Icahn Sees More Mergers for TWA

Trans World Airlines Chairman Carl C. Icahn, buoyed by a profitable summer and by the expectation that the impending merger between TWA and Ozark Airlines will be approved by the government, told stockholders Wednesday that there are more mergers in the company’s future.

“Philosophically, I believe that this company has to consolidate to be a winner,” Icahn said at the company’s annual meeting here. Although he declined to give details, Icahn said TWA will start considering another merger within six months.

Icahn, who took over the nation’s fifth-largest airline at the beginning of this year, said consolidation is a necessity throughout the industry. “Down the road,” he said, speaking to reporters after the meeting, “there are going to be only a few airlines left.”

As for the health of ailing TWA, Icahn said, “we see the light at the (end of the) tunnel.” He said he expects the company to show a profit of at least $25 million for July and a bigger profit in August.

TWA is coming off losses of more than $87 million for the second quarter and $256 million for the first six months of 1986. It had shown profits of $18 million and $56 million for the periods in 1985.

TWA announced in February that it would buy Ozark Holdings Inc., parent of Ozark Airlines, for $224 million. Last week, a Transportation Department administrative law judge recommended approval of the merger.

Decision by Mid-September

Less than a month earlier, the Justice Department advised against allowing the deal on grounds that it would substantially reduce competition. The DOT has the final word and should announce a decision by mid-September.

TWA’s most notable problems this year have been the fear of terrorism abroad and a strike by flight attendants that Icahn estimated cost more than $100 million. The strike also cost 4,200 flight attendants their jobs when TWA hired lower-paid replacements.

In part by maintaining a hard line with the flight attendants union and by gaining concessions from the unions representing pilots and machinists, Icahn said the airline has been able to make a substantial cut in costs.

Analysts were skeptical, however, of any claim that TWA is turning itself around. July and August are historically the strongest months in the airline industry.

“It would be very disturbing if they (TWA) did not make money in the summer,” said Edmund Greenslet, airline analyst for the New York brokerage firm of Merrill Lynch. Greenslet expects that the fall will be a difficult period for TWA and that over the course of the entire year, “they will probably lose” money.

Icahn’s predictions regarding industry consolidation, on the other hand, are widely accepted.

Scott Drysdale, who covers the airline industry from Seattle for Birr, Wilson & Co., a San Francisco investment firm, said airlines will need to merge in order to assure that they are not locked out of any markets for lack of feeder routes.

Just which company will be TWA’s next merger target is anybody’s guess. “TWA is very weak in the West,” Drysdale said, “but there are a lot of potential acquisition candidates.”