Jettisoned

Trans World Airlines spins off

Over the years, Trans World Airlines, the fifth largest domestic carrier, has become a conglomerate that includes profitable hotel, restaurant and real estate operations. In 1978. TWA set up Trans World Corp. (1982 revenues: $5.1 billion) as a holding company for the airline and other subsidiaries, which now include Hilton International (90 hotels overseas plus three Vista International hotels in the U.S.), Spartan Food Systems (423 restaurants in Quincy's Family Steak House and Hardee's chains). Canteen (one of the nation's largest vending and direct-food-service businesses) and Century 21 Real Estate (a nationwide chain with 6,400 offices). Last week Trans World Corp. decided that the airline should fly solo and recommended that it be separated from the rest.

In the increasingly competitive environment created by the 1978 deregulation of the airline industry, TWA has become a drag on the parent corporation's earnings. It has suffered operating deficits for three of the past four years, losing a total of $133.5 million during that period. The 16-member board decided that it was "in the best interest of Trans World shareholders" to divide the parent corporation into two companies: an airline with more than $3 billion in annual revenues and a hotel, restaurant and real estate firm with $2 billion worth of business. Under the proposed spinoff, Trans World stockholders will receive 93 shares of TWA stock for each 100 shares of the corporation's stock that they now own, giving them a total of 193 shares in the two companies.

The decision comes just six months after Trans World defeated an attempt by Odyssey Partners, a group of former Oppenheimer & Co. executives, to break up the corporation's units into separate companies. Odyssey, which eventually won the support of more than a third of Trans World stockholders, argued that the subsidiaries were worth at least twice the $32 per share at which the corporation's stock was then trading.

Trans World Vice President and Controller James R. Painter insisted that cutting the airline loose from the parent company would not "put TWA at a disadvantage," and that it "could possibly help" it. Painter was obviously referring to TWA's ongoing labor negotiations, in which its nearly 30,000 employees are being asked to take about a 15% pay cut. Without the profits from other Trans World subsidiaries, TWA's management and the unions will be under much stronger pressure to reduce costs. TWA hopes the spin-off will help it avoid following Braniff International and Continental Air Lines into bankruptcy. This file is automatically generated by a robot program, so viewer discretion is required.