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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 JUNE 30, 1999
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 JULY 30, 1999
----------------------- -----------------
Common Stock, par value
$0.01 per share 58,690,886
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
TRANS WORLD AIRLINES, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED OPERATIONS
For the Three Months and Six Months Ended June 30, 1999 and 1998
(Amounts in Thousands Except Per Share Amounts)
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- ----------------------------
1999 1998 1999 1998
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Operating revenues:
Passenger $780,734 $789,343 $1,461,924 $1,465,786
Freight and mail 24,060 25,624 49,324 53,068
All other 61,199 68,569 119,333 130,071
-------- -------- ---------- ----------
Total 865,993 883,536 1,630,581 1,648,925
-------- -------- ---------- ----------
Operating expenses:
Salaries, wages and benefits 312,321 304,774 621,162 629,060
Aircraft fuel and oil 91,977 88,559 164,594 180,987
Passenger sales commissions 50,828 58,733 95,433 110,273
Aircraft maintenance materials and repairs 34,615 35,381 72,907 70,042
Depreciation and amortization 34,969 39,499 72,284 78,680
Aircraft Rent 98,318 80,745 188,665 156,525
Other Rent and Landing Fees 49,762 46,144 96,757 89,230
All other 174,833 184,153 337,995 357,287
-------- -------- ---------- ----------
Total 847,623 837,988 1,649,797 1,672,084
-------- -------- ---------- ----------
Operating income (loss) 18,370 45,548 (19,216) (23,159)
-------- -------- ---------- ----------
Other charges (credits):
Interest expense 24,450 32,247 49,411 62,462
Interest and investment income (4,739) (6,865) (7,912) (12,131)
Disposition of assets, gains and losses-net 3,757 (11,810) 1,747 (18,807)
Other charges and credits-net (5,365) (18,063) (36,667) (25,164)
-------- -------- ---------- ----------
Total 18,103 (4,491) 6,579 6,360
-------- -------- ---------- ----------
Income (loss) before income taxes and extraordinary items 267 50,039 (25,795) (29,519)
Provision (credit) for income taxes 5,610 25,289 1,106 (129)
-------- -------- ---------- ----------
Income (loss) before extraordinary items (5,343) 24,750 (26,901) (29,390)
Extraordinary items, net of income taxes (866) (5,256) (866) (6,636)
-------- -------- ---------- ----------
Net income (loss) (6,209) 19,494 (27,767) (36,026)
Preferred stock dividend requirements 5,863 5,863 11,726 11,726
-------- -------- ---------- ----------
Income (loss) applicable to common shares $(12,072) $ 13,631 $ (39,493) $ (47,752)
======== ======== ========== ==========
Basic earnings per share amounts:
Earnings (loss) before extraordinary items $ (.17) $ .33 $ (.59) $ (.71)
Extraordinary items (.01) (.09) (.01) (.11)
-------- -------- ---------- ----------
Net income (loss) $ (.18) $ .24 $ (.60) $ (.82)
======== ======== ========== ==========
Diluted earnings per share amounts:
Earnings (loss) before extraordinary items $ (.17) $ .28 $ (.59) $ (.71)
Extraordinary items (.01) (.07) (.01) (.11)
-------- -------- ---------- ----------
Net income (loss) $ (.18) $ .21 $ (.60) $ (.82)
======== ======== ========== ==========
See notes to consolidated financial statements
</TABLE>
1
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<TABLE>
TRANS WORLD AIRLINES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 1999 and December 31, 1998
(Amounts in Thousands)
<CAPTION>
ASSETS
June 30, December 31,
1999 1998
----------- ------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 288,663 $ 252,408
Receivables, less allowance for doubtful accounts,
$13,581 in 1999 and $14,459 in 1998 223,316 170,492
Spare parts, materials and supplies, less allowance for
obsolescence, $21,431 in 1999 and $20,554 in 1998 100,511 99,909
Prepaid expenses and other 111,623 82,605
---------- ----------
Total 724,113 605,414
---------- ----------
Property:
Property owned:
Flight equipment 342,323 414,645
Prepayments on flight equipment 97,596 69,875
Land, buildings and improvements 72,566 68,812
Other property and equipment 76,628 72,108
---------- ----------
Total property owned 589,113 625,440
Less accumulated depreciation 152,676 136,336
---------- ----------
Property owned-net 436,437 489,104
---------- ----------
Property held under capital leases:
Flight equipment 176,094 176,094
Land, buildings and improvements 49,431 49,431
Other property and equipment 8,932 9,093
---------- ----------
Total property held under capital leases 234,457 234,618
Less accumulated amortization 117,796 103,692
---------- ----------
Property held under capital leases-net 116,661 130,926
---------- ----------
Total property-net 553,098 620,030
---------- ----------
Investments and other assets:
Investments in affiliated companies 137,439 124,429
Investments, receivables and other 155,798 149,206
Routes, gates and slots-net 345,640 356,324
Reorganization value in excess of amounts allocable to identifiable
assets-net 678,244 699,220
---------- ----------
Total 1,317,121 1,329,179
---------- ----------
$2,594,332 $2,554,623
========== ==========
See notes to consolidated financial statements
</TABLE>
2
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<TABLE>
TRANS WORLD AIRLINES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 1999 and December 31, 1998
(Amounts in Thousands Except Per Share Amounts)
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
June 30, December 31,
1999 1998
----------- ------------
(Unaudited)
<S> <C> <C>
Current liabilities:
Current maturities of long-term debt $ 124,417 $ 111,538
Current obligations under capital leases 37,131 37,865
Advance ticket sales 323,205 211,340
Accounts payable, principally trade 258,017 229,368
Accounts payable to affiliated companies 6,224 7,167
Accrued expenses:
Employee compensation and vacations earned 146,451 159,064
Contributions to retirement and pension trusts 13,474 12,616
Interest on debt and capital leases 34,442 33,156
Taxes 12,040 11,447
Other accrued expenses 205,338 189,278
---------- ----------
Total accrued expenses 411,745 405,561
---------- ----------
Total 1,160,739 1,002,839
---------- ----------
Long-term liabilities and deferred credits:
Long-term debt, less current maturities 530,488 572,372
Obligations under capital leases, less current obligations 143,892 163,046
Postretirement benefits other than pensions 484,774 496,848
Noncurrent pension liabilities 24,011 24,634
Other noncurrent liabilities and deferred credits 88,203 109,562
---------- ----------
Total 1,271,368 1,366,462
---------- ----------
Shareholders' equity:
8% cumulative convertible exchangeable preferred stock,
$50 liquidation preference; 3,869 shares issued and outstanding 39 39
9 1/4% cumulative convertible exchangeable preferred stock,
$50 liquidation preference; 1,725 shares issued and outstanding 17 17
Employee preferred stock, $0.01 liquidation preference;
special voting rights; shares issued and outstanding:
1999-7,036; 1998-6,347 70 63
Common stock, $0.01 par value; shares issued and outstanding:
1999-58,647; 1998-57,768 586 578
Additional paid-in capital 735,549 730,894
Accumulated deficit (574,036) (546,269)
---------- ----------
Total 162,225 185,322
---------- ----------
$2,594,332 $2,554,623
========== ==========
See notes to consolidated financial statements
</TABLE>
3
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<TABLE>
TRANS WORLD AIRLINES, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
For the Six Months Ended June 30, 1999 and 1998
(Amounts in Thousands)
(Unaudited)
<CAPTION>
Six Months Ended
June 30,
--------------------------
1999 1998
-------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (27,767) $ (36,026)
Adjustments to reconcile net loss to net cash used by operating activities:
Employee earned stock compensation 2,594 26,522
Depreciation and amortization 72,284 78,680
Amortization of discount and expense on debt 3,810 6,128
Amortization of deferred gains/losses on sale and leaseback of certain
aircraft and engines (5,055) (3,984)
Extraordinary loss on extinguishment of debt 866 6,636
Equity in undistributed earnings of affiliates not consolidated (13,206) (6,780)
Revenue from Icahn ticket program - (75,167)
Net (gains) losses on disposition of assets 1,747 (18,807)
Change in operating assets and liabilities:
Decrease (increase) in:
Receivables (52,840) (46,365)
Inventories (1,490) (4,268)
Prepaid expenses and other current assets (28,484) (4,105)
Other assets (5,770) (7,257)
Increase (decrease) in:
Accounts payable and accrued expenses 60,260 7,732
Advance ticket sales 111,865 63,603
Other noncurrent liabilities and deferred credits (21,014) (10,270)
--------- ---------
Net cash provided (used) 97,800 (23,728)
--------- ---------
Cash flows from investing activities:
Proceeds from sales of property 12,363 29,928
Capital expenditures, including aircraft pre-delivery deposits (73,946) (48,907)
Return of pre-delivery deposits related to leased aircraft 9,620 -
Net (increase) decrease in investments, receivables and other (2,329) 18,616
--------- ---------
Net cash used (54,292) (363)
--------- ---------
Cash flows from financing activities:
Net proceeds from long-term debt issued - 144,938
Net proceeds from sale and leaseback of certain aircraft and engines 80,633 160,176
Repayments on long-term debt and capital lease obligations (76,600) (133,245)
Cash dividends paid on preferred stock (11,727) (12,014)
Net proceeds from exercise of warrants and options 441 987
--------- ---------
Net cash provided (used) (7,253) 160,842
--------- ---------
Net increase in cash and cash equivalents 36,255 136,751
Cash and cash equivalents at beginning of period 252,408 237,765
--------- ---------
Cash and cash equivalents at end of period $ 288,663 $ 374,516
========= =========
See notes to consolidated financial statements
</TABLE>
4
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<TABLE>
TRANS WORLD AIRLINES, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
For the Six Months Ended June 30, 1999 and 1998
(Amounts in Thousands)
(Unaudited)
<CAPTION>
SUPPLEMENTAL CASH FLOW INFORMATION
Six Months Ended
June 30,
----------------------
1999 1998
------- --------
<S> <C> <C>
Cash paid during the period for:
Interest $ 36,492 $ 51,148
======== ========
Income taxes $ 10 $ 9
======== ========
Information about noncash operating, investing and financing activities:
Promissory notes issued to finance aircraft acquisitions $ - $100,822
======== ========
Promissory notes issued to finance aircraft predelivery payments $ 38,687 $ 8,516
======== ========
Aircraft acquired and obligations recorded under new capital lease
transactions $ - $ 16,406
======== ========
</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
5
<PAGE>
<PAGE>
TRANS WORLD AIRLINES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
(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 26.315%
owned affiliate, are recorded under the equity method and are included
in the Statements of Consolidated Operations in Other Charges (Credits).
Effective October 2, 1998, TWA's equity interest in Worldspan increased
from 24.999% to 26.315%. The increase was a result of a distribution by
Worldspan to certain existing owners of additional interest at no cost
to the Company.
The unaudited consolidated financial statements included herein
have been prepared by the Company pursuant to the rules and regulations
of the Securities and Exchange Commission (the "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, 1998. The consolidated balance sheet at
December 31, 1998 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 consolidated financial results on an interim basis are not
necessarily indicative of future financial results on either an interim
or annual basis. TWA's air transportation business has historically
experienced seasonal changes with the second and third quarters of the
calendar year producing substantially better operating results than the
first and fourth quarters, although operational adjustments with the
intent of reducing the level of seasonality have been, and continue to
be, implemented. While the Company anticipates that the
deseasonalization of operations affected thereby will reduce quarter to
quarter fluctuations in the future, there can be no assurance that the
reduction of seasonal fluctuations in financial operating results will
be realized. Accordingly, the results for the three months and six
months ended June 30, 1999 should not be read as indicators of results
for the full year.
2. INCOME TAXES
The income tax provisions/benefits recorded for the three and six
month periods ended June 30, 1999 and 1998 reflect quarterly effective
tax rates and management's current expectation of full year pre-tax
profits. Considering the high level of non-deductible expenses in
relation to expected 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 provisions/benefits recorded for the first two quarters
of 1999 and 1998 were based upon the allocable portion of certain non-
deductible expenses, primarily amortization of reorganization value in
excess of amounts allocable to identifiable assets, and statutory tax
rates.
6
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<PAGE>
3. EXTRAORDINARY ITEMS
In the six months ended June 30, 1999 the Company recorded
extraordinary non-cash charges of $866 thousand related to the premium
on the early retirement of 11 3/8% Senior Secured Notes due 2003
("11 3/8% Notes") and 10 1/4% Senior Secured Notes due 2003 ("10 1/4%
Notes") which were redeemed to comply with the requirements of the
indentures for such notes in order to permit TWA to sell a portion of
the collateral securing the 11 3/8% Notes and all of the collateral
securing the 10 1/4% Notes.
In the six months ended June 30, 1998 the Company recorded
extraordinary non-cash charges of $6.6 million related to the early
extinguishment of a portion of the promissory notes issued to the
Pension Benefit Guaranty Corporation (the "PBGC Notes") as a result of
Karabu Corp. ("Karabu"), a company controlled by Carl Icahn, applying
approximately $68.9 million in ticket proceeds as prepayments on the
PBGC Notes. In December 1998, the PBGC Notes were paid in full.
4. INCOME (LOSS) PER SHARE
In computing the loss applicable to common shares for the three
months and six months ended June 30, 1999, the net loss has been
increased by dividend requirements on the 8% Cumulative Convertible
Exchangeable Preferred Stock (the "8% Preferred Stock") and the 9 1/4%
Cumulative Convertible Exchangeable Preferred Stock (the "9 1/4%
Preferred Stock"). In computing the related net loss per share, the
loss applicable to common shares has been divided by the aggregate
average number of outstanding shares of common stock (58.5 million and
58.2 million for the three months and six months ended June 30, 1999,
respectively) and employee preferred stock (7.6 million and 7.7 million
for the three months and six months ended June 30, 1999, respectively)
which, with the exception of certain special voting rights, is the
functional equivalent of common stock. Diluted earnings per share are
the same as basic earnings per share for the periods presented as the
impact of stock options, warrants or potential issuances of additional
common stock or employee preferred stock in the three and six month
periods ended June 30, 1999 would have been anti-dilutive.
The income applicable to common shares for the three months and
the loss applicable to common shares for the six months ended June 30,
1998 have likewise been adjusted by dividend requirements on the 8%
Preferred Stock and the 9 1/4% Preferred Stock. In computing the
related basic earnings/(loss) per share, the amounts applicable to
common shares were divided by the aggregate average number of
outstanding shares of common stock (52.1 million and 51.9 million for
the three months and six months ended June 30, 1998, respectively) and
employee preferred stock (5.9 million and 6.1 million for the three
months and six months ended June 30, 1998, respectively). Diluted
earnings per share amounts for the three months ended June 30, 1998 give
effect to potential issuances of common stock under stock options,
warrants and employee compensation programs and the conversion of
preferred stock and convertible debt, when the effect is dilutive. No
effect has been given to stock options, warrants or potential issuances
of additional common stock or employee preferred stock in diluted
earnings per share amounts in the six month period ended June 30, 1998
as their impact would have been anti-dilutive.
5. PROPERTY AND DISPOSITION OF ASSETS
The Company has reclassified the net book value of its grounded
L-1011 and B-747 aircraft from Property to Investments, Receivables and
Other as such aircraft have been retired from service and are currently
held for sale. The amounts reclassified were $25.8 million and $17.5
million at June 30, 1999 and 1998, respectively.
7
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<PAGE>
During the six months ended June 30, 1999 and 1998, disposition of
assets resulted in net losses of $1.7 million and net gains of $18.8
million, respectively. The net losses in the first six months of 1999
included a loss from the sale and leaseback of four B-767 aircraft in
April 1999 partially offset by gains from the sale of L-1011 and B-727
aircraft and engines, spare L-1011 and DC9-10 engines and the sale of
TWA's investment in SatoTravel, a company which provides ticketing
services ("SATO"). In 1998, the recorded gains related primarily to the
sale of L-1011 and B-747 aircraft and engines and other surplus engines
which had been retired from active service.
6. SEGMENT REPORTING
TWA operates one segment, that of air transportation. However,
that segment is analyzed and reported in two primary geographic areas,
Domestic and International (the Atlantic division as reported to the
Department of Transportation). Information related to revenues
generated from operations within those geographic areas is presented
below.
<TABLE>
<CAPTION>
Quarters Ended Six Months Ended
June 30, June 30,
--------------------- ------------------------
1999 1998 1999 1998
------ ------ -------- --------
<S> <C> <C> <C> <C>
Operating Revenues (in millions):
Domestic $767.1 $760.6 $1,457.2 $1,441.0
International 98.9 122.9 173.4 207.9
------ ------ -------- --------
Total $866.0 $883.5 $1,630.6 $1,648.9
====== ====== ======== ========
</TABLE>
TWA identifies revenues to each division based on revenues
generated by specific flight segment and the division in which each
flight segment operates. A major portion of the Company's long-lived
assets consists of its flight equipment (aircraft), which are not
assigned to a specific geographic area but rather are flown across
geographic boundaries.
7. PRICELINE.COM INC. WARRANTS
TWA entered into an agreement with Priceline.com Inc. ("Priceline")
which sets forth the terms and conditions under which ticket inventory
provided by TWA may be sold utilizing Priceline's internet-based
electronic commerce system. In connection with this agreement, TWA
received warrants to purchase up to 312,500 shares of Priceline's common
stock for $3.20 per share, subject to adjustment in certain
circumstances. These warrants are exercisable during the period
commencing October 27, 1999 and ending December 31, 2001. These
warrants, and the shares issuable when the warrants are exercised, are
not registered under the Securities Act of 1933, but TWA has certain
demand and piggyback registration rights with respect to the shares.
8. SALE OF EQUANT SHARES
TWA is a long-term member of the Societe Internationale de
Telecommunications Aeronautiques ("SITA"), a worldwide provider of
communication services to the aviation industry. In February 1999,
members of SITA divested a portion of their shares in Equant N.V.
("Equant"), a telecommunication network company, through a secondary
offering. As a member of SITA, TWA indirectly participated in the sale
of a
8
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<PAGE>
portion of its holdings in Equant, resulting in a reported gain and
receipt of cash of approximately $21.3 million. Additionally,
Worldspan, an affiliate, also participated in the divestiture of Equant,
resulting in the additional recognition of gain by TWA of approximately
$2.7 million as an equity participant in the earnings of Worldspan.
9. 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, 1998 which, among other matters, described
various contingencies and other legal actions against TWA, except as
discussed in Note 10 and Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
10. STATUS OF LABOR AGREEMENTS
On June 13, 1999, TWA and the International Association of
Machinists and Aerospace Workers ("IAM") reached tentative agreement on
new contract proposals for TWA flight attendant and ground employees,
who constitute approximately 73% of TWA's employees as of June 30, 1999.
Ratification of these contracts occurred on July 22, 1999. The
contracts became effective August 1, 1999 and become amendable on
January 31, 2001.
TWA agreed to pay increases over the next 18 months that will
result in wages for TWA's ground employees and flight attendants
improving by the end of the term of the contract to averages ranging
from 86.5% to 91.0% of industry average as determined by wage rates in
contracts in effect as of June 1999. Additionally, TWA has agreed to
distribute 3,500,000 shares of TWA common stock to these employees. As
soon as practicable following contract ratification, 500,000 shares will
be distributed to IAM-represented flight attendants in a manner
determined by the IAM. The remaining 3,000,000 shares will be
distributed in a manner determined by the IAM to IAM-represented
employees on the following dates: July 31, 2000 - 1,000,000 shares,
January 31, 2001 - 1,000,000 shares, January 31, 2002 - 1,000,000
shares.
In conjunction with these contracts, TWA and the IAM-represented
employees have agreed to withdraw all pending litigation including
contempt proceedings. Additionally, all outstanding grievances
regarding scope, work jurisdiction, outsourcing and compensation were
withdrawn. In settlement of these disputed matters, IAM-represented
flight attendant employees will receive $25 million to be distributed in
a manner directed by the IAM on the following dates: August 31, 1999 -
$11.0 million, August 1, 2000 - $11.0 million, August 1, 2001 - $3.0
million. Similarly, in settlement of these disputed matters, IAM-
represented ground employees will receive $10 million to be distributed
in a manner directed by the IAM by no later than the following dates:
November 2, 2001 - $5.0 million, and August 1, 2002 - $5.0 million. As
a result of the ratification of the contract, including settlements of
the disputes discussed above, TWA expects to record a non-recurring
charge to earnings in the third quarter of 1999 aggregating $34.0
million, net of amounts previously accrued.
9
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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 financial condition or results
of operations. To that extent, they are forward-looking statements
within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended, and each is subject to risks, uncertainties and
assumptions that could cause actual results to differ from those in the
forward-looking statements. 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. In any event, these forward-looking statements
speak only as of their dates, and the Company undertakes no obligation
to update or revise any of them whether as a result of new information,
future events or otherwise.
GENERAL
TWA operates in an intensely competitive environment. The Company
competes with one or more major airlines on most of its routes
(including all routes between major cities). The airline industry has
consolidated as a result of mergers and liquidations and more recently
through alliances, and further consolidation may occur in the future.
This consolidation has, among other things, enabled certain of the
Company's major competitors to expand their international operations and
increase their domestic market presence, thereby strengthening their
overall operations, by transporting passengers connecting with or
otherwise traveling on the alliance carriers. Such alliances could
further intensify the competitive environment.
The rapid growth of regional jet airline affiliates represents a
significant competitive challenge for TWA due to its reliance on
through-hub passenger traffic. A small regional jet can now offer
direct service in markets that previously were served only by through-
hub service. The Company's newly ratified labor agreements with IAM-
represented employee groups will allow TWA to utilize feed of regional
jets immediately.
These issues represent a competitive challenge for the Company,
which has higher operating costs than many regional carriers and fewer
financial resources than many of its major competitors. Small
fluctuations in revenue per available seat mile ("RASM") and cost per
available seat mile ("CASM") can significantly affect TWA's financial
results. The Company has experienced significant operating losses on an
annual basis since the early 1990s, except in 1995 when the Company's
combined operating profit was $25.1 million. TWA expects the airline
industry will remain extremely competitive for the foreseeable future.
The Company continues to focus on implementing several strategic
initiatives to improve operational reliability and schedule integrity
and overall product quality in order to attract higher-yield passengers
and enhance overall productivity. Key initiatives currently in progress
include:
* modernizing its fleet;
* focusing on improved productivity;
* implementing a series of revenue-enhancing marketing
initiatives to attract higher-yield business travelers;
* implementing a number of employee-related initiatives to
reinforce the Company's focus on operational performance;
and
* optimizing TWA's route structure.
10
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<PAGE>
TWA faces a number of uncertainties that may adversely affect its future
results of operations, including:
* insufficient levels of air passenger traffic resulting from,
among other things, war, threat of war, terrorism or changes
in the economy;
* governmental limitations on the ability of TWA to service
certain airports and/or foreign markets;
* regulatory requirements necessitating additional capital or
operating expenditures;
* pricing and scheduling initiatives by competitors;
* the availability and cost of capital;
* increases in fuel and other operating costs; and
* the adverse effects on yield of the continued implementation
of a discount ticket program between TWA and Karabu, on the
terms currently applied by Karabu. (TWA believes these
terms are inconsistent with, and in violation of, the ticket
agreement governing this program.) (See "Part II. Item 1.
Legal Proceedings.")
TWA is unable to predict the potential effect of any of these
uncertainties upon its future results of operations.
Labor Costs
Wage rates for most of TWA's employees have increased recently as
a result of several events. A new collective bargaining agreement
between TWA and its pilots became effective September 1, 1998. As part
of the new contract, TWA agreed to pay increases over four years that
will result in wages for TWA's pilots improving in 2002 to 90% of the
industry average as determined by wage rates in contracts in effect as
of August 1998. The contract also provides for significant work rule
improvements for pilots in certain areas while also granting TWA
flexibility and improvements necessary to enhance its competitive
position. Under the contract, TWA also will distribute either one
million shares of TWA's common stock or $11 million in cash to its
pilots, in four equal quarterly payments commencing in 1999. TWA has
the option to make each quarterly payment in shares or in cash. The
Company made the first quarterly distribution of 250,000 shares of
common stock in April 1999, and has declared the second quarterly
distribution will be 250,000 shares of common stock.
On June 13, 1999, TWA and the IAM reached tentative agreement on
new contract proposals for TWA flight attendant and ground employees,
who constitute approximately 73% of TWA's employees as of June 30, 1999.
Ratification of these contracts occurred on July 22, 1999. The
contracts became effective August 1, 1999 and become amendable on
January 31, 2001.
TWA agreed to pay increases over the next 18 months that will result
in wages for TWA's ground employees and flight attendants improving by the
end of the term of the contract so averages ranging from 86.5% to 91.0%
of industry average as determined by wage rates in contracts in effect
as of June 1999. Additionally, TWA has agreed to distribute 3,500,000
shares of TWA common stock to these employees. As soon as practicable
following contract ratification, 500,000 shares will be distributed to
IAM-represented flight attendants in a manner determined by the IAM. The
remaining 3,000,000 shares will be distributed in a manner determined
by the IAM to IAM-represented employees on the following dates: July 31,
2000 - 1,000,000 shares, January 31, 2001 - 1,000,000 shares, January 31,
2002 - 1,000,000 shares.
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In conjunction with these contracts, TWA and the IAM-represented
employees have agreed to withdraw all pending litigation including
contempt proceedings. Additionally, all outstanding grievances
regarding scope, work jurisdiction, outsourcing and compensation were
withdrawn. In settlement of these disputed matters, IAM-represented
flight attendant employees will receive $25 million to be distributed in
a manner directed by the IAM on the following dates: August 31, 1999 -
$11.0 million, August 1, 2000 - $11.0 million, August 1, 2001 - $3.0
million. Similarly, in settlement of these disputed matters, IAM-
represented ground employees will receive $10 million to be distributed
in a manner directed by the IAM by no later than the following dates:
November 2, 2001 - $5.0 million, and August 1, 2002 - $5.0 million. As
a result of the ratification of the contract, including settlements of
the disputes discussed above, TWA expects to record a non-recurring
charge to earnings in the third quarter of 1999 aggregating $34.0
million, net of amounts previously accrued. (see "Part II, Item 1. Legal
Proceedings - Other Actions")
Pursuant to the labor agreements TWA entered into in 1992, TWA
agreed to pay to employees represented by the IAM a cash bonus for the
amount by which overtime incurred from September 1992 through August
1995 was reduced below specified thresholds. This amount was to be
offset by the failure of medical savings to meet certain specified
levels during the period for the same employees. TWA and the IAM came
to agreement on this obligation which will be due in three equal annual
installments, the first of which was made in October 1998. The
remaining obligation of $17.8 million is reflected as a liability in
the consolidated financial statements.
TWA also entered into agreements subsequent to the 1992 labor
agreements that provide for an adjustment to existing salary rates of
certain labor-represented employees based on the amount of the cash
bonus for overtime to the employees represented by the IAM as described
in the previous paragraph. These adjustments equated to a 4.814%
increase which management made effective for all employee groups on
September 1, 1998, except for pilots whose contract provided for
separate increases also effective September 1, 1998, and the officers of
TWA who did not receive the increase.
TWA's agreements with employees could result in significant non-
cash charges to future operating results. Shares granted or purchased
at a discount under the Employee Stock Incentive Plan ("ESIP") will
generally result in a charge equal to the fair market value of shares
granted and the discount for shares purchased at the time these shares
are earned or purchased. As a result of the first two target prices
being realized on February 17, 1998, and March 4, 1998, respectively,
the Company issued an additional 2,377,084 shares on July 15, 1998, to
satisfy the 1997 and 1998 ESIP grant amounts. In connection with such
issuance, TWA recorded an aggregate non-cash charge in the first quarter
of 1998 in the amount of $26.5 million. An aggregate non-cash charge of
$1.0 million was recorded in the third quarter of 1998 to reflect the
actual number of shares issued on July 15, 1998. If the ESIP's
remaining target prices for TWA common stock are realized, the minimum
aggregate non-cash charge for the years 1999 to 2002 will be
approximately $103.4 million based upon these target prices and the
number of shares of common stock and employee preferred stock
outstanding at December 31, 1998. The non-cash charge for any year,
however, could be substantially higher if the then market price of
TWA common stock exceeds certain target prices.
TWA believes it is essential to improve employee productivity as
an offset to any wage increases and will continue to explore other ways
to control and/or reduce operating expenses. However, there can be no
assurance that the Company will be successful in obtaining such
productivity improvements or unit cost reductions. It is essential that
the Company's labor costs remain favorable in comparison to its largest
competitors.
Seasonality
Due to the greater demand for air travel during the summer months,
airline industry revenues for the third quarter of the year are
generally significantly greater than revenues in the first and fourth
quarters of the
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year and moderately greater than revenues in the second quarter of the
year. In the last two years, TWA has attempted to reduce the seasonal
nature of its business through an acceleration of its fleet renewal
program, a decrease in international operations, and the restructuring
of its JFK operations, with the result that the difference between TWA's
seasonal average daily peak and trough capacities relating to available
seat miles ("ASMs") has dropped from 20.8% in 1996 and 16.9% in 1997 to
3.9% in 1998. TWA anticipates that the seasonal variability of its
financial performance will be reduced (but not eliminated) as a result
of these changes; however, there can be no assurance that this
deseasonalization will occur.
TWA's passenger traffic data, for scheduled passengers only, are
shown in the table below for the indicated periods <F1>:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30, YEARS ENDED DECEMBER 31,
--------------------- ---------------------- -------------------------------------
1999 1998 1999 1998 1998 1997 1996
------ ------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
NORTH AMERICA
Passenger revenues
($ millions) $ 700 $ 689 $ 1,322 $ 1,300 $ 2,562 $ 2,512 $ 2,512
Revenue passenger miles
(millions)<F2> 5,841 5,417 10,741 10,211 20,132 19,737 19,513
Available seat miles
(millions)<F3> 7,572 7,245 14,735 14,316 28,796 29,341 30,201
Passenger load factor<F4> 77.1% 74.8% 72.9% 71.3% 69.9% 67.3% 64.6%
Passenger yield
(cents)<F5> 11.97 cents 12.72 cents 12.31 cents 12.73 cents 12.72 cents 12.73 cents 12.89 cents
Passenger revenue per
available seat mile
(cents)<F6> 9.24 cents 9.51 cents 8.97 cents 9.08 cents 8.90 cents 8.56 cents 8.33 cents
INTERNATIONAL
Passenger revenues
($ millions) $ 81 $ 100 $ 140 $ 166 $ 333 $ 412 $ 563
Revenue passenger miles
(millions)<F2> 1,076 1,286 1,896 2,257 4,290 5,363 7,598
Available seat miles
(millions)<F3> 1,298 1,543 2,432 2,940 5,657 7,093 10,393
Passenger load
factor<F4> 82.9% 83.3% 78.0% 76.8% 75.8% 75.6% 73.1%
Passenger yield
(cents)<F5> 7.56 cents 7.78 cents 7.40 cents 7.35 cents 7.77 cents 7.68 cents 7.41 cents
Passenger revenue per
available seat mile
(cents)<F6> 6.27 cents 6.49 cents 5.77 cents 5.65 cents 5.89 cents 5.81 cents 5.42 cents
TOTAL SYSTEM
Passenger revenues
(millions) $ 781 $ 789 $ 1,462 $ 1,466 $ 2,895 $ 2,924 $ 3,078
Revenue passenger
miles (millions)<F2> 6,917 6,703 12,637 12,468 24,422 25,100 27,111
Available seat miles
(millions)<F3> 8,870 8,788 17,167 17,256 34,453 36,434 40,594
Passenger load factor<F4> 78.0% 76.3% 73.6% 72.3% 70.9% 68.9% 66.8%
Passenger yield
(cents)<F5> 11.29 cents 11.78 cents 11.57 cents 11.76 cents 11.85 cents 11.65 cents 11.35 cents
Passenger revenue per
available seat miles
(cents)<F6> 8.80 cents 8.98 cents 8.52 cents 8.49 cents 8.40 cents 8.03 cents 7.58 cents
Operating cost per
available seat mile
(cents)<F7> 9.38 cents 9.30 cents 9.45 cents 9.48 cents 9.31 cents 8.99 cents 8.78 cents
Average daily
utilization per
aircraft (hours)<F8> 9.68 10.08 9.74 9.94 9.77 9.38 9.63
Aircraft in fleet
being operated at
end of period 188 183 188 183 185 185 192
<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 scheduled available seat miles.
<F7> Operating expenses, excluding special charges, other nonrecurring
charges and subsidiaries, divided by total available seat miles.
<F8> The average block hours flown per day in revenue service per
aircraft.
</TABLE>
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RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 1999 COMPARED
TO THE THREE MONTHS ENDED JUNE 30, 1998
During the second quarter of 1999, TWA reported operating income
of $18.4 million, which was $27.1 million unfavorable compared to the
operating income of $45.5 million in the second quarter of 1998. TWA
also reported a second quarter 1999 pre-tax profit of $0.3 million
compared to $50.0 million in 1998. After extraordinary items of $0.9
million in the second quarter of 1999 and $5.3 million in the second
quarter of 1998 relating to the early retirement of debt, the Company
recorded a net loss of $6.2 million in 1999 versus net income of $19.5
million in the same period of 1998.
For the second quarter of 1999, total operating revenues of $866.0
million were $17.5 million less than the $883.5 million recorded in
1998. Passenger revenues declined $8.6 million from the prior year
period as higher-yield passengers diverted to other airlines in response
to the continuing negotiations between TWA and the IAM and a threatened
strike action. Freight and mail revenues also declined $1.6 million as
the U.S. Postal Service began diverting mail to other airlines for the
same reason. Decreases in all other revenue were also recorded in
Getaway Tour revenues ($4.1 million) and third party contract revenues
($1.0 million) while a slight increase was noted in charter revenues
($0.2 million).
System-wide capacity, as measured by scheduled ASMs, increased
0.9% in the second quarter of 1999 from the comparable period of 1998.
Domestic ASMs increased 4.5% while International ASMs decreased 15.9%.
The system passenger load factor improved 1.7 percentage points in the
second quarter of 1999 versus the same period in 1998 to 78.0% from
76.3%. TWA generated these higher load factors by carrying a higher
percentage of leisure traffic during the period. System yield declined
4.2% to 11.29 cents in the second quarter of 1999 compared to 11.78
cents in 1998, again related to the diversion of higher yielding
business passengers because of the uncertainty of the outcome of labor
negotiations between the Company and the IAM. RASM decreased year over
year to 8.80 cents in the second quarter of 1999 from 8.98 cents in the
second quarter of 1998. Through the second quarter of 1999, TWA has
taken delivery of 11 new aircraft in a plan which anticipates acceptance
of 37 new aircraft for the year. Second quarter CASM continued to
reflect the increase in aircraft rental expense resulting from this
change in equipment, increasing to 9.38 cents versus 9.30 cents in the
second quarter of 1998.
Operating expenses increased $9.6 million during the second
quarter of 1999 to $847.6 million from $838.0 million during the second
quarter of 1998, representing a net change in the following expense
groups:
* Salaries, wages and benefits were $312.3 million during the
second quarter of 1999 compared to $304.8 million during the
second quarter of 1998. The decrease of 5.3% in the average
number of full-time equivalent employees to 21,053 in the
second quarter of 1999 versus 22,232 in the second quarter
of 1998 was more than offset by the increase of $7.5 million
related to a company-wide (except for Company officers and
pilots) salary increase of 4.814 percent effective September 1,
1998, the pilot contract increase, and continued overtime
and premium pay resulting from high turnover and attrition.
TWA's group insurance costs also increased $3.7 million in
comparison to the second quarter of 1998.
* Aircraft fuel and oil expense of $92.0 million for the
second quarter of 1999 was $3.4 million greater than $88.6
million recorded in the second quarter of 1999.
Approximately $3.2 million of the increase was caused by an
increase in the average cost per gallon to 52.9 cents in
1999 from 51.0 cents in 1998. The remaining $0.2 million of the
increase was related to increased fuel consumption to 174.0
million gallons in the second quarter of 1999 versus 173.8
million gallons in the second quarter of 1998 as the result
of increased block hours and operational difficulties
experienced in June.
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* Passenger sales commission expense of $50.8 million was $7.9
million less than the expense recorded in the second quarter
of 1998 primarily due to a decrease of 4.9% in the
percentage of domestic commissionable tickets sold during
the second quarter of 1999 versus 1998 and domestic
commissions being capped at a certain dollar limit during
the second quarter of 1998.
* Aircraft maintenance material and repairs expense of $34.6
million for the second quarter of 1999 represents a decrease
of $0.8 million from $35.4 million during the same period of
1998. The primary factor contributing to this decrease was
reduced engine material requirements for both TWA and
customer engine overhauls.
* Depreciation and amortization expense decreased $4.5 million
to $35.0 million in the second quarter of 1999 from $39.5
million in the second quarter of 1998. The decrease
resulted primarily from the sale and leaseback of four B-757
aircraft in June and July 1998, four B-767 aircraft in April
1999 and major improvements to certain aircraft becoming
fully depreciated in 1998.
* Aircraft lease rentals increased $17.6 million to $98.3
million in the second quarter of 1999 from $80.7 million in
the second quarter of 1998. TWA continues to aggressively
renew its fleet and has taken delivery of 19 additional
leased aircraft since the end of the second quarter 1998 in
addition to selling and leasing back eight aircraft.
* Other lease rentals and landing fees were $49.8 million in
the second quarter of 1999 versus $46.1 million in the
second quarter of 1998, an increase of $3.7 million. The
principal causes of this change were increases of $3.7
million in landing fees and $2.3 million in facility rentals
offset by a $2.3 million decrease in ground equipment
rentals.
All other operating expenses of $174.8 million in the second
quarter of 1999 were $9.4 million less than the $184.2 million recorded
in the second quarter of 1998, reflecting decreases in passenger food
and beverages expense related to the use of more cost-effective products
($3.4 million), corporate liability and hull insurance premiums
resulting from lower insurance premiums during the current policy period
($2.9 million) and Getaway tour expenses related to a lower volume of
tour packages sold by TWA's subsidiary, Getaway Vacations ($3.8
million).
Other charges (credits) were a net charge of $18.1 million during
the second quarter of 1999 compared to a net credit of $4.5 million for
the second quarter of 1998. Interest expense decreased $7.8 million in
the second quarter of 1999 from the same period in 1998 as a result of
the retirement of certain debt in 1998 and 1999. Interest and
investment income decreased $2.1 million in the second quarter of 1999
primarily due to a decrease in the level of invested funds. Net gains
(losses) from the disposition of assets were net losses of $3.8 million
and net gains of $11.8 million during the second quarters of 1999 and
1998, respectively. The net losses recorded in the second quarter of
1999 included a loss from the sale and leaseback of four B-767 aircraft
in April 1999, partially offset by gains from the sale of spare L-1011
and DC9-10 engines. The net gains recorded in the 1998 second quarter
included gains from the sale of non-operating L-1011 and B-747 aircraft.
Other charges and credits - net declined $12.7 million when compared to
the second quarter of 1998 primarily as the result of a cash undertaking
previously posted by TWA of $13.7 million in an action brought by
Travellers International A.G. and its parent company, Windsor, Inc.
After the U.S. Supreme Court refused to hear an appeal of a decision
in 1998 reversing a 1991 judgment against TWA, the cash was returned in
June 1998 and a credit of $13.7 million was recorded in the second
quarter of 1998.
A tax provision of $5.6 million was recorded in the second quarter
of 1999 compared to a provision of $25.3 million in the second quarter
of 1998 (see Note 2 to Consolidated Financial Statements).
15
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As a result of the above, the Company's operating profit of $18.4
million for the second quarter of 1999 declined $27.1 million from $45.5
million in the second quarter of 1998. The Company had a net loss of
$6.2 million in the second quarter of 1999 compared to a net income of
$19.5 million in the same period of 1998. The second quarter results
included extraordinary charges of $0.9 million and $5.3 million in the
second quarter of 1999 and 1998, respectively, related to the early
extinguishment of debt.
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO
THE SIX MONTHS ENDED JUNE 30, 1998
For the first six months 1999, TWA reported an operating loss of
$19.2 million and a pre-tax loss of $25.8 million. These results
compare to a prior year operating loss of $23.2 million and pre-tax loss
of $29.5 million which included a non-cash charge to operating expense
of $26.5 million relating to a distribution made in July 1998 of TWA
common stock to employee stock plans pursuant to the ESIP. After
extraordinary items of $0.9 million in the first six months of 1999 and
$6.6 million in the first six months of 1998 relating to the early
retirement of debt, the Company recorded a net loss of $27.8 million in
1999 versus $36.0 million in the same period of 1998.
In the first six months of 1999, total operating revenues of
$1,630.6 million were $18.3 million less than the $1,648.9 million
recorded in 1998. Passenger revenues declined $3.9 million from the
prior year period as business passengers diverted to other airlines in
response to the continuing negotiations between TWA and the IAM and a
threatened strike action. Freight and mail revenues also declined $3.7
million as the U.S. Postal Service began diverting mail to other
airlines for the same reason. Decreases were also noted in Getaway Tour
revenues ($5.3 million) and charter revenues ($0.7 million).
System-wide capacity, as measured by scheduled ASMs, decreased
0.5% in the six months ended June 30, 1999 from the comparable period of
1998. Domestic ASMs increased 2.9% while International ASMs decreased
17.3%. The system passenger load factor improved 1.3 percentage points
in the first six months of 1999 versus the same period in 1998 to 73.6%
from 72.3%. System yield declined 1.6% to 11.57 cents in the first six
months of 1999 compared to 11.76 cents in 1998, again related to the
diversion of higher yielding business passengers because of the
uncertainty of the outcome of labor negotiations between the Company and
the IAM. RASM increased year over year to 8.52 cents in the six months
ended June 30, 1999 from 8.49 cents in the same period of 1998. Through
the second quarter of 1999, TWA has taken delivery of 11 new aircraft in
a plan which anticipates acceptance of a total of 37 new aircraft for
the year. CASM continued to reflect the increase in aircraft rental
expense resulting from this change in equipment, even though decreasing
to 9.45 cents versus 9.48 cents in the first six months of 1998.
Operating expenses decreased $22.3 million during the first six
months of 1999 to $1,649.8 million from $1,672.1 million during the
first six months of 1998, representing a net change in the following
expense groups:
* Salaries, wages and benefits were $621.2 million during six
months ended June 30, 1999 compared to $602.5 million during
the same period in 1998. The increase of $18.7 million was
related primarily to a company-wide (except for Company
officers and pilots) salary increase of 4.814 percent effective
September 1, 1998 in addition to pilot contract increases.
An increase of $9.4 million was also reflected in the cost
of TWA's group insurance plans during the first six months
of 1999 versus the same period in 1998. The average number
of full-time equivalent employees decreased 5.0% to 21,110
in the first six months of 1999 versus 22,222 in the first
six months of 1998. Additionally, earned stock compensation
charges of $26.5 million were recorded in the first six
months of 1998.
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These charges were related to incentive shares issued in
July 1998 under the ESIP relative to the achievement of
certain common stock target prices in February and March
1998 per agreements reached under the 1995 reorganization.
No such charges were recorded in the first six months of
1999.
* Aircraft fuel and oil expense of $164.6 million in the first
six months of 1999 was $16.4 million less than $181.0 million
recorded in the first six months of 1998. Approximately $13.8
of the decrease was caused by a decline in the average cost per
gallon to 49.1 cents in 1999 from 53.2 cents in 1998 and $2.6
million of the decrease was related to reduced fuel consumption
to 335.3 million gallons in the first half of 1999 versus 340.1
million gallons in the first half of 1998.
* Passenger sales commission expense of $95.4 million for the
first six months of 1999 was $14.8 million less than the
expense recorded in the same period of 1998 primarily due to
domestic commissions being capped at a certain dollar limit
during the first six months of 1999 and a decrease of 3.1%
in the percentage of domestic commissionable tickets sold
during the first half of 1999 versus 1998.
* Aircraft maintenance material and repairs expense of $72.9
million for the first six months of 1999 represents an
increase of $2.9 million from $70.0 million during the same
period of 1998. The primary factors contributing to this
increase were increases in the costs of airframe materials
and third party repairs, offset in part by reduced engine
material requirements.
* Depreciation and amortization expense decreased $6.4 million
to $72.3 million in the six months ended June 30, 1999 from
$78.7 million in the first six months of 1998. The decrease
resulted primarily from the sale and leaseback of four B-757
aircraft in June and July 1998 and major improvements to
certain aircraft becoming fully depreciated in 1998.
* Aircraft lease rentals increased $32.1 million to $188.7
million in the first half of 1999 from $156.5 million in the
first half of 1998. TWA continues to aggressively renew its
fleet and has taken delivery of 19 additional leased
aircraft since the end of June 1998 in addition to the
selling and leasing back of eight aircraft.
* Other lease rentals and landing fees were $96.8 million in
the first six months of 1999 versus $89.2 million in the
same period of 1998, an increase of $7.6 million.
Contributing to this increase were increases in landing fees
($5.3 million) and facility rentals ($4.0 million) which
were partially offset by decreases in equipment rentals
($1.7 million).
All other operating expenses of $338.0 million in the first six
months of 1999 were $19.3 million less than the $357.3 million recorded
in the first six months of 1998, reflecting decreases in corporate
liability and hull insurance resulting from lower insurance premiums
during the current policy period ($5.7 million), Getaway tours expense
related to a lower volume of tour packages sold by TWA's subsidiary,
Getaway Vacations ($5.0 million), passenger food and beverage expense
related to the use of more cost-effective products ($4.3 million), and
advertising related to an emphasis on effectively targeting advertising
dollars ($2.5 million).
Other charges (credits) were a net charge of $6.6 million during
the six months ended June 30, 1999 compared to a net charge of $6.4
million in the first six months of 1998. Interest expense decreased
$13.1 million in the first half of 1999 from the same period in 1998 as
a result of the retirement of certain debt in 1998 and 1999. Interest
and investment income decreased $4.2 million in the first six months of
1999 primarily due to a decrease in the level of invested funds. Net
gains (losses) from the disposition of assets were net losses of
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$1.7 million and net gains of $18.8 million during the first six months
of 1999 and 1998, respectively. The net losses in the first six months
of 1999 included a loss from the sale and leaseback of four B-767
aircraft in April 1999 partially offset by gains from the sale of L-1011
and B-727 aircraft and engines, spare L-1011 and DC9-10 engines and the
sale of TWA's investment in SATO. The net gains in the comparable 1998
period were primarily related to the sale of L-1011 and B-747 aircraft
and engines and other surplus engines which had been retired from active
service. Other charges and credits - net improved $11.5 million in the
first six months of 1999 versus the same period in 1998 primarily as the
result of improvements in TWA's interest in the 1999 earnings of
Worldspan ($6.4 million) and the gain from the sale of the Company's
interest in Equant N.V., a telecommunication network company which was
spun off from SITA ($21.3 million). During the same period in 1998, a
cash undertaking previously posted by TWA of $13.7 million in an action
brought by Travellers International A.G. and its parent company, Windsor
Inc. was returned to TWA in June 1998 and recorded as a credit in the
second quarter 1998.
A tax provision of $1.1 million was recorded in the first six
months of 1999 compared to a tax benefit of $129,000 in the first six
months of 1998 (see Note 2 to Consolidated Financial Statements).
As a result of the above, the Company's operating loss of $19.2
million for the six months ended June 30, 1999 was a $3.9 million improvement
from the $23.2 million operating loss recorded in the same period of 1998.
The Company had a net loss of $27.8 million in the first half of 1999 compared
to a net loss of $36.0 million in the same period of 1998. The results for the
six months included extraordinary charges of $0.9 million and $6.6 million in
1999 and 1998, respectively, related to the early extinguishment of debt.
LIQUIDITY AND CAPITAL RESOURCES
The following is a discussion of the impact of significant factors
affecting TWA's liquidity position and capital resources. These
comments should be read in conjunction with, and are qualified in their
entirety by, the Consolidated Financial Statements and Notes thereto.
Liquidity
The Company's consolidated cash and cash equivalents balance at
June 30, 1999 was $288.7 million, a $36.3 million increase from the
December 31, 1998 balance of $252.4 million. Operating activities
provided $97.8 million in cash in the first six months of 1999 versus a
$23.7 million use of cash in 1998. The increase in consolidated cash
and cash equivalents resulted from a reduction in the net loss in the
first six months of 1999 as compared to the same period in 1998 of $8.2
million. This includes a first quarter 1999 gain of $21.3 million
related to the sale of a portion of TWA's shares of Equant N.V., a
telecommunications network company. Additionally, in the first six
months of 1998, $75.2 million in net discounted sales from tickets sold
under the Karabu ticket agreement were excluded from cash flows from
operating activities as the related amounts were applied to reduce the
PBGC Notes. In December 1998, the PBGC Notes were paid in full primarily
with the proceeds from tickets sold under the Karabu ticket agreement.
Accordingly, proceeds from the sales of tickets under the Karabu ticket
agreement are now paid directly to TWA. During the first six months of
1999, $67.3 million of these proceeds were paid directly to TWA. Finally,
there was an improvement of $48.3 million in the cash provided by advance
ticket sales, and an improvement of $52.5 million in the cash provided by
trade accounts payable and accrued expenses. Both of these amounts are
primarily due to the timing of payments of certain obligations in the
comparative periods.
Cash used by investing activities increased to $54.3 million in
the first six months of 1999 versus $363,000 in the first six months of
1998. Components of cash used in the first six months of 1999 include
the purchase for $27.1 million of one Boeing 767-200 aircraft and
related engines, which were subsequently sold to and leased back from an
aircraft lessor in April 1999. Additionally, capital expenditures
(including aircraft pre-delivery deposits) during the first six months
of 1999 amounted to $46.8 million. Comparatively, cash used in the first
six months of 1998 included capital expenditures (including aircraft
pre-delivery payments) amounting to $48.9 million.
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Asset sales during both periods were primarily limited to retired,
widebody aircraft, engines and other surplus equipment. Additionally,
approximately $9.6 million was provided in 1999 primarily due to the
return of pre-delivery deposits relating to two new Boeing 757-200
aircraft delivered in March and May 1999 which were immediately sold to
and leased back under operating leases from an aircraft lessor.
Cash used by financing activities was $7.3 million in the first
six months of 1999 versus cash provided of $160.8 million in the same
period of 1998. Proceeds from the sale and leaseback of certain
aircraft were $80.6 million in the first half of 1999 versus $160.2
million in the comparable period in 1998. In addition, sources of cash
generated by financing activities in 1998 included proceeds from the
sale of notes of $144.9 million which was mostly offset by repayments of
long-term debt and capital lease obligations totaling $133.2 million.
Capital Resources
TWA generally must satisfy all of its working capital expenditure
requirements from cash provided by operating activities, from external
capital sources or from the sale of assets. However, TWA has pledged a
substantial portion of its assets to secure various issues of
outstanding debt. TWA's financing agreements generally require TWA to
apply the sale proceeds from the sale of any pledged assets to repay the
corresponding debt. If TWA is unable to obtain additional capital, the
Company may not be able to make certain capital expenditures or to
continue to implement certain other aspects of its strategic plan, and
TWA may therefore be unable to achieve the full benefits expected from
the plan.
Commitments
TWA entered into an agreement in February 1996 with Boeing for the
purchase of ten B-757-231 aircraft and related engines, spare parts and
equipment for an aggregate purchase price of approximately $500 million.
As of December 31, 1998, TWA had taken delivery of six aircraft and had
four on firm order. Five of the six aircraft already delivered were
originally manufacturer-financed and one was leased. In separate
transactions in June, July and October 1998, these five manufacturer-
financed aircraft were sold to, and leased back from, an aircraft
lessor. The four remaining aircraft are scheduled to be delivered in
1999. The first of these aircraft was delivered in March 1999 and was
immediately sold to, and leased back under an operating lease from an
aircraft lessor. A second aircraft was delivered in May 1999 utilizing
a prior commitment for 100% lease financing. TWA has obtained
commitments for debt financing for approximately 80% of the cost of
acquiring the remaining two aircraft. In September 1998, TWA entered
into an agreement with Boeing to acquire four additional B-757-231
aircraft to be delivered during 1999. TWA has obtained commitments for
debt financing for approximately 80% of the cost of acquiring these
aircraft. The Company has granted to a major financial institution the
option to purchase and leaseback to TWA, under substantially the same
terms and conditions as another B-757 aircraft previously leased to TWA
in 1998, four of the B-757-231 aircraft to be delivered by Boeing during
1999. However, this institution has not, at this time, exercised these
options.
The Company has entered into an agreement for operating leases for
one additional B-767-300ER and three additional B-757-200 aircraft.
These aircraft are scheduled to be delivered in 1999, excluding one
B-757-200 that is scheduled for delivery in January 2000. The first of
the B-757-200 aircraft was delivered in June 1999.
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In 1989, TWA entered into agreements with AVSA, S.A.R.L.
("Airbus") 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 $1.0 billion.
The agreements, as amended, require the delivery of the aircraft in 2001
and 2002 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 may be subject to
forfeiture.
In 1996, TWA entered into an agreement to acquire from Boeing 15
new MD-83s, to be financed by long-term leases. The final aircraft
under this agreement was received in February 1999.
In April 1998, TWA entered into an agreement with Boeing to
acquire 24 additional new MD-83 aircraft, with deliveries in 1999. The
Company has obtained commitments for lease financing for these aircraft.
TWA has received six of these aircraft as of June 30, 1999.
In December 1998, TWA announced that it had signed letters of
intent to acquire an additional 125 new aircraft: 50 Boeing 717-200
aircraft for delivery beginning in 2000, 50 Airbus A318 aircraft for
delivery beginning in 2003 and 25 Airbus "A320 Family" aircraft for
delivery beginning in 2005. In addition to these 125 firm orders, TWA
has taken options on an additional 50 Boeing 717s and an additional 75
"A320 Family" aircraft. The letters of intent include financing for all
of the firm order aircraft. The terms of the purchase orders and the
related financing for the 50 Boeing 717-200 aircraft were finalized in
June 1999 and definitive agreements were signed at that time. The terms
of the purchase orders and the related financing for the Airbus A318 and
related Airbus "A320 Family" aircraft are subject to further negotiation
and the signing of definitive agreements. These new aircraft would
primarily replace B-727, DC-9 and older MD-80 aircraft currently in
TWA's fleet.
TWA elected to comply with the transition requirements of the
Noise Act by adopting the Stage 2 aircraft phase-out/retrofit option,
which required that 50% of its base level (December 1990) Stage 2 fleet
be phased-out/retrofitted by December 31, 1996. To comply with the 1996
requirement, the Company retrofitted, by means of engine hush-kits, 30
of its DC-9 aircraft at an aggregate cost of approximately $55.5
million, most of which was financed by lessors with repayments being
facilitated through increased rental rates or lease term extensions.
TWA complied with the transition requirements for December 31, 1998, by
having 75% of its fleet meet Stage 3 requirements through the grounding
of older Stage 2 aircraft in combination with the acquisition of Stage 3
aircraft. By December 31, 1999, 100% of the fleet must meet Stage 3
requirements.
In April 1999, TWA sold and leased back four Boeing 767-200
aircraft and completed a sale/leaseback in July 1999 of a fifth such
aircraft which will subsequently be returned to the lessor in 1999 and
2000. These five Boeing 767-200 aircraft will be replaced with three
Boeing 767-300 aircraft which will be leased during 1999 and 2000 from
the same aircraft lessor. In connection with this transaction, the
Company purchased $28.8 million total principal amount of its
outstanding 11 3/8% Senior Secured Notes due April 15, 2003 and all of
its outstanding 10 1/4% Senior Secured Notes due June 15, 2003 which
totaled $14.5 million.
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Certain Other Capital Requirements
TWA generally does not commit to expenditures for facilities and
equipment, other than aircraft, before purchase and, therefore, no such
significant commitments exist at the present time. TWA's ability to
finance these expenditures will depend in part on TWA's financial
condition at the time of the proposed expenditure.
Restructuring Liabilities
At December 31, 1998, TWA established a provision related to the
restructuring of its international operations and the closure of the Los
Angeles Reservation Office. The Company recorded a special charge of
approximately $17.6 million primarily related to employee severance
liabilities. During the first six months of 1999, the Company incurred
approximately $1.3 million of expenditures related to these provisions.
The Company continues to expect severance costs to be paid to the
respective employees during 1999 due to these changes in operations.
Year 2000
TWA utilizes software and related computer technologies essential
to its operations that use two digits rather than four to specify the
year, which will result in a date recognition problem in the year 2000
and thereafter unless modified. TWA has completed an assessment to
determine the changes needed to make its computer systems, internal
operating systems and equipment year 2000 compliant and is executing a
plan to implement these changes. The Company currently expects that it
will complete the necessary changes and testing for its mission critical
systems in the third quarter of 1999.
TWA estimates that the total cost to complete the remediation of
its information technology systems is approximately $19.3 million, which
is approximately 20% of the Company's total information technology
budget for the project duration period. As of June 30, 1999, the
Company estimates that approximately 60% of the cost to complete the
remediation of its computer systems had been incurred. As of June 30,
1999, approximately 87% of the systems had been remediated. TWA has
substantially completed assessments and has completed remediation for
many of the non-information technology related systems. The Company
currently estimates the remediation costs related to infrastructure and
facilities enhancements necessary to prepare its systems for the year
2000 will range from $2 million to $4 million, which it plans to fund
through operating cash flows. The costs of the Company's year 2000
project and the date on which it will be completed are based on
management's best estimates and include assumptions regarding
modification plans of third parties. However, there can be no assurance
that these estimates will be achieved and actual results could differ
materially from those anticipated.
TWA has also reviewed software that was purchased from outside
vendors and has evaluated its reliance on other third parties (e.g. the
FAA, the DOT, airport authorities, data providers and suppliers) to
determine and minimize the extent to which its operations may be
dependent on these third parties to remediate the year 2000 issues in
their systems. Outside vendors and other third parties have provided
TWA with year 2000 compliant versions of their products, informed TWA
that all mission critical systems from such parties are in process of
being remediated or arrangements for the remediation of such systems are
in process. To help insure compliance, TWA is continuing to set up and
perform independent testing with these systems. Although the Company
currently has day-to-day operational contingency plans, management is in
the process of reviewing and modifying these plans for each mission
critical system for possible year 2000-specific operational
requirements. The review and modifications are scheduled for completion
during the fourth quarter of 1999.
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TWA's emphasis in this process is on passenger safety, and then on
business continuity. Further, TWA has been actively participating in
the industry reviews led by the Air Transport Association and the
International Air Transport Association. TWA's business, operating
results and financial condition could be materially adversely affected
by the failure of its systems or those of other parties to operate
properly beyond 1999.
Fuel Hedging
TWA is party to future jet fuel fixed price swaps with respect to
a minor portion of its fuel requirements during 1999 to provide a
hedging mechanism against significant increases in jet fuel prices.
Reorganization
During the period from 1992 through 1995, TWA underwent two
separate Chapter 11 bankruptcy reorganizations, the first in 1992-93,
and the second in 1995. In connection with the 1995 reorganization, TWA
applied fresh start reporting in accordance with generally accepted
accounting principles, which resulted in the creation of a new reporting
entity for accounting purposes and TWA's assets and liabilities being
adjusted to reflect fair values on the effective date of the 1995
reorganization.
As a result of the application of fresh start reporting,
substantial values were assigned to routes, gates and slots ($458.4
million) and reorganization value in excess of amounts allocable to
identifiable assets ($839.1 million). TWA has evaluated its future cash
flows and notwithstanding the operating losses experienced since the
1995 reorganization, expects that the carrying value of the intangibles
at December 31, 1998, will be recovered. However, the achievement of
these improved future operating results and cash flows are subject to
considerable uncertainties. In future periods, TWA will evaluate these
intangibles for recoverability based upon estimated future cash flows.
If TWA does not achieve these expectations, it may be required to charge
future operations for impairment of these assets, and these charges
could be material.
Availability of NOLs
TWA estimates that it had, for federal income tax purposes, net
operating loss carryforwards ("NOLs") amounting to approximately $975
million at December 31, 1998. Such NOLs expire in 2008 through 2018 if
not utilized before then to offset taxable income. Section 382 of the
Internal Revenue Code of 1986, as amended, 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. Changes in ownership in future periods could
substantially restrict the Company's ability to utilize its tax net
operating loss carryforwards. The Company believes that no such
ownership change has occurred subsequent to the 1995 reorganization.
There can be no assurance, however, that such an ownership change will
not occur in the future. In addition, the NOLs are subject to
examination by the Internal Revenue Service ("IRS") and, thus, are
subject to adjustment or disallowance resulting from any such IRS
examination. For financial reporting purposes, the tax benefits related
to the utilization of the tax net operating loss carryforwards generated
prior to the 1995 reorganization of approximately $491 million 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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New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities". This statement establishes accounting and reporting
standards for derivative instruments and all hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities at their fair values. Accounting for changes in the fair
value of a derivative depends on its designation and effectiveness. For
derivatives that qualify as effective hedges, the change in fair value
will have no impact on earnings until the hedged item affects earnings.
For derivatives that are not designated as hedging instruments, or for
the ineffective portion of a hedging instrument, the change in fair
value will affect current period earnings. With the deferral of the
effective date of Statement No. 133, the Company will adopt this
standard during its first quarter of fiscal 2001 and does not presently
believe that it will have a significant effect on its results of
operations or cash flows.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The risk inherent in the Company's market risk sensitive
instruments and positions is the potential loss arising from adverse
changes in those factors. TWA is susceptible to certain risks related
to changes in the cost of jet fuel, changes in interest rates and
foreign currency exchange rate fluctuations. The Company does not
purchase or hold any derivative financial instruments for trading
purposes.
Aircraft Fuel
Airline operators are inherently dependent upon energy to operate
and, therefore, are impacted by changes in jet fuel prices. Jet fuel
and oil consumed in the first six months of 1999 represented
approximately 9.9% of TWA's operating expenses. TWA endeavors to
acquire jet fuel at the lowest prevailing prices possible.
TWA's earnings are affected by changes in the price and
availability of aircraft fuel. The Company hedges its exposure to jet
fuel price market risk only on a limited basis. The fair value of
outstanding derivative commodity instruments (primarily commodity swap
agreements) related to the Company's jet fuel price market risk during
the first six months of 1999 and at June 30, 1999 was immaterial. A one
cent change in the average cost of jet fuel would impact TWA's aircraft
fuel expense by approximately $6.7 million per year, based upon
consumption in the first six months of 1999.
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Interest Rates
Airline operators are also inherently capital intensive, as the
vast majority of assets are aircraft, which are long lived. TWA's
exposure to market risk associated with changes in interest rates
relates primarily to its debt obligations. The Company does not have
significant exposure to changes in cash flows resulting from changes in
interest rates as substantially all its long-term debt carries fixed
rates of interest. The nature of fixed rate obligations does expose the
Company to the risk of changes in the fair value of these instruments.
The Company has outstanding debt of $654.9 million, net of unamortized
discounts and including current maturities at June 30, 1999. The
contractual maturities of long term debt and the associated average
interest rates are as follows:
Contractual
Amounts Weighted Average
Maturity Date in Thousands Interest Rate
------------- ------------ ----------------
1999 $106,323 9.03%
2000 33,837 9.02%
2001 139,209 9.56%
2002 67,899 11.53%
2003 29,978 10.83%
Thereafter 290,000 11.44%
Foreign Currency Exchange Rates
Airline operators who fly internationally are exposed to the
effect of foreign exchange rate fluctuations on the U.S. dollar value of
foreign currency-denominated operating revenues and expenses. While
international operations generated 10.6% of TWA's operating revenues in
the first six months of 1999, a substantial portion of these related
ticket sales are denominated in U.S. dollars. Additionally, no single
foreign currency is a material portion of that amount. The Company does
not have significant exposure to fluctuations in these currency rates
because of the short-term nature of maturities of receivables and
payables related to these operations. The Company has not undertaken
additional actions to cover this currency risk and does not engage in
any other currency risk management activity.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Icahn Litigation
On June 14, 1995, TWA signed the Extension and Consent Agreement
with Karabu to extend the term of certain financing provided by Karabu
(the "Icahn Loans"). In consideration of, among other things, the
extension of the Icahn Loans, TWA and Karabu entered into a 99-month
ticket agreement, which permitted Karabu to purchase two categories of
discounted tickets: (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 the next 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 TWA to Karabu pursuant to the ticket agreement are
priced at levels intended to approximate current competitive discount
fares available in the airline industry. TWA believes that applicable
provisions of the ticket agreement do not allow Karabu to market or sell
system tickets through travel agents or directly to the general public.
Karabu, however, has been marketing system tickets through travel agents
and directly to the general public. TWA has demanded that Karabu cease
doing so, and Karabu has stated that it disagrees with TWA's
interpretation concerning sales through travel agents or directly to the
general public. In December 1995, TWA filed a lawsuit against Karabu,
Mr. Icahn, and certain affiliated companies seeking damages and to
enjoin further violations of the ticket agreement. Mr. Icahn countered
by threatening to file his own lawsuit and to declare a default on the
loans from entities related to Mr. Icahn, which financing was then
secured by certain receivables and flight equipment. Mr. Icahn's
position was based upon a variety of claims related to his
interpretations of the security agreement, as well as, with respect to
certain alleged violations of the ticket agreement by TWA. The parties
negotiated a series of standstill agreements pursuant to which TWA's
original lawsuit was withdrawn, while TWA and Mr. Icahn endeavored to
negotiate a settlement of their differences and respective claims.
On March 20, 1996, TWA filed a petition in the Circuit Court for
St. Louis County, Missouri, commencing a lawsuit against Mr. Icahn,
Karabu and certain other entities affiliated with Mr. Icahn. The TWA
petition alleged that the defendants are violating the ticket agreement
and otherwise tortiously interfering with TWA's business expectancy and
contractual relationships, by among other things, marketing and selling
tickets purchased under the ticket agreement to the general public. The
TWA petition sought a declaratory judgment finding that the defendants
have violated the ticket agreement, and also sought liquidated,
compensatory and punitive damages, in addition to TWA's costs and
attorney's fees. On May 7, 1998 the court denied the TWA petition and
dismissed the defendants' counterclaims. The court concluded that the
defendants could sell discount tickets under the ticket agreement to any
person who actually uses the ticket, including non-business travelers,
and that the defendants had not breached the ticket agreement. No
damages were assessed in respect to either plaintiff's or defendants'
petitions.
The court's ruling could have an adverse effect on revenue, which
could be significant but the impact of which will depend on a number of
factors, including yield, load factors and whether any resulting
incremental sales by the defendants will be to passengers that would not
otherwise have flown on TWA. The defendants moved to amend or modify
the court's ruling to include a declaratory judgment that the defendants
are permitted to sell tickets to any person for any purpose, which could
include use by the purchaser's family members or friends. TWA opposed
the motion and requested that
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the court clarify the ruling to limit its scope consistent with the
reasoning set forth in the decision, specifically so that the person
purchasing the ticket must use the ticket (with certain enumerated
exceptions) and may not purchase a ticket for any other person. The
court denied both motions on June 25, 1998. TWA has appealed the denial
of its motion for clarification and the court's original ruling.
Although TWA intends to press its claims vigorously, it is
possible that Karabu's interpretation of the ticket agreement regarding
system discount ticket sales by the defendants through travel agents or
directly to the general public could be determined, either by a court or
otherwise, to be correct. In such event, unless TWA took appropriate
action to mitigate the effect of these sales, TWA could suffer loss of
revenue and reduced overall passenger yields on a continuing basis
during the term of the ticket agreement.
Additional disputes have arisen between TWA and the entities
affiliated with Mr. Icahn as to the meanings of various provisions of
the ticket agreement. These include disputes as to the scope of the
advertising restrictions in the ticket agreement; whether the Icahn
entities are entitled to discounts under the ticket agreement based on
special fares offered by TWA on the Internet; whether the Icahn entities
can sell discounted tickets to travel agencies; and whether the Icahn
entities are complying with certain tax provisions of the ticket
agreement. The disputes have resulted in new suit filed by the Icahn
entities against TWA on May 3, 1999 in the District Court for Clark
County, Nevada, in which the Icahn entities allege that TWA has
tortiously interfered with their ability to complete a proposed public
offering of a company controlled by Mr. Icahn and in which they seek a
declaratory judgment with respect to their disputes. TWA has filed an
answer denying Karabu's allegations. The case has been removed to
federal district court pending Karabu's motion to remand to the Clark
County court.
Other Actions
In connection with certain wage scale adjustments afforded to
TWA's non-contract employees, employees previously represented by the
Independent Federation of Flight Attendants ("IFFA") asserted and won an
arbitration ruling with respect to the comparability of wage concessions
made in 1994 that, if fully sustained, would have required TWA to
provide additional compensation to these employees. As part of the
agreement reached with the IAM (now collective bargaining agent for
employees formerly represented by IFFA) on a new collective bargaining
agreement, noted in Item 5 below, the IAM agreed to withdraw all
litigation regarding this matter.
ITEM 5. OTHER INFORMATION
TWA reached agreement with its flight attendants and ground
employees, represented by the IAM, on new collective bargaining
agreements covering approximately 16,000 employees. These agreements
have been ratified and became effective as of August 1, 1999.
On June 24, 1999, James F. Martin, resigned as Senior Vice President,
Human Resources of TWA. Positions previously reporting to Mr. Martin,
now report to Kathleen A. Soled, Senior Vice President and General
Counsel.
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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: August 16, 1999 By: /s/ Michael J. Palumbo
----------------------------------
Michael J. Palumbo
Executive Vice President and
Chief Financial Officer
<PAGE>
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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 the
Registrant's Registration Statement on Form S-4, Registration Number
33-84944, as amended)
<F*>2.2 - Modification 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 1995
Reorganization (Exhibit 2.7 to 12/31/95 Form 10-K)
<F*>3(i) - Third Amended and Restated Certificate of Incorporation of the
Registrant (Exhibit 3(i) to the Registrant's Registration Statement on
Form S-4, Registration Number 333-26645)
<F*>3(ii) - Amended and Restated By-Laws of Trans World Airlines, Inc., effective
December 8, 1998 (Exhibit 3(ii) to 12/31/98 10-K)
<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)
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<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 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*>4.9 - 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*>4.10 - 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*>4.11 - TWA Air Line Pilots Supplemental Stock Plan, effective September 1, 1994
(Exhibit 4.13 to 9/95 10-Q)
<F*>4.12 - TWA Air Line Pilots Supplemental Stock Plan Trust, effective August 23,
1995 (Exhibit 4.14 to 9/95 10-Q)
<F*>4.13 - TWA Air Line Pilots Supplemental Stock Plan Custodial Agreement,
effective August 23, 1995 (Exhibit 4.15 to 9/95 10-Q)
<F*>4.14 - Form of Indenture relating to TWA's 8% Convertible Subordinated
Debentures Due 2006 (Exhibit 4.16 to Registrants Registration Statement
on Form S-3, No. 333-04977)
<F*>4.15 - Indenture dated as of March 31, 1997 between TWA and First Security
Bank, National Association relating to TWA's 12% Senior Secured Notes
due 2002 (Exhibit 4.15 to Registrant's Registration Statement on Form
S-4, No. 333-26645)
<F*>4.16 - Form of 12% Senior Secured Note due 2002 (contained in Indenture filed
as Exhibit 4.15)
<F*>4.17 - Registration Rights Agreement dated as of March 31, 1997 between the
Company and the Initial Purchaser relating to the 12% Senior Secured
Notes due 2002 and the warrants to purchase 126.26 shares of TWA Common
Stock (Exhibit 4.17 to Registrant's Registration Statement on Form S-4,
No. 333-26645)
<F*>4.18 - Warrant Agreement dated as of March 31, 1997 between the Company and
American Stock Transfer & Trust Company, as Warrant Agent, relating to
warrants to purchase 126.26 shares of TWA Common Stock (Exhibit 4.18 to
Registrant's Registration Statement on Form S-4, No. 333-26645)
<F*>4.19 - Form of Indenture relating to TWA's 9 1/4% Convertible Subordinated
Debentures due 2007 (Exhibit 4.19 to Registrant's Registration Statement
on Form S-3, No. 333-44689)
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<F*>4.20 - Registration Rights Agreement dated as of December 2, 1997 between the
Company and the Initial Purchasers (Exhibit 4.20 to Registrant's
Registration Statement on Form S-3, No. 333-44689)
<F*>4.21 - Indenture dated as of December 9, 1997 by and between TWA and First
Security Bank, National Association, as Trustee, relating to TWA's
11 1/2% Senior Secured Notes due 2004 (Exhibit 4.21 to Registrant's
Registration Statement on Form S-4, No. 333-44661)
<F*>4.22 - Form 11 1/2% Senior Secured Note due 2004 (contained in Indenture filed
as Exhibit 4.21)
<F*>4.23 - Registration Rights Agreement dated as of December 9, 1997 among the
Company and Lazard Freres & Co. LLC and PaineWebber Incorporated, as
initial purchasers, relating to TWA's 11 1/2% Senior Secured Notes due
2004 (Exhibit 4.23 to Registrant's Registration Statement on Form S-4,
No. 333-44661)
<F*>4.24 - Sale and Service Agreement dated as of December 30, 1997 between TWA and
Constellation Finance LLC, as purchaser, relating to TWA's receivables
(Exhibit 4.24 to Registrant's Registration Statement on Form S-4, No.
333-44661)
<F*>4.25 - Registration Rights Agreement dated as of March 3, 1998 between the
Company and the Initial Purchaser (Exhibit 4.25 to Registrant's
Registration Statement on Form S-4, No. 333-59405)
<F*>4.26 - Indenture dated as of March 3, 1998 by and between TWA and First
Security Bank, National Association, as Trustee, relating to TWA's
11 3/8% Senior Notes due 2006 (Exhibit 4.26 to Registrant's Registration
Statement on Form S-4, No. 333-59405)
<F*>4.27 - Aircraft Sale and Note Purchase Agreement dated as of April 9, 1998
among TWA, First Security Bank, National Association, as Owner Trustee
and Seven Sixty Seven Leasing, Inc. (Exhibit No. 4.27 to Registrant's
Registration Statement on Form S-4, No. 333-59405)
<F*>4.28 - Indenture dated as of April 21, 1998 by and between TWA and First
Security Bank, National Association, as Trustee, relating to TWA's
11 3/8% Senior Secured Notes due 2003 (Exhibit No. 4.28 to Registrant's
Registration Statement on Form S-4, No. 333-59405)
<F*>4.29 - Form of 11 3/8% Senior Secured Notes due 2003 (contained as Exhibit 1 to
Rule 144A/Regulation S Appendix to Indenture in Exhibit 4.28)
<F*>4.30 - Registration Rights Agreement dated as of April 21, 1998 between the
Company, Lazard Freres & Co. LLC and First Security Bank, National
Association relating to the 11 3/8% Senior Secured Notes Due 2003
(Exhibit 4.31 to Registrant's Registration Statement on Form S-3, No.
333-56991)
<PAGE>
<PAGE>
10.1 - Consulting Agreement dated as of May 19, 1999 between TWA and Gerald L.
Gitner.
10.2 - Employment Agreement dated as of May 19, 1999 between TWA and William F.
Compton.
10.3 - Amendment Agreement dated as of May 24, 1999 between TWA and Michael J.
Palumbo.
10.4 - Separation Agreement dated as of June 24, 1999 between TWA and James F.
Martin.
11 - Statement of computation of per share earnings
27 - Financial Data Schedule
</TABLE>
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the second quarter of 1999.
[FN]
- - --------------
<F*>Incorporated by reference
<PAGE>
EXHIBIT 10.1
CONSULTING AGREEMENT
--------------------
CONSULTING AGREEMENT, dated as of May 19, 1999 and effective
as of May 25, 1999, between Trans World Airlines, Inc. (the "Company"),
and Gerald L. Gitner (the "Consultant").
WHEREAS, the Company desires to retain the consulting
services of the Consultant, and the Consultant has agreed to provide
consulting services to the Company, in each case in accordance with the
terms of this Agreement; and
WHEREAS, the parties desire to set forth the entirety of
their agreements and understandings with respect to such matters;
NOW, THEREFORE, in consideration of the mutual promises
contained herein and other good and valuable consideration, the receipt
and sufficiency of which is hereby duly acknowledged, the parties agree
as follows:
1. Consultancy. The Company hereby retains the Consultant to render
-----------
to the Company certain consulting services described below, and the
Consultant hereby agrees to render such consulting services to the
Company, subject to the terms and conditions described in this
Agreement.
2. Term. The Consultant's retention commences as of the effective
----
date of this Agreement and will continue until May 24, 2002, unless
earlier terminated in accordance with this Agreement.
3. Consulting Duties. The Consultant will provide such consulting
-----------------
services as from time to time may reasonably be requested by the
Company's Chief Executive Officer or Board of Directors, such consulting
services to be provided at the pleasure of the Consultant with no
minimum number of hours required. Without limiting the foregoing
sentence, while the parties intend in good faith that until May 24, 2000
the Consultant will devote to such consulting services between fifty
percent (50%) and seventy-five percent (75%) of his working time, the
parties hereto acknowledge that there is no minimum service requirement
under this Agreement.
4. Non-Consulting Duties. In addition to providing consulting
---------------------
services to the Company, the Consultant will serve at the pleasure of
the Board of Directors of the Company (subject to election by the
shareholders of the Company) and for separate compensation as the
Chairman of the Board of Directors of the Company and also as the
Chairman of the Executive Committee of the Board of Directors of the
Company. The Company agrees to nominate the Consultant for reelection
as a member of the Board of Directors of the Company at the May, 1999
annual meeting of the shareholders of the Company.
- 1 -
August 13, 1999
<PAGE>
<PAGE>
5. Cash Compensation.
-----------------
(a) In exchange for his consulting services to the
Company, the Consultant will receive from the Company cash payments in
the amount of $770,000 for the twelve (12) month period beginning on the
effective date of this Agreement and ending on May 24, 2000 (the "Annual
Fee"), payable in equal monthly installments, but no less promptly than
when the Consultant was paid as an employee. Thereafter, the Consultant
will be paid per diem, cash payments by the Company (for consulting
services as reasonably requested by the Chief Executive Officer or the
Board of Directors of the Company) at a rate equal to $3,500 for each
full working day on which such consulting services are provided (the
"Per Diem Fees"). The Consultant's Annual Fee and Per Diem Fees will be
payable, if the Consultant so chooses, to a nominee of the Consultant
designated in writing.
(b) In exchange for performing his duties as Chairman of
the Board of Directors of the Company and Chairman of the Executive
Committee of the Board of Directors of the Company, the Consultant will
receive for so long as he acts in such capacity an annual retainer of
$75,000, payable in equal quarterly installments (the "Annual
Retainer"). In addition, the Consultant will receive fees for
participating in meetings of the Board of Directors, so long as he
remains Chairman of the Board of Directors of the Company, the Executive
Committee and other board committees on which the Consultant serves, all
at rates 1.5 times higher than the rates paid to other directors
attending such meetings (the "Board Fees"). Both the Annual Retainer
and the Board Fees shall be paid at the same time and in the same manner
as such payments are made to other members of the Board of Directors of
the Company.
6. Expenses. The Consultant will receive reimbursement from
--------
the Company for all reasonable out-of-pocket expenses for any business
travel and business expenses incurred in the performance of his duties
under this Agreement, in accordance with the expense reimbursement
policies of the Company from time-to-time in effect. The Company will
at its cost continue to provide the Consultant with his current
apartment or an equivalent apartment at no higher cost to the Company
(without sublet rights) in the St. Louis, Missouri area until May 24,
2000, unless this Agreement is terminated earlier in accordance with its
terms.
7. Stock Options. All stock options previously granted to the
-------------
Consultant will continue to vest during the term of this Agreement in
accordance with the vesting schedule specified in the Stock Option
Agreements between the Company and the Consultant, and as provided in
the Company's Key Employee Stock Incentive Plan (the "KESIP"). If the
Consultant's consulting services are terminated, the Consultant's
previously granted stock options will vest and remain outstanding and
exercisable under the Stock Option Agreements and the KESIP as amended
from time to time to the extent, in the same manner and on the same
terms and conditions as if his employment with the Company had then been
so terminated at such time; provided that when the KESIP permits
exercise of options following termination, the Consultant will have no
less than sixty (60) days in which to exercise such options. During the
term of this Agreement, the Consultant will continue to be entitled to
receive stock options from the Company under the Outside Directors'
Stock Ownership and Stock Option Plan (the "Plan"), as such options may
be granted by the Board of Directors of the Company from time to time,
consistent with such Plan and on the same terms granted to other members
of the Board of Directors of the Company.
- 2 -
<PAGE>
<PAGE>
8. Accelerated Payments.
--------------------
(a) If prior to May 24, 2000, the Consultant ceases to be
the Chairman of the Board of Directors of the Company (other than as a
result of the Consultant resigning or being removed for good cause, and
for any reason after a "change in control" (as such term is defined in
the KESIP) of the Company), then the unpaid balance of the Annual Fee
immediately will accelerate and become due and payable in one lump cash
sum to the Consultant. For purposes of this Agreement, "good cause"
shall mean that (i) the Consultant is convicted of or engages in conduct
which constitutes a felony, or a misdemeanor involving moral turpitude;
or (ii) the Consultant is found by the Company's Board of Directors
after reasonable investigation to have failed or refused to in any
material respect to perform his duties and responsibilities, (after
notice and opportunity to cure if such material failure or refusal can
be cured) provided that a failure shall not mean actions taken in good
--------
faith in the Consultant's exercise of his business judgment and within
the Consultant's authority as Chairman of the Company's Board of
Directors; or (iii) the Consultant is found by the Company's Board of
Directors after reasonable investigation to have willfully engaged in
conduct which is demonstrably and materially injurious to the Company
and such conduct was not taken in good faith in the Consultant's
exercise of his business judgment and within the Consultant's authority
as Chairman or was not otherwise authorized in the Company's business
plan or directly or indirectly by the Company's Board of Directors or
Chief Executive Officer, or (iv) the Consultant is found by the
Company's Board of Directors after reasonable investigation to have
breached his legal 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 Consultant is found by the Company's
Board of Directors after reasonable investigation to have breached any
material provision of this Agreement. For purposes of this Agreement,
"resigning" shall mean that (i) the Consultant informs one of the
Company's directors or officers in writing that the Consultant will
cease to serve as any of the Chairman of the Board of Directors of the
Company, a member of the Board of Directors of the Company, or a
consultant to the Company or (ii) the Consultant works for or provides
services to a United States, Canadian or Mexican based or incorporated
carrier operating aircraft having 51 or more seats (a "Subject Airline")
in the capacity of (x) a director or officer or (y) a consultant
providing marketing or strategic planning advice. Without altering the
provisions of subpart (ii) of the preceding sentence or the Consultant's
other obligations as a member of the Company's Board of Directors, the
Consultant will advise the Company's Board of Directors or Executive
Committee before accepting any position with another commercial, charter
or cargo airline. The Consultant may provide to a Subject Airline those
consulting services not prohibited by this Section 8(a).
(b) If after May 24, 2000, but during the term of this
Agreement, the Consultant ceases to be the Chairman of the Board of
Directors of the Company, the Company promptly will pay his out-of-
pocket expenses, his prorated Annual Retainer and his Board Fees for
meetings attended.
(c) If the Consultant's consulting services under this
Agreement are discontinued, the Company promptly will pay the
Consultant's out-of-pocket expenses, and the Consultant's accrued but
unpaid Per Diem Fees (after May 24, 2000).
- 3 -
<PAGE>
<PAGE>
9. Medical, Dental, Insurance, Life and Accident Insurance.
-------------------------------------------------------
The Consultant and his spouse will at all times during the continuation
of the term of this Agreement be eligible to receive the same level of
benefits (other than vacation) on the same terms and conditions as they
may be offered to any retired executive officer of the Company and such
officer's spouse. Without limiting the foregoing, (i) the Executive and
his eligible dependents will receive medical and dental coverage, on the
same terms provided to other retired executive officers of the Company,
up to the date coverage becomes available from a federal or state
government, and (ii) the Executive will receive a life insurance policy
funded by the Company having a value equal to 30% of his final base
salary. Any insurance premium paid by the Company will be imputed to
the Consultant to the extent provided in applicable Internal Revenue
Service rules, as the same may be amended. The Consultant will use his
reasonable efforts, if subsequently employed or consulting for an entity
providing generally comparable or superior medical or dental benefits,
to elect such benefits and suspend his use of such benefits from the
Company, with full power to renew such Company coverage in the future.
If such subsequent entity provides generally comparable or superior
post-retirement medical or dental benefits, the Consultant will use his
reasonable efforts to substitute those benefits for those provided by
the Company.
10. Vacation. The Consultant will not be entitled to vacation
--------
or payments in lieu of vacation under this Agreement. Notwithstanding
the foregoing, the Consultant will receive on or before May 27, 1999 a
cash payment from the Company for previously accrued but unused vacation
earned by the Consultant in his previous capacities with the Company in
accordance with the Company's policies for the payment of unused
vacation.
11. Flight Privileges. The Consultant and eligible family
-----------------
members will be entitled to card-type Class A "term" passes (and tax
gross up payments in accordance with the Company's policies) on the
Company's routes worldwide for so long as the Consultant provides
consulting services to the Company or serves on the Company's Board of
Directors or any committee thereof, after which the Consultant will be
entitled to flight privileges in accordance with the Company's policies
applicable to retired directors.
12. No Assignment. This Agreement is personal to the
-------------
Consultant and, except as set forth in Section 5, without the Company's
and the Consultant's prior written consent, it will not be assignable by
the Consultant or the Company other than by will or the laws of descent
and distribution. This Agreement will inure to the benefit of and be
enforceable by the legal representatives of the Consultant's estate.
13. Termination Obligations. The Consultant agrees that:
-----------------------
(a) The Consultant will not during the term of this
Agreement and for a period of two (2) years following the termination of
his Agreement, 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 Consultant's services to the
Company to be employed by the Consultant or by any entity in which the
Consultant owns or reasonably expects to own any equity interest in
excess of five percent (5%) of any class of the outstanding securities
thereof, or by any entity by which the Consultant is employed or for
which the Consultant serves or reasonably expects to serve in any
capacity; nor (after his consultancy ends and during such 2 year period)
encourage or induce any
- 4 -
<PAGE>
<PAGE>
Company employee to terminate his or her Company employment. For the
purposes of this paragraph, the term "solicit" will mean any contact by
the Consultant with or providing information to others who may be
reasonably 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
Consultant, with any person affiliated with the Consultant or by whom
the Consultant is employed but will 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) The Consultant will 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, alliance, route
structure, capital or other financial information including costs,
strategies, forecasts or trade secrets, acquisition strategies or
candidates or personnel acquisition plans ("confidential information")
which will have been obtained by the Consultant during or by reason of
his past employment or present or future retention by the Company or by
any of its subsidiaries or affiliated companies and which will not be
public knowledge. During and after the end of the term of this
Agreement, the Consultant will 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 Consultant will 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
Consultant may provide confidential information as appropriate to those
persons who in the Consultant's reasonable judgment have a need to know
such confidential information.
(c) Except as may otherwise be required by law or
regulation, the Consultant will not for a period of two (2) years
following the effective date of the termination of his consultancy
discuss or disclose to the media or Company personnel the circumstances
or terms of the termination of his consultancy.
(d) The Consultant will not publicly disparage or
denigrate the Company or any of its officers, directors or practices.
(e) The Company agrees that its officers, directors and
agents will not publicly disparage or denigrate the Consultant following
his termination of consultancy or, except as may be required by law or
regulation, otherwise discuss or disclose to the media or Company
personnel the circumstances or terms of the termination of his
consultancy.
(f) To the extent that any covenant or agreement contained
in this Section 13 is determined by a Court to be invalid or
unenforceable in any respect or to any extent, the covenant or agreement
will not be rendered void, but instead will be automatically amended to
such lesser scope or to such lesser extent as will grant Company the
maximum restriction on Consultant's conduct and activities permitted by
applicable law in such circumstances.
- 5 -
<PAGE>
<PAGE>
(g) Neither party to this Agreement will issue a press
release or make a public statement regarding the other party hereto
without such other party's prior approval, except that the Company will
be entitled to make such disclosures as are required by applicable
securities laws and exchange rules and will endeavor in good faith to
consult with the Consultant regarding such disclosures.
(h) For a period of two (2) years following termination of
employment, the Consultant will to the extent reasonably possible, upon
reasonable prior 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 and such other costs and
expense incurred by the Consultant in connection with any such activity
including compensation at the Consultant's then standard hourly rate for
such time as the Consultant is required to devote to the matter,
provided however that as to such required time the Consultant is not
then otherwise being compensated by his employer, firm or other similar
such entity.
14. Miscellaneous.
-------------
(a) This Agreement will be governed by and be construed in
accordance with the internal laws of the State of New York applicable to
agreements made and to be performed entirely within New York and without
reference to principles of conflicts of laws. The captions of this
Agreement are not part of the provisions hereof and will 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.
(b) All notices and other communications hereunder will be
in writing and will 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 Consultant:
Mr. Gerald L. Gitner
8 Arlene Court
Short Hills, New Jersey 07078
with a copy to:
Linda E. Rappaport, Esq.
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
- 6 -
<PAGE>
<PAGE>
If to the Company:
Trans World Airlines, Inc.
One City Centre
515 North 6th Street
St. Louis, Missouri 63101
Attn: General Counsel
With a copy to:
Christopher P. Davis, Esq.
Kleinberg, Kaplan, Wolff & Cohen, P.C.
551 Fifth Avenue, 18th Flr.
New York, New York 10176
or to such other address as either party will have furnished to the
other in writing in accordance herewith. Notice and communications will
be effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of
this Agreement will 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 (including the employment agreement between the
Company and the Consultant dated as of February 12, 1997),
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, will not
modify, alter, or invalidate any term of this Agreement nor alter the
Consultant'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) The Consultant represents that or he is not a party to
any agreement, or under any legal obligation, which would preclude or in
any way impair the Consultant's performance of Consultant's duties for
the Company hereunder. The Consultant has not provided, and will not
provide, to the Company any trade secret of another person whose secrecy
he is obligated to maintain.
(f) In the event that a dispute arises between the Company
and the Consultant concerning the enforcement or interpretation of the
terms of this Agreement, the Company and the Consultant agree to
negotiate in good faith to resolve such dispute. In the event that the
parties are unable to resolve this dispute within ninety (90) business
days of the date of written notice one to the other concerning this
dispute, the parties agree to submit this dispute for expedited binding
arbitration at the American Arbitration Association ("AAA") in New York,
New York before a panel of three (3) arbitrators all in accordance with
the AAA rules then obtaining. Expedited arbitration will mean that the
time period following the submission of the dispute to the AAA for the
selection of the arbitrators will not exceed twenty (20) business days
- 7 -
<PAGE>
<PAGE>
and that the time period between the selection of the arbitrators and
the issuance of a decision will not exceed sixty (60) business days.
Upon the rendering of a decision by the arbitrators, the prevailing
party will be entitled to reimbursement from the other party of all fees
and costs related to the arbitration, including submission of the claim.
The decision of the arbitrators will be binding upon the parties and any
such decision may be entered in any court having jurisdiction thereof.
During the pendency of the arbitration, this Agreement will remain in
full force and effect.
(g) Nothing in this Agreement or otherwise will be
construed as entitling the Consultant to employment rights, or to any
rights except as provided for in this Agreement, by law or by the
policies and procedures of the Company applicable to the Consultant.
(h) The Consultant will continue to receive all indemnity
protections afforded to directors and executive officers of the Company
under the Company's charter documents and insurance policies, as the
same may be modified from time to time with respect to all directors and
executive officers of the Company. The foregoing sentence will not
affect any rights the Consultant has under any indemnification agreement
between the Consultant and the Company.
(i) Any party succeeding to the Company's interest under
this Agreement pursuant to the terms of this Agreement or by operation
of Law will be required to assume (or to the extent legally permissible,
will be deemed to have assumed) all duties and obligations of the
Company to the Consultant under this Agreement.
(j) In the event of a dispute under this Agreement between
the Company and the Consultant, the Company will advance to the
Consultant all the Consultant's reasonable legal fees and costs, subject
to the Consultant's obligation to repay such amounts to the extent the
Company prevails in such dispute.
(k) All reasonable legal fees and costs incurred by the
Consultant in negotiating this Agreement will be paid for by the Company
upon submission to the Company of reasonable and customary invoices from
the Consultant or the Consultants' legal representatives.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
signed in its corporate name, and the Consultant has hereunto set his
hand, all as of the day and year first above written.
------------------------------------
Gerald L. Gitner
TRANS WORLD AIRLINES, INC.
By:
---------------------------------
Name:
Title:
- 8 -
<PAGE>
EXHIBIT 10.2
EMPLOYMENT AGREEMENT (the "Agreement"), dated as of May 19, 1999,
and effective as of May 25, 1999, between Trans World Airlines, Inc.
("Company"), and William F. Compton ("Executive");
WHEREAS, the Executive currently serves as the Chief Operating
Officer and President of the Company, and is a member of the Board of
Directors of the Company; and
WHEREAS, the Executive will continue to be a member of the Board
of Directors of the Company but, effective as of May 25, 1999, will no
longer be the Chief Operating Officer of the Company; and
WHEREAS, the Company desires to employ and the Executive has
accepted a position as Chief Executive Officer ("CEO") and President of
the Company, effective as of May 25, 1999; 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 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;
provided, however, the Executive is currently a Company employee serving
- - --------
as (among other capacities) a pilot whose terms of employment are
subject to a collective bargaining agreement between the Company and the
Air Line Pilots Association ("ALPA Contract"). At such time as the
Executive ceases to serve as or is terminated pursuant to the terms of
this Agreement from his position as CEO and President or in such other
executive positions to which he might be assigned pursuant to the terms
of this Agreement, the Executive reserves the right to return to service
with the Company as a pilot subject to the terms of the ALPA Contract.
2. Term. The Executive's employment hereunder will begin upon
----
the effective date of this Agreement and will continue until May 24,
2002, unless earlier terminated at any time by Company or Executive with
or without cause.
3. Duties.
------
(a) The Executive will serve at the pleasure of the Board
of Directors of the Company as CEO and President and will perform such
executive, advisory and/or administrative and managerial assignments and
duties as reasonably may be assigned to the Executive from time to time
by the Board of Directors of the Company in light of his position as the
CEO and
<PAGE>
<PAGE>
President of the Company. The Executive will carry out and perform all
such duties and assignments and all directions of the Board of Directors
of the Company and will report directly and exclusively to the Board of
Directors of the Company and to the Chairman of that Board. The
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 the Executive in accordance with the terms of this
Agreement; provided, however, that the Executive may during normal
--------
business hours perform such duties as a pilot-in-command of TWA aircraft
to the extent necessary to satisfy all applicable requirements for the
Executive to maintain a valid air line pilot's competency certificate.
Without limiting the foregoing, to the extent it does not impede his
ability to perform his duties and responsibilities as CEO and President,
the Executive may serve on one or more civic or educational boards
during the term of this Agreement, including, without limitation,
continued service on the boards of RCGA and Webster University. The
Executive will be permitted to serve during the term of this Agreement
as a director of one other corporation, subject to the prior written
approval of the Board of Directors of the Company or the Executive
Committee thereof, which approval will not be unreasonably withheld.
4. Compensation and Other Terms of Employment. During the
------------------------------------------
period in which the Executive is employed by Company as CEO and
President, the Executive will receive the following:
(a) Salary. The Executive will be paid an annual rate of
------
$500,000 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 increase but not decrease 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. $22,000
of such Base Salary (or such higher maximum amount as from time to time
may be permitted by law) will be paid by the Company into the Pilots
defined contribution plan, the "Directed Account Plan."
(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 stock option grants are for
35,000 shares granted on March 22, 1999 in anticipation of his
employment under this Agreement and for 75,000 shares granted in January
1999, subject in each case to the terms and conditions (including as to
vesting) set forth in each KESIP Agreement between the Executive and the
Company. The exercise price of such options will be the Fair Market
Value, as that term is defined in the KESIP, of the Company's common
stock as of the option grant date. 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 will
control.
- 2 -
<PAGE>
<PAGE>
(c) Management Annual Incentive Plan. The Executive will
--------------------------------
participate in the Management Annual Incentive Plan ("MAIP") in
accordance with its terms. The MAIP will be the exclusive Company bonus
program in which the Executive will participate. The Executive promptly
will present the applicable committee of the Company's Board of
Directors with written proposals for CEO goals and objectives for the
years falling within the term of this Agreement, and the applicable
committee of the Company's Board of Directors and the Executive will
work in good faith to agree upon mutually acceptable goals and
objectives.
(d) Change of Control Agreement. The Executive is party to
---------------------------
a "change-of-control" agreement with the Company dated as of November 1,
1997 ("COC Agreement"). The COC Agreement will remain in full force and
effect as if it were an amendment to this Agreement instead of an
amendment to the employment agreement between the Executive and the
Company dated as of March 27, 1997.
(e) Passes. The Executive and eligible family members will
------
be entitled to card-type Class A "term" passes on the Company's routes
worldwide during the period of time that the Executive is employed by
the Company; provided, however, that nothing contained herein will in
--------
any way alter any additional rights which the Executive may have been
provided by virtue of the Executive's service as a member of the
Company's Board of Directors.
(f) 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 $200,000 at a monthly cost of $7.20 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. (v) So long as permitted
under the rules of eligibility for the ALPA Contract, the Executive will
continue to be eligible for participation on the same terms and
conditions applicable to pilots under the ALPA Contract in the
Retirement Plan for Pilots (the "A" Plan), the Directed Account Plan and
the Section 401(k) Plan for Pilots. (vi) So long as permitted under the
rules of eligibility for the ALPA Contract, the Executive will continue
to be eligible to participate in the Pilot Mutual Aid Loss of License
Plan. Nothing herein will be construed to prevent the Company from
amending or altering any such plans or programs set forth herein in
sections (i) to (iv) so long as the Executive continues to have the
opportunity to receive in the aggregate benefits at a level no less
favorable than those provided to other executive officers of the
Company. Nothing herein will be construed to reduce the Executive's
rights under the ALPA Contract.
- 3 -
<PAGE>
<PAGE>
5. Board Seat. The Executive will continue to be appointed to
----------
serve as a member of the Company's Board of Directors as of the
effective date of this Agreement, subject to the Executive's election
(and reelection during the term of this Agreement) to the Board of
Directors by the shareholders of the Company. The Company will take all
necessary actions to nominate the Executive to serve on the Board of
Directors of the Company during the term of this Agreement
6. Vacation. The Executive will be eligible for four (4) weeks
--------
vacation per annum.
7. Termination of Employment.
-------------------------
(a) Death/Permanent Disability. This Agreement will
--------------------------
terminate automatically upon the Executive's death and/or permanent
disability. All benefits and compensation then accrued hereunder, and
under any related plans, will be paid when due to the Executive's
beneficiaries or legal representatives, as appropriate.
(b) Termination Without Cause. The Company will have the
-------------------------
right to terminate the Executive's employment without cause at any time
during the term of this Agreement on thirty (30) calendar days' notice.
In such event the Company will pay to the Executive one (1) year's Base
Salary (the "severance payment") plus, in accordance with Company
policy, any earned, unpaid salary, granted but unpaid bonus, 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"). If the Executive returns to
service as a pilot for the Company after termination pursuant to this
Section 7(b), he will receive the severance payment and will also be
compensated as and receive the benefits of a pilot (less any vacation
the Executive has already used or been compensated for in a given year
in his capacity as CEO and President) under the then current ALPA
Contract. Such payment (other than earned unpaid salary, earned unused
vacation and current earned unused vacation, which will 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
will be made from the active payroll. The Company will have no further
obligation to the Executive under this Agreement and the 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 will 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" will 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
- 4 -
<PAGE>
<PAGE>
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 will pay the Executive his earned,
unpaid salary and granted but unpaid bonus 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 termination. Upon the making of such
payment, the Company will have no further obligation to the Executive
under this Agreement. In the event that the Executive's employment as
CEO and President is terminated in accordance with the immediately
preceding sentence, to the extent he remains qualified and eligible the
Executive will have the right to return to service as a pilot for the
Company and if the Executive elects to return to service as a pilot for
the Company, only earned, unpaid salary will be paid to the Executive;
earned unused vacation and current earned unused vacation will be
available for use by the Executive in the calendar year in which the
termination of Executive's employment as CEO and President is effective.
(d) Termination by the Executive. If the Executive
----------------------------
voluntarily terminates his employment, the Executive must give the
Company sixty (60) calendar days' advance notice in writing. If the
Executive fails to do so, the Executive will 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 each
KESIP Agreement between the Executive and the Company 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, the
Executive will turn over to Company all Company property and documents
and all computer passwords, and will (after copying the same to 3.5 inch
disks, returning the disks to the Company and receiving confirmation
from the Company that such data are retrievable in good form) delete all
Company information from any computer which is not Company property.
Upon termination, all benefits and compensation ceases except as
described above.
8. Termination Obligations. The Executive agrees that during
-----------------------
his employment hereunder or as a pilot for the Company and following
termination of his employment hereunder or as a pilot (which periods
will be tolled for the duration of the Executive's service as a pilot if
he returns to such position and reimposed in full upon the termination
of such service):
(a) he will not during his employment and for a period of
two (2) 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 the 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
- 5 -
<PAGE>
<PAGE>
employment ends and during such two (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" will 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 will 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 will hold forever hereafter in a fiduciary capacity
for the benefit of the Company all secret or confidential information,
knowledge and 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 will 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 will not be public knowledge. During
and after the end of the term of employment, the Executive will 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 the
Executive will 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 will 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 will 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 8 is determined by a Court to be invalid or unenforceable in any
respect or to any extent, the covenant or agreement will not be rendered
void, but instead will be automatically amended to such lesser scope or
to such lesser extent as will grant the Company the maximum restriction
on the Executive's conduct and activities permitted by applicable law in
such circumstances.
9. No Assignment. This Agreement is personal to the Executive
-------------
and without the Company's prior written consent it will not be
assignable by the Executive other than by will or the laws of descent
and distribution. This Agreement will inure to the benefit of and be
enforceable by the legal representatives of the Executive's estate, and
otherwise is freely assignable by the Company.
- 6 -
<PAGE>
<PAGE>
10. Assistance. For a period of three (3) years following
----------
termination of employment as CEO and President (including if the
Executive returns to service as a pilot for the Company), the 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 the Executive in connection with any such activity.
11. Expenses. The Executive will receive reimbursement from the
--------
Company for all reasonable out-of-pocket expenses for any business
travel and business expenses incurred in the performance of his duties
under this Agreement, in accordance with the expense reimbursement
policies of the Company from time-to-time in effect.
12. Miscellaneous.
-------------
(a) This Agreement will 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 will have no force
or effect.
(b) 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.
(c) All notices and other communications hereunder will be
in writing and will 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:
Mr. William F. Compton
1606 Horseshoe Ridge
Chesterfield, Missouri 63005
with a copy to:
Linda E. Rappaport, Esq.
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
- 7 -
<PAGE>
<PAGE>
If to the Company:
Trans World Airlines, Inc.
One City Centre
515 North 6th Street
St. Louis, Missouri 63101
Attn: General Counsel
with a copy to:
Christopher P. Davis, Esq.
Kleinberg, Kaplan, Wolff & Cohen, P.C.
551 Fifth Avenue, 18th Floor
New York, New York 10176
or to such other address as either party will have furnished to the
other in writing in accordance herewith. Notice and communications will
be effective when actually received by the addressee.
(d) The invalidity or unenforceability of any provision of
this Agreement will not affect the validity or enforceability of any
other provision of this Agreement.
(e) This Agreement contains the entire understanding
between the parties concerning the subject matter hereof and supersedes
all prior agreements (including the Employment Agreement dated as of
March 27, 1997, which is hereby superceded and cancelled as of the
effective date of this Agreement), 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, will not modify, alter, or
invalidate any term of this Agreement nor alter the 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).
(f) The Executive represents that 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 the Executive's duties for the
Company. The Executive has not provided, and will not provide, to
Company any trade secret of another person whose secrecy he is obligated
to maintain.
(g) Notwithstanding any provision hereof to the contrary,
nothing in this Agreement will be deemed to entitle the Executive to
employment beyond the term hereof.
(h) In the event of a dispute under this Agreement between
the Company and the Executive, the Company will advance to the Executive
all the Executive's reasonable legal fees and costs, subject to the
Executive's obligation to repay such amounts to the extent the Company
prevails in such dispute.
- 8 -
<PAGE>
<PAGE>
(i) All reasonable legal fees and costs incurred by the
Executive in negotiating this Agreement will be paid for by the Company
upon submission to the Company of reasonable and customary invoices from
the Executive or the Executive's legal representatives.
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.
- - ------------------------------
William F. Compton
TRANS WORLD AIRLINES, INC.
By:
---------------------------
Name:
Title:
- 9 -
<PAGE>
EXHIBIT 10.3
AMENDMENT AGREEMENT
AMENDMENT AGREEMENT, dated as of May 24, 1999, between Trans World
Airlines, Inc. ("Company"), and Michael J. Palumbo ("Executive");
WHEREAS, the Company and the Executive entered into an employment
agreement as of October 1, 1996 ("Employment Agreement");
WHEREAS, the Company and the Executive wish to amend the
Employment Agreement to the extent provided in this Agreement; and
WHEREAS, this Agreement shall be effective retroactive to March
25, 1999;
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Duties. Paragraph 3(a) of the Employment Agreement is
------
hereby deleted and replaced in its entirety by the
following:
"Executive shall serve at the pleasure of the Company
as Executive Vice President and Chief Financial
Officer of the Company, 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 Company's
Chairman or President, all according to the direction
and control of the Company's Chairman or President.
Executive will carry out and perform all such duties
and assignments in all directions of the Company's
Chairman or President. 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 of any
subsidiary, affiliated or related corporation or
business or of any company in which the Company may
hold any interest."
2. Salary. Paragraph 4(a) of the Employment Agreement is
------
hereby deleted and replaced in its entirety by the
following:
"The Executive will be paid at his current annual rate
of $350,000 on a regular basis, not less frequently
than one time per month, on a regular Company payday.
This rate of pay ("Base Salary") is subject to
adjustment upward from time to time, and will be
reviewed on a regular basis."
<PAGE>
<PAGE>
3. Change in Control. The following Section 11 is hereby added
-----------------
to the Employment Agreement:
"11. Change in Control - If, during the term of this
-----------------
Agreement, Mr. William F. Compton ceases to be the
Chief Executive Officer of the Company, then the
Executive shall have 120 calendar days from the later
of the date on which Mr. Compton's termination as
Chief Executive Officer of the Company is announced or
becomes effective in which to notify the Board of
Directors of the Company in writing of the Executive's
intention to cease to function as the Executive Vice
President and Chief Financial Officer of the Company.
In such event, the Company shall within 10 business
days of the receipt of such written notice, pay to the
Executive (in a single lump sum cash payment) his Base
Salary for 12 months, plus any accrued but unpaid
salary, unused vacation time, and expenses through and
including the date of such termination."
4. Limited Amendment. Except as specifically modified and
-----------------
amended by this Agreement, the Employment Agreement between
Executive and the Company remains in full force and effect
in accordance with the terms. Nothing in this Agreement
alters Executive's rights under his Change in Control
Agreement with the Company dated as of November 21, 1997.
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.
-------------------------------------
Michael J. Palumbo
TRANS WORLD AIRLINES, INC.
-------------------------------------
Name:
Title:
<PAGE>
EXHIBIT 10.4
June 24, 1999
Mr. James F. Martin
939 Arlington Oaks
Town & Country, MO 63017
Dear Jim:
This will confirm the Company's agreement concerning your separation
from Trans World Airlines, Inc. ("TWA" or the "Company"). In this
connection, TWA and you have agreed as follows:
1. Your last day of employment at TWA will be June 30, 1999
("termination date"). Subject to your compliance with the terms
and conditions of this letter, following the termination date TWA
will continue to issue monthly checks to you in an amount equal to
your monthly earnings less all statutory tax withholdings and
normal payroll deductions up to and including the check issued on
June 15, 2000.
2. On or about the second week of July, 1999, you will receive
payment in lieu of all remaining accrued vacation in an aggregate
amount equal to 14 days of vacation at your current rate of pay
(less any applicable federal and state income and employment tax
withholdings).
3. 135,340 of the non-qualified stock options (the "Options") issued
to you under TWA's Key Employee Stock Incentive Program ("KESIP")
will be treated as vested options (117,250 such options pursuant
to the November 11, 1997 award and 18,090 such options pursuant to
the January 25, 1999 award) and such vested options will be
exercisable by you in accordance with the terms of the KESIP, as
amended to date. All other options granted to you shall be
forfeited as of the termination date.
4. In accordance with the KESIP, your vested options will expire
sixty (60) days following the date (after the termination date) on
which TWA files its Form 10-Q with the United States Securities
and Exchange Commission which filing should be on or about August
14, 1999 ("Option Termination Period") provided that, if at any
time during the Option Termination Period either TWA requests that
you not trade in
<PAGE>
<PAGE>
James F. Martin
June 24, 1999
Page 2
securities of the Company for a period of time or you notify TWA
that counsel reasonably acceptable to the Company has advised you
that applicable securities laws prohibit trading securities of the
Company (either such period being referred to herein as a
"Restricted Period") then TWA, subject to any applicable Option
expiration dates set out in the KESIP Agreement between you and
TWA ("the KESIP Agreement"), shall extend the period during which
the Option may be exercised until the close of business on the day
which follows the Restricted Period, by the number of days
remaining in such Option Termination Period as of the beginning of
the Restricted Period. To the extent that there is any
inconsistency between the terms and conditions of this Agreement
and those of the KESIP or the KESIP Agreement, the terms and
conditions of this Agreement shall control.
5. You, your spouse and eligible dependents will be entitled to Class
A pass privileges for 90 days following the termination date. A
non-ID Term Pass will be issued to you, your spouse and eligible
dependents and when received you will promptly return all TWA
issued term passes to the undersigned on behalf of TWA. Use of
the above passes will be subject to TWA's pass policy and
applicable restrictions published in its Management Policy and
Procedure Manual, as the same may be in effect from time to time.
You will promptly return to the undersigned on behalf of TWA all
term passes issued to you by other air carriers.
6. Your participation in the Retirement Savings Plan for Non-Contract
Employees of TWA will continue for the period until the earlier of
(i) the date you are re-employed, or (ii) June 23, 2000, on
which date TWA's contribution on your after-tax savings will be
100% vested. Your vested account balance will be treated as you
elect, subject to and in accordance with the terms of the Plan.
7. All TWA medical and dental insurance currently provided to you and
your spouse and dependent children by TWA will be maintained in
force and effect by TWA for the period until the earlier of (i)
the date you are re-employed or otherwise become covered by a
medical benefits plan, or (ii) the expiration of twelve (12)
months after June 30, 1999. After June 30, 2000 (if you have not
attained other coverage by that time as a result of obtaining
other employment) you will be eligible for group medical and or
dental benefit coverage continuation at your expense as provided
by COBRA.
8. TWA will provide you professional out placement services from a
firm selected by TWA and reasonably acceptable to you for a period
until the earlier of (i) the date you are re-employed or (ii)
the expiration of six (6) months after June 30, 1999.
9. Any and all coverage and benefits, other than those set out above,
under any TWA group benefit or insurance plan and any other
benefits, privileges, or emoluments whatsoever pertaining to your
employment by TWA shall be discontinued as of midnight, June 30,
1999, after which time you will be eligible to convert your TWA
Group Life Insurance or Additional Life Insurance, if applicable,
to individual coverage. Information regarding life insurance
conversion will be provided to you.
<PAGE>
<PAGE>
James F. Martin
June 24, 1999
Page 3
10. Unless otherwise agreed by the parties, you will return to TWA any
computers and all accessories, software and appurtenances thereto
and cellular telephones or pagers which are the property of or
leased by TWA and in your possession, and any other Company
property, documents or material that may be in your possession, by
not later than the termination date.
11. For a period of three (3) years following the termination date,
you will, upon reasonable notice, make yourself available at
reasonable times 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 trial, deposition,
arbitration or proceeding, concerning any legal matter involving
or affecting the Company, or to consult regarding any matter
involving or affecting the Company which have arisen or may arise,
directly or indirectly, out of or in connection with the
performance of your duties while you were employed by TWA. TWA
will compensate you for said services pursuant to its standard
compensation of an hourly rate based upon your last salary while
still employed by TWA or, if greater your then current salary.
You agree not to serve as an expert witness or otherwise testify
against TWA in any litigation against TWA brought by any third
parties unless you are under a court order or subpoena to do so.
You will promptly notify TWA if you are so subpoenaed or ordered
by any court to so testify in any litigation against TWA. Time
which is not time spent actually performing services pursuant to
this paragraph will not be compensated. The Company will also
reimburse you for all reasonable and necessary out of pocket
travel and telephone costs and expense incurred by you in
connection with any such activity. At the Company's option, air
transportation on TWA shall be provided gratis by TWA for your use
in providing services hereunder. You will utilize TWA air
transportation services except when expressly authorized by TWA in
writing in advance.
12. You agree that under any of the circumstances set forth herein:
(a) you shall not for a period of two years following your termination
date, 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
your employment by the Company to be employed by you or by any
entity in which you own or expect 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 you are employed or
for which you serve or expect to serve in any capacity; nor
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 you 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 you, with any person
affiliated with you or by whom you are employed but shall not
include
<PAGE>
<PAGE>
James F. Martin
June 24, 1999
Page 4
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) you 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, personnel 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 you during or by reason of your employment by the
Company or by any of its subsidiaries or affiliated companies and
which shall not be public knowledge. You 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 you 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.
(c) you shall not for a period of two years following your termination
date discuss or disclose to the media or Company personnel the
circumstances or terms of your termination of employment.
(d) you 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
paragraph 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 your conduct and activities permitted by applicable law
in such circumstances.
13. In consideration of the foregoing, you agree as follows:
(a) With the exception of claims arising out of a breach of this
Agreement, you irrevocably and unconditionally release, remise,
acquit and forever discharge Trans World Airlines, Inc., its past
and present parents, subsidiaries, divisions, controlling parties,
officers, directors, agents, employees, successors, and assigns
(separately and collectively "releasees") jointly and
individually, of and from any and all claims, demands, causes of
action, obligations, damages or liabilities, in law or in equity,
arising from any and all bases, however denominated, known or
unknown, relating to your employment by TWA and the termination
thereof, including, but not limited to, any and all claims under
the agreement dated October 1, 1996 described above and any and
all claims of employment discrimination under any
<PAGE>
<PAGE>
James F. Martin
June 24, 1999
Page 5
federal, state or local law, rule or regulation. This release
expressly refers to, includes and releases all rights or claims
arising under the Age Discrimination in Employment Act of 1967, as
amended, Title 29 U.S. Code 621, et. seq. This release extends to
any relief, no matter how described, including, but not limited
to, back pay, front pay, reinstatement, compensatory damages,
punitive damages, liquidated damages or damages for pain and
suffering. You further agree that you will not file nor permit to
be filed on your behalf any such claim, will not permit yourself
to be a member of any class seeking relief against releasees, and
will not counsel or assist in the prosecution of any claims
against the releasees, whether those claims are on behalf of
yourself or others, unless you are under a court order or subpoena
to do so. In the event you are served with such a court order or
subpoena, you agree to notify TWA's Legal Department of such
service within 24 hours of your obtaining actual knowledge of
service or your receipt of same, whichever first occurs. This
release extends to and includes all rights or claims arising on or
before the date of your signing of this Agreement, but shall not
extend to or include any rights or claims that may arise after the
date on which you sign this Agreement is signed.
(b) You further acknowledge that the only consideration for signing
this Agreement and all that you are ever to receive from the
releasees are the terms stated in this Agreement and that no other
promises or agreements of any kind have been made to you or with
you by any person or entity whatsoever to cause you to sign this
Agreement; and that you have signed this Agreement as your free
and voluntary act. You further acknowledge that pursuant to the
terms of this Agreement you are and will be receiving benefits
from TWA which are substantially above and beyond those benefits
to which you are already entitled under TWA's published corporate
policies and procedures governing termination of employment; that
you are entitled to a full, fair and adequate opportunity of at
least twenty-one (21) days in which to reflect upon and consider
the terms of this Agreement if you so elect; that you have been
advised to consult, and have consulted, with an attorney of your
choosing prior to signing this Agreement; that you have elected to
waive the 21 day period and intend that this letter agreement be
effective at the end of the seven day period provided in paragraph
(c) below unless you elect to revoke the agreement pursuant to
that paragraph, that no pressure or duress of any kind has been
applied to you with respect to your signing this Agreement; and
that you understand and are fully satisfied with the terms and
provisions of this Agreement.
(c) Under the Older Workers Benefits Protection Act of 1990, you have
seven (7) days from the date of your signing of this Agreement to
revoke the Agreement, and this Agreement shall not become
effective or enforceable until this revocation period has expired
and you have not revoked the Agreement.
14. With the exception of claims arising out of a breach of this
Agreement, TWA agrees to irrevocably and unconditionally release,
remise, acquit and forever discharge you, your successors, and
assigns (separately and collectively "releasees") jointly and
individually, of and from any and all claims, demands, causes of
action, obligations,
<PAGE>
<PAGE>
James F. Martin
June 24, 1999
Page 6
damages or liabilities, in law or in equity, arising from any and
all bases, however denominated, known or unknown, relating to your
employment by TWA and the termination thereof.
15. This Agreement shall be governed by and be construed in accordance
with the 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.
16. All notices and other communications hereunder shall be in writing
and shall be given by facsimile or 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 you:
James F. Martin
939 Arlington Oaks
Town & Country, MO 63017
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.
17. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any
other provision of this Agreement.
<PAGE>
<PAGE>
James F. Martin
June 24, 1999
Page 7
18. 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.
Sincerely,
Kathleen A. Soled
Senior Vice President & General Counsel
Read, Acknowledged and Agreed to
this day of , 1999:
---- ----------
- - ------------------------------------
James F. Martin
<PAGE>
EXHIBIT 11
<TABLE>
TRANS WORLD AIRLINES, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
Three Months Ended
June 30,
--------------------
1999 1998
-------- -------
<S> <C> <C>
ADJUSTMENTS TO NET INCOME (LOSS):
Income (loss) before extraordinary items $ (5,343) $24,750
Preferred stock dividend requirements (5,863) (5,863)
-------- -------
Income (loss) before extraordinary items applicable to
common stock for basic earnings per share calculation (11,206) 18,887
Extraordinary items (866) (5,256)
-------- -------
Net income (loss) applicable to common stock for basic
earnings per share calculation $(12,072) 13,631
======== =======
Diluted earnings per share adjustment - dividend requirements
on the 9 1/4% preferred stock assumed to be converted 1,994
Interest net of taxes on the April Equity Notes 199
Interest net of taxes on the 10 1/4% Equity Notes 34
-------
Net income applicable to common stock for
diluted earnings per share calculation $15,858
=======
ADJUSTMENTS TO OUTSTANDING SHARES:
Basic earnings per share:
Average number of shares of common stock <F1> 66,092 58,003
Diluted earnings per share adjustments:
Incremental shares associated with the assumed
exercise of options and warrants 191 2,571
Incremental shares associated with the July ESIP distribution <F2> - 2,282
Common shares assumed to be issued upon conversion of
the April Equity Notes - 2,481
Common shares assumed to be issued upon conversion of
the 10 1/4% Equity Notes - 214
Common shares assumed to be issued upon conversion of
the 8% preferred stock <F3> 9,545 -
Common shares assumed to be issued upon conversion of
the 9 1/4% preferred stock 10,918 10,918
-------- -------
Total average number of common and common equivalent
shares used for diluted earnings per share calculation 86,746 76,469
======== =======
PER SHARE AMOUNTS:
Income (loss) before extraordinary items:
Basic $ (0.17) $ 0.33
Diluted <F3> N/A $ 0.28
Extraordinary items:
Basic $ (0.01) $ (0.09)
Diluted <F3> N/A $ (0.07)
Net income (loss):
Basic $ (0.18) $ 0.24
Diluted <F3> N/A $ 0.21
<FN>
- - --------------
<F1> Includes 7,623 shares for the three months ended June 30, 1999, and 5,869 for the three
months ended June 30, 1998 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 1995
reorganization. The Company distributed 931,064 additional shares in July 1997 and
2,377,084 additional shares in July 1998 under this provision. Additionally, the ESIP
provides that, continuing through 2002, 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 future potential issuance of these
shares.
<F3> As the impacts of including the incremental shares associated with options and warrants
and the assumed conversion of the 8% and the 9 1/4% Preferred Stock in 1999 would be
antidilutive, diluted earnings per share for the period are the same as basic earnings per
share. Additionally, the effect of assuming conversion of the 8% Preferred Stock for 1998
is antidilutive, and accordingly, it has not been assumed to be converted for purposes of
computing diluted amounts for the quarter ended June 30, 1998.
</TABLE>
<PAGE>
<PAGE>
EXHIBIT 11
<TABLE>
TRANS WORLD AIRLINES, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
Six Months Ended
June 30,
--------------------
1999 1998
-------- --------
<S> <C> <C>
ADJUSTMENTS TO NET LOSS:
Loss before extraordinary items $(26,901) $(29,390)
Preferred stock dividend requirements (11,726) (11,726)
-------- --------
Loss before extraordinary items applicable to common stock
for basic earnings per share calculation (38,627) (41,116)
Extraordinary items (866) (6,636)
-------- --------
Net loss applicable to common stock for
earnings per share calculation $(39,493) $(47,752)
======== ========
ADJUSTMENTS TO OUTSTANDING SHARES:
Basic earnings per share:
Average number of shares of common stock <F1> 65,861 57,946
Diluted earnings per share adjustments:
Incremental shares associated with the assumed
exercise of options and warrants 212 3,262
Incremental shares associated with the July ESIP distribution <F2> - 1,521
Common shares assumed to be issued upon conversion of
the April Equity Notes - 1,247
Common shares assumed to be issued upon conversion of
the 10 1/4% Equity Notes - 108
Common shares assumed to be issued upon conversion of
the 8% preferred stock <F3> 9,545 9,545
Common shares assumed to be issued upon conversion of
the 9 1/4% preferred stock 10,918 10,918
-------- --------
Total average number of common and common equivalent
shares used for diluted earnings per share calculation 86,536 84,547
======== ========
BASIC EARNINGS PER SHARE AMOUNTS <F2>:
Loss before extraordinary items $ (0.59) $ (0.71)
Extraordinary items $ (0.01) $ (0.11)
Net loss $ (0.60) $ (0.82)
<FN>
- - ---------------
<F1> Includes 7,629 shares for the six months ended June 30, 1999, and 6,088 for the six months
ended June 30, 1998 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 1995
reorganization. The Company distributed 931,064 additional shares in July 1997 and
2,377,084 additional shares in July 1998 under this provision. Additionally, the ESIP
provides that, continuing through 2002, 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 future potential issuance of these
shares.
<F3> As the impacts of including the incremental shares associated with options and warrants
and the assumed conversion of the 8% and the 9 1/4% Preferred Stock would be antidilutive,
diluted earnings per share for the periods are the same as basic earnings per share.
</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
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 288,663
<SECURITIES> 0
<RECEIVABLES> 236,897
<ALLOWANCES> 13,581
<INVENTORY> 100,511
<CURRENT-ASSETS> 724,113
<PP&E> 823,570
<DEPRECIATION> 270,472
<TOTAL-ASSETS> 2,594,332
<CURRENT-LIABILITIES> 1,160,739
<BONDS> 674,380
0
126
<COMMON> 586
<OTHER-SE> 161,513
<TOTAL-LIABILITY-AND-EQUITY> 2,594,332
<SALES> 0
<TOTAL-REVENUES> 1,630,581
<CGS> 0
<TOTAL-COSTS> 1,649,797
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,379
<INTEREST-EXPENSE> 49,411
<INCOME-PRETAX> (25,795)
<INCOME-TAX> 1,106
<INCOME-CONTINUING> (26,901)
<DISCONTINUED> 0
<EXTRAORDINARY> (866)
<CHANGES> 0
<NET-INCOME> (27,767)
<EPS-BASIC> (0.60)
<EPS-DILUTED> (0.60)
</TABLE>
