Word: icahn
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...mission seemed manageable when Icahn first gained control of the ailing airline. As part of his takeover deal, the new chairman received $250 million worth of wage and work-rule concessions from TWA employees, including the unionized pilots and machinists. Because of its high labor costs, TWA has been hard pressed to compete with such no-frills carriers as People Express and Continental Airlines...
...Icahn insists that the flight attendants must make $100 million in concessions if TWA is to become competitive. His demands: 17% wage cuts and a two-hour increase in the workweek, which now consists of some 20 in-flight hours. TWA flight attendants currently make an average of $35,000 a year, or 40% more than the industry norm. The union will accept 15% wage reductions but refuses to work as many hours as TWA is requesting...
...facing the union, Icahn is determined and defiant. He has hired nearly 2,000 nonunion flight attendants to replace the strikers. Says he: "The company cannot exist without these cuts. We've got guts. We're not going to chicken out." If the unions reject his demands, Icahn has threatened to sell all or part of TWA. Says he: "I am not going to stand by and watch this company bleed to death. If we can't make money, I will cash in my chips." But Icahn has worked his way into a trap: he could walk away right...
Many industry insiders think Icahn had no business buying an airline in the first place. Says a TWA executive: "Icahn doesn't know the difference between a propeller and a jet engine, and he doesn't seem to care." The chairman, however, shrugs off such criticism: "You don't have to understand everything about planes to make money in the business...
...Icahn, who has made a fortune by buying and selling stakes in such companies as Dan River and Gulf+Western, hopes to use his deal-making skills to rebuild TWA. He made his first major move three weeks ago, when he persuaded Ozark Air Lines to merge with TWA for $250 million. Among other benefits, the acquisition will sharply increase the number of domestic flights that feed passengers to TWA's overseas routes. Icahn is also thinking about buying a hotel chain and an auto-rental company to combine with TWA. That would enable customers to reserve a plane seat...