall be final and binding upon the parties
and judgment upon any such award rendered by the arbitrator
may be entered by any state or federal court in New York. No
suit at law or in equity based upon any controversy, dispute
or claim arbitrable hereunder shall be instituted by any party
except to enforce the award of the arbitrator. The arbitrator
shall be entitled to determine which is the prevailing party
and shall include in the award reasonable attorneys fees and
costs to such prevailing party.
The parties hereto agree to endeavor in good faith to obtain
a decision from any such arbitration as promptly as
practicable and shall so endeavor to conduct any hearing
required and obtain any decision of the arbitrator without
delay and, in any event, within three months of any demand for
arbitration if possible, and if not possible, as promptly as
reasonably practicable. The arbitration hearing shall be
conducted within thirty (30) days unless otherwise ordered by
the arbitrator and the award on the hearing shall be made
within fifteen (15) days
3
<PAGE> 4
after the hearing. The parties each irrevocably waive (and
irrevocably agree not to raise) any objection which it may have
now or hereafter to the venue of any such arbitration proceeding
or court referred to in this Section and any claim that such
arbitration proceedings have been brought in any inconvenient
forum.
14. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York, without regard to the
principles of conflict of laws thereof.
In witness hereof and intending to be legally bound hereby, Consultant
has executed the foregoing Agreement.
Executed as of this 16th day of December, 1996.
TRANS WORLD AIRLINES, INC.
By:
- ---------------------------------- ----------------------------------
DAVID KENNEDY
Title: Senior Vice President - Legal
4
<PAGE> 1
EXHIBIT 11
TRANS WORLD AIRLINES, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------------
1997 1996
-------- --------
<S> <C> <C>
ADJUSTMENTS TO NET INCOME (LOSS):
Loss before extraordinary items........................................ $(70,032) $(37,107)
Preferred stock dividend requirements.................................. (3,869) (4,007)
Special dividend requirement relating to redemption of
12% Preferred Stock.................................................. -- (19,991)
-------- --------
Loss before extraordinary items applicable to common stock
for primary calculation.............................................. (73,901) (61,105)
Extraordinary item..................................................... (1,532) --
-------- --------
Net loss applicable to common stock for primary calculation............ (75,433) (61,105)
Fully diluted adjustment--dividend requirements on 8% Preferred Stock
assumed to be converted.............................................. 3,869 --
-------- --------
Net loss applicable to common stock for fully diluted calculation...... $(71,564) $(61,105)
======== ========
ADJUSTMENTS TO OUTSTANDING SHARES:
Average number of shares of common stock <F1>.......................... 49,036 41,800
Primary Adjustments
Incremental shares associated with the assumed exercise
of options and warrants <F2>..................................... 610 1,493
-------- --------
Total average number of common and common equivalent shares
used for primary calculation......................................... 49,646 43,293
======== ========
Average number of shares of common stock <F1>.......................... 49,036 41,800
Fully Diluted Adjustments
Incremental shares associated with the assumed exercise
of options and warrants <F2>......................................... 741 2,246
Common shares assumed to be issued upon conversion of
8% Preferred Stock................................................... 9,544 --
-------- --------
Total average number of common and common equivalent shares
for fully diluted calculation........................................ 59,321 44,046
======== ========
PER SHARE AMOUNTS:
Loss before extraordinary item and special preferred dividend
Average number of shares of Common Stock........................... $ (1.51) $ (.98)
Primary <F3>....................................................... $ (1.49) $ (.95)
Fully diluted <F3>................................................. $ (1.18) $ (.93)
Net loss
Average number of shares of Common Stock........................... $ (1.54) $ (1.46)
Primary <F3>....................................................... $ (1.52) $ (1.41)
Fully diluted <F3>................................................. $ (1.21) $ (1.39)
<FN>
- --------
<F1> Includes 5,913 shares for the three months ended March 31, 1997 and 5,516
shares for the three months ended March 31, 1996 of Employee Preferred
Stock which, except for a liquidation preference of $.01 per share and the
right to elect a certain number of directors to the Board of Directors, is
the functional equivalent of Common Stock.
<F2> Pursuant to an employee stock incentive plan (ESIP or the Plan), the
Company is required to distribute additional shares of common stock and
Employee Preferred Stock as a result of the distribution of additional
shares following the effective date of the '95 Reorganization. No shares
have as yet been distributed to employees under this provision and
discussions are being held with union representatives to determine the
appropriate number of shares to be distributed. The Company believes that,
based on these discussions, no more than 950,000 additional shares will be
distributed. Additionally, the ESIP provides that, beginning in 1997,
employees may significantly increase their ownership, through grants or
purchases, as set forth in the Plan. The earnings (loss) per share
computations do not give any effect to the potential issuances of these
shares.
<F3> As the effects of including the incremental shares associated with options
and warrants and the assumed conversion of the 8% Preferred Stock are
antidilutive, these amounts are not presented in the accompanying
condensed statements of consolidated operations.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF TRANS WORLD AIRLINES,
INC. AND SUBSIDIARIES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 136,522
<SECURITIES> 0
<RECEIVABLES> 270,101
<ALLOWANCES> 12,357
<INVENTORY> 104,134
<CURRENT-ASSETS> 596,694
<PP&E> 771,995
<DEPRECIATION> 138,975
<TOTAL-ASSETS> 2,741,091
<CURRENT-LIABILITIES> 1,084,439
<BONDS> 861,303
<COMMON> 441
0
96
<OTHER-SE> 185,282
<TOTAL-LIABILITY-AND-EQUITY> 2,741,091
<SALES> 0
<TOTAL-REVENUES> 762,306
<CGS> 0
<TOTAL-COSTS> 861,792
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 729
<INTEREST-EXPENSE> 28,397
<INCOME-PRETAX> (105,193)
<INCOME-TAX> (35,161)
<INCOME-CONTINUING> (70,032)
<DISCONTINUED> 0
<EXTRAORDINARY> (1,532)
<CHANGES> 0
<NET-INCOME> (71,564)
<EPS-PRIMARY> (1.54)
<EPS-DILUTED> (1.54)
</TABLE>
