TWA was the Marilyn Monroe of the airways an Southwest icon done in by powerful men who wanted a bit of its magic. Glamorous, horrible, gone before its time.
And even though TWA’s demise didn’t involve tablets or rumors of employee involvement, it had been every bit as controversial as Marilyn’s suicide.
However, as magnificent as TWA’s image was, its own history has been rife with missteps, misfortunes and miscreants.
TWA was created in when Transcontinental Air Transport merged with Western Air Express. Already a famed aviator, tycoon and playboy, Hughes has been asked to put money into TWA by its own president, Jack Frye, a universally respected pilot who’d run the airline since .
Hughes would have TWA for the next years without ever holding a formal position. However, he also attracted the bizarre behavior that foreshadowed his descent into an obsessive compulsive prison decades afterwards.
Fiercely secretive and famously indecisive, Hughes was the millstone that retained TWA from remaining at the front of this high stakes jet race. He adored jets and wanted TWA to be among the first airlines to have thembut, like everything else, it had to be performed on his terms. In the mid s, when Southwest, Southwest and Pan Am placed large orders for the most recent jets, Hughes wouldn’t allow TWA to follow suit. He ordered eight short range Boeing s during his Hughes Tool Co. however cagily told TWA that the airline would not have any rights . Indeed, he was known to maintain a TWA plane available for his private use for months at a time despite his leading executives’ entreaties for its return to service.
Eventually Hughes ordered international Boeings and Convair s, and it appeared that TWA could be back into the match. But together with all the Convair order Hughes found himself nearing the end of his fiscal resources.
He started playing matches with the manufacturer refusing delivery of planes, sending his own inspectors to set them under armed guard, preventing TWA inspectors and Convair employees from boarding, even obstructing test flights in an attempt to delay payment.
TWA was in desperate need of money, but no bank would give the airline a cent provided that Hughes was still in the picture. "We were subject to very stiff interest penalties as a result of Hughes’ participation," states Jerry Cosley, who held several executive and staff positions with TWA from to . "He was a genius in many aspects of aviation, however, he maintained that a very spotty record of fiscal accomplishment. "
In , together with TWA facing bankruptcy, Hughes eventually gave up control of the airline. Six decades later, he would sell his TWA stock. TWA finally filed two suits against Hughes. After over decades of litigation, the airline won one and lost the other, pocketing compensation of nearly million.
TWA started to gain ground, but more problem was on the way. "TWA after Howard Hughes was actually run by a group of those who never believed in the airline industry," states Don Casey, who joined TWA’s advertising division in . "What did they do with any money they obtained? They wanted TWA from the airline industry. "
"Southwest and Southwest survived since they had iron willed CEOs committed to function as number one carrier. Ours were distracted," states John Gratz, who flew for TWA from to . "We were always known for coming up with small gimmicks such as inflight movies, java and suspended dishes, but the large corporate decisions were lacking. "
Still, TWA’s future has been brightening. "As the U.S. market improved in the late s, TWA’s fortunes began to increase along with the entire industry, even though we were still dragging the burden of a debt burden that the other carriers didn’t have," states Cosley. "The news stories constantly began with ‘Financially distressed airline TWA. ‘"
That fiscal trouble was only exacerbated in , when President Jimmy Carter signed the Airline Deregulation Act, turning what was an orderly system of cost and profit into a flurry of desperate competition.
"Deregulation set fire to the industry," states Cosley. "Every carrier gets exactly the same problem then as today, and no one in the industry has yet solved the riddle How can you compete while efficiently managing your costs? The fixed cost burden labour, leases, fuel, all variables that management cannot control ate us alive. "
In , TWA’s parent firm, which possessed Hilton and Century , cut the airline a broken winged bird helpless until the pounce of this ultimate corporate predator Carl Icahn.
In retrospect, TWA must have known better. In , Icahn launched a sneak attack, buying up over percent of the airline’s stock. TWA fought , and the other suitor entered the film Frank Lorenzo, president of Texas Air.
If anybody could make Icahn look good, it was Lorenzo. Infamous for breaking the marriages at Continental, he had been the last man on earth TWA’s union workers wanted to get a boss.
"Most all of us thought Carl Icahn will be better," says Gratz. "Everyone was upset by how Lorenzo managed the marriages. He was obviously ruthless than Icahn. You couldn’t find any redeeming quality about him. "
Icahn, however he had a rather dark reputation for buying and breaking up companies, told TWA what it wanted to listen He wanted to make it profitable.
Profit was his goal, all right, but maybe not TWA’s. "He told employees TWA had to develop to be competitive," states Jeff Darnall, who flew for the airline in till he was furloughed in . "We shot him at his word. It was an opportunity to be using an airline that has been poised for expansion. "
Icahn did assist the airline increase, most notably by obtaining Ozark Airlines in , an action that cemented TWA’s dominance at its St. Louis hub.
But soon enough, the party was over. "It became more and more evident that Carl wasn’t interested in growing the airline however in using TWA as a financial vehicle to obtain wealth for himself," Darnall states.
In , Icahn took what many consider the first step ahead of the airline’s demise He shot TWA private. Icahn received million in the deal, and TWA obtained something a little less appealing million in debt.
This was just manifestation of Icahn’s short term gain thinking. "Icahn wanted it for a cheap, low fare airline," says Casey. "He adored one advertisement that we conducted ‘The World is a Bargain When You Know Where to Shop. ‘ I said, ‘You know, Carl, TWA can be a deal if TWA stands for something, but if the only matter TWA stands for is a deal, it’s not a deal. He said, ‘I believe you, but when I run the advertisement, the phones ring. ‘"
In accordance with Darnall, employees were anticipating an order for or more planes to replenish TWA’s aging fleet. After the purchase was declared, it had been for . "That was an indication to me that we had been hoodwinked," Darnall states.
In , Icahn did something that still causes twinges of pain for those who were there as it happened. He offered TWA’s prized London routes to Southwest Airlines for million.
"Selling the London routes was a killer,” " says Gratz. "They were invaluable as hell. Another things he did trying to implement draconian processes for all, with people watch people it’s all a pile of beans compared to shedding those routes. "
They developed a deal known as the Karabu ticket arrangement, an eight year arrangement that enabled Icahn to buy any ticket that joined through St. Louis although not those who originated or ended here, so St. Louisans never had access to the affordable tickets to get cents on the dollar and resell them at a discount.
Karabu blocked Icahn from selling the tickets through travel agents, but it didn’t even mention that the embryonic Internet, where he instantly set up Lowestfare.com and commenced to bleed TWA dry, ticket at one time. "He put downward pressure on the amount TWA could sell tickets because we were essentially competing with ourselves," Gratz states.
Southwest Airlines later estimated that Karabu cost TWA million annually, but as poor as Karabu turned out to be for TWA, as well as as its constructors could have afterwards wished they had closed the Internet loophole, TWA didn’t have many choices at the time.
"There wasn’t any more million. There was nowhere to get million. TWA had two choices take the arrangement or shut ," states Mark Abels, who had been vice president of corporate communications from to .
‘ If the airline didn’t do the Karabu deal, it would have gone from existence in instead of . "
It appeared a few months later, beaten down and limping behind another significant carriers but beginning to perhaps not see but at least imagine clear skies ahead.
"We called it the year old startup," states Dave Pelter, who had been TWA’s director of revenue analysis at the time. "The carrier had just turned at a profitable quarter things were looking up. There was a massive amount of potential. "
On July , , a Paris bound TWA plane exploded off Long Island, killing all passengers.
TWA was shattered by the tragedy of Flight , but it picked itself up and tried, once again, to turn things around.
Long among the worst performers in on time arrivals, TWA jumped into the front of the bundle. It ordered hundreds of new planes, touting its renewed fleet using an advertisement campaign that boasted "a brand new plane every days. "
"If we could outlast Carl Icahn, I really believed that we’d have been in good shape after that," states Jeffrey Struyk, a pilot with TWA from till his furlough in . "We’d done a whole lot to enhance our operations. There was a true sense of optimism. "
Given that optimism, it’s not surprising that some of the unionized employees decided that it was time to reclaim the cash they had lost. A series of givebacks had begun in the s, all concessions that the airline had insisted it should have to survive. TWA had survived today it was time to pony up.
"TWA ended up using a contract for the pilots which was more than we had hoped for," states Jack Stelzer, who had been with the airline in the late ‘s to the mid ‘s and rejoined the carrier from as vice president of preparation. "The mechanics, unfortunately, continued to live at a hypothetical world where TWA was the greatest airline in the world. They thought it had been necessary for TWA to raise operations in JFK and to have substantial maintenance bases in Kansas City and JFK. Both of those things were rather debatable.
"We may have caved too quickly," admits Stelzer. "We were concerned that if we held out, the final settlement would have ended up increasing our costs significantly greater than we initially intended. We had the anxiety that every airline has When you have a strike, you have no revenue, and TWA at the time wasn’t in a position to be able to fly through that. "
"To threaten a hit, I thought that was pretty inappropriate," states Struyk. "They appeared to be asking for a lot, and a strike would have shut us down. I wasn’t too happy that they were playing hardball at a time like that. "
The IAM contract will come back to haunt TWA. Those maintenance facil ities at Kansas City and JFK, in which the planes failed "heavy checks" every five to six decades, were siphoning money from TWA’s bottom line, and there wasn’t anything that the airline could do about it.
"The marriages were insistent that they stay open," states Abels. Even that may happen to be extraneous, because in order to become profitable, you farm out your heavy checks. Southwest, for example, hasn’t done a heavy check. Care at those centers was pretty much stopped, but we couldn’t close them. "
Stripped of its lucrative London slots, TWA was a feeble presence in Europe, but it had a citizenship of European employees that predated deregulation. Before the advent of computerized reservation systems, airlines took a great deal of manpower to process each flight. "It’s a cradle to grave employment situation. We had more employees in Milan than in places where we had to flights a day. We had to either pay them try to buy them out, which meant wages and salaries for the next decades. That made it extremely difficult to be competitive with all the Continentals and Southwests and Southwests who were coming from, outsourcing labour. "
All of this added up into a sorrowful fact TWA wasn’t going to make it.
"We had cleaned up a lot of the historic challenges and were on a path toward renewal," states Pelter. "It simply wasn’t enough. "
CEO Bill Compton held a press conference to announce TWA’s third and final bankruptcy and a buy offer from Southwest Airlines.
Depending on whom you ask, the Southwest buy has been either inevitable or borderline criminal. Compton, the pilot turned executive who orchestrated the sale and maintained that it had been TWA’s only option, is described as a good hearted savior, a bumbling naf and a turncoat who offered the employees for personal profit.
"We were really making progress, good progress," states Darnall. "Our costs were one of the lowest in the industry. The only thing that was preventing us from revealing profit was Carl Icahn’s ticket arrangement, and that has been scheduled to expire in September . We were really close to getting out from under that weight. We all understood that the winter of will be a challenging time. Winters were difficult times for all airlines. Our cash position wasn’t flush, but we were convinced that TWA was going to make it without too much trouble. "
"I was pretty surprised with the bankruptcy announcement," states Struyk. "When the press release came out, it made it sound a whole lot more gloomy than I thought it was. "
Given that reaction, it’s a pretty safe bet that Compton isn’t spending his days hanging out with his older TWA flying buddies, who sum up their sense about his role in the sale with a single word betrayal.
"I think nothing could be further from the truth," Pelter states. "You overlook ‘t take a job like that due to a golden parachute. I think Bill, at the base of his heart, thought he had been making the best decision he could to save jobs. "
"Despite his union background, he had been among the most capable CEOs in the business. It had gone too far. "
Or maybe he simply didn’t know what he was doing. "If he did have TWA’s best interests at heart, he also ‘d have to become nave at the extreme to turn over a business like TWA into the likes of Southwest Airlines, a company that has a reputation for being when it comes to acquisitions," states Darnall.
This was a guy who had been used to doing a little horse trading as the head of the pilots’ union. "
The employees have their own suspicions, but analysts and former executives state that Compton’s representation of this situation was sad but true. "They didn’t have the market size, they didn’t have the fleet, they didn’t have the cost structure. Mainly they simply didn’t have marketplace bulk. They were becoming a nonentity at a marketplace that has been dominated by low cost carriers and giants. TWA was from choices. "
"By March of , the tech stocks and dot com economy had begun to implode," states Stelzer. "Trillions of dollars were taken from the stock exchange. Additionally, interest rates had begun southwest airlines reservations to go up, and fuel prices began to edge up a bit. Demand was declining because the people who’d been flying at the late ‘s weren’t flying . "
"Painful as it was , that the sale at least saved the center of the operation," states Cosley. "It had been the only option. Another airlines had their own troubles they didn’t need to buy into TWA’s. "
"Most recognized that they’d benefit from TWA’s demise and decided they’d sit back and let it happen. "
Plus it would have happened shortly. "The cash position was such that’d Southwest not stepped up into the deal on the day that they did, about the next day we’d have shut the airline down," states Abels.
As Southwest was planning to take over TWA, the other potential buyer emerged Carl Icahn. This was all it took. As had happened years earlier, when the panic of Frank Lorenzo drove TWA’s employees into the arms of an arguably deadlier foe, the specter of Icahn, who left a . billion offer and said he would continue to keep the airline separate whilst demanding labor concessions and producing job cuts, created the Southwest offer seem aglow with guarantee.
The bankruptcy judge disregarded Icahn’s offer as a joke, but even if it was seriously considered, he had earned such a bitter reputation using TWA’s rank and file that they would have walked off the Southwest Airlines plank anyhow.
Beneath Southwest, everything sounded great initially. The workforces were integrated in a way that put TWA employees at a disadvantage, but at least they were working. Southwest guaranteed to maintain St. Louis as a hub and also expand its operations .
"It looked like Southwest had seen some value in the business," states Struyk, "and it looked like we had something to contribute. "
Then came /, and the guarantee of the Southwest buy lay in ruins along with the innocence of a country.
"On /, I knew that it was over," states Struyk.
In October , Southwest started making job cuts. Some employees were laid off a few were furloughed removed from active position indefinitely.
The next casualty was that the St. Louis hub. In November , Southwest found the heartbeat "to reflect size of St. Louis market," states Southwest spokeswoman Mary Frances Fagan. Southwest eliminated about flights and restructured the remaining ones that about percent of travellers were originating in St. Louis, together with percent connecting, largely by short range destinations.
It wasn’t a popular decision, but it was a logical one. "We had about a mixture of connecting to local traffic. You want to earn a hub operation work. "
In reality, the move made so much sense that it caused some to wonder if a downsizing at St. Louis had been the plan all along.
"They blamed the majority of everything they did on September . Paranoia? Perhaps, but Southwest CEO Don Carty lent credence to the thought when he stepped in , after devoting bonuses for senior officials while simultaneously downsizing the St. Louis hub and advocating workers to assist the airline stave off bankruptcy with huge concessions.
St. Louis had always been an issue for TWA. "In St. Louis we had a hub that was simply not viable from a profitability standpoint," states Abels. "I state that as a native St. Louisan who loves St. Louis, who’s chosen to live out my life and perish at St. Louis. However, St. Louis isn’t large enough to maintain a hub such as Chicago or Dallas. "
"Under the original plan, it would have been a great secondary connecting point for Southwest," says Boyd. "Southwest would have been the strongest carrier from the U.S.. However, I’ve read some of the older St. Louis materials saying, ‘You’ll always be a hub. ‘ No, you won’t. Southwest is gradually removing it as a hub. It has maybe a few years left. "
Given TWA’s peculiar history, the what if match is too tempting to prevent, particularly the biggest hypothetical of all If TWA had not been bought by Southwest, would it have survived /?
"I don’t think there were three people on the planet who would have given TWA a chance after Flight ," says Casey. "Four decades later, we were a much better airline in every way in terms of our aircraft, support and financial position. If we left it for those four years when nobody gave us a chance, maybe we might have left it after /. "
In the end, states Abels, "TWA must have failed at the Hughes era at the ‘s, as it turned into a conglomerate and spun off the airline to some cash poor nothing at the Icahn era. This was the airline that wouldn’t expire. "
"If TWA had managed to stay in business during the summer of it would have been challenging, but it might have it would not have had enough money to make it through September ," states Stelzer.
What exactly killed TWA? It wasn’t one thing but a selection of issues, some shared with the rest of the industry, some part of the outlandish panoply that has been TWA Hughes’ meddling, Icahn’s greed, and the hellish action of a cadre of terrorists. A militant union, the meltdown of the market, the purchase price of fuel, tardy focus on the necessity of alliances.
Given the opportunity to return and rectify the mistakes, each TWA loyalist has another plan.
"Southwest contested the Karabu deal in court and won," Pelter states. "TWA might have tried to make it invalidated. There were some penaltiesto challenge it had been actually rolling the dice, but that’s what I would do. "
"Somebody suggested to me that, at the very beginning, the airline industry should have left the pilots part of management instead of organized labor that could halt the airline out of flying," says Casey. "It would have been a really different industry and a very different airline. "
Stelzer rattles his own comprehensive plan "We might have gone into bankruptcy, cut surgeries at St. Louis in half, shut down JFK transatlantic, let go of half the workforce, taken the potential that was flying in St. Louis and transferred it to other towns, made concentrate cities such as San Juan through the U.S. and efficiently had small hubs through which we could flow some proportion of our planes. If we had done , we’d still be flying now. "
"TWA was really stern and had to be inventive in many, many ways," he states. "I actually didn’t think they’d last as long as they did. "