Today in 1993, Trans World Airlines (TWA) emerged from its first Chapter 11 bankruptcy on November 3, ending 22 months under court protection.
The airline had filed for Chapter 11 on January 31, 1992. Its reorganization transferred ownership to employees and creditors, with labor concessions and debt relief forming central parts of the plan.
Under the plan, employees were to receive 45% of the stock and creditors the remaining 55%. Contemporary reporting by UPI described more than $600m in employee wage and benefit concessions.
Carl Icahn's position was different from that of the new shareholders. A December 1992 settlement summary preserved in the Dole Archives provided for Icahn and his affiliates to relinquish control and cancel unsecured claims, while also providing financing for the reorganized airline.
The Karabu Deal
Icahn's financial relationship with TWA continued after the first reorganization. In June 1995, TWA signed an agreement extending financing from Karabu and entered into a 99-month ticket agreement, according to TWA's account in its 1999 quarterly filing.
The arrangement covered two categories of discounted tickets, domestic consolidator tickets and system tickets. TWA and Karabu later disputed how system tickets could be marketed.
TWA filed for bankruptcy again on June 30, 1995, to implement a prepackaged restructuring plan. It emerged on August 23 that year, according to the Department of Transportation's financial review.
The 1993 reorganization did not secure TWA's long-term independence. On April 9, 2001, American Airlines, through its TWA Airlines subsidiary, purchased substantially all of TWA's assets and assumed certain liabilities. Airways' account of TWA's final flight follows the carrier's last chapter later that year.
Featured image: A Lockheed Constellation L-1649 Starliner in TWA livery, seen here parked at the TWA Hotel, which occupies the restored TWA Flight Center.
Featured image: Jag9889/CC BY-SA 4.0
