MIAMI – Today in Aviation, Trans World Airlines (TWA), formed as Transcontinental & Western Air, emerged from its first bankruptcy in 1993.

Once one of the world’s most iconic airlines, TWA had been struggling financially for a number of years. Deregulation in the United States had left the carrier lagging behind, especially in the domestic market.

In 1985 TWA was purchased by entrepreneur Carl Icahn. Under his direction, many of the airline’s most profitable assets were sold off. This included its prized London Heathrow (LHR) routes, purchased by American Airlines (AA) for US$445m in 1991. Losses continued and its first bankruptcy was declared on January 31, 1992.

Its creditors, who had bailed out the company now owned 55% of the company. One of these investors was Icahn.

In the summer of 1988, TWA carried over 50% of all transatlantic passengers. (Photo: Ted Quackenbush (GFDL 1.2 http://www.gnu.org/licenses/old-licenses/fdl-1.2.html or GFDL 1.2 http://www.gnu.org/licenses/old-licenses/fdl-1.2.html), via Wikimedia Commons)

The Karabu Deal


To recoup his money, Icahn developed the “Karabu deal.” This saw TWA tickets being sold to the Karabu Corp, a company he controlled, at a massive 45% discount. The deal cost the airline an estimated $150 million per year. This pushed TWA into its second bankruptcy on June 30, 1995.

It emerged a few months later and for the first time in many years, the carrier announced a modest profit. Then tragedy struck with the loss of TWA Flight 800. All 230 on board were killed when a Boeing 747 bound for Paris (CDG) exploded off Long Island.

A turnaround plan was introduced. Hundreds of new planes were ordered and on-time performance drastically improved. But financial woes continued. Its third bankruptcy was declared in January 2001 and the company was purchased by AA in April 2001.

N93119 was delivered new to TWA on October 27, 1971. (Photo: Steve Fitzgerald (GFDL 1.2 http://www.gnu.org/licenses/old-licenses/fdl-1.2.html or GFDL 1.2 http://www.gnu.org/licenses/old-licenses/fdl-1.2.html), via Wikimedia Commons)

Featured image: TWA