Despite Reorganization, Analysts Are Skeptical About TWA's Prospects

TRANS World Airlines could begin to put its financial troubles behind it in as little as two weeks, after a federal bankruptcy judge approved a prepackaged reorganization of the beleaguered airline. But industry analysts are still skeptical about the company's long-term prospects.

United States Bankruptcy Court Judge Barry Schermer, in the order he signed Friday, wrote of employee sacrifices to save the airline that has twice filed for bankruptcy in the past 3-1/2 years.

''Once again, TWA's employees played a major role in TWA's financial resurrection,'' Judge Schermer stated. ''Although the future of TWA is uncertain, the court is confident that if the same dedicated family of veteran TWA employees ... continues to work for this airline, the future will look a lot brighter.''

St. Louis-based TWA filed for Chapter 11 in June. Under the approved plan, creditors forgave $500 million of TWA's $1.8 billion debt in exchange for greater ownership of the airline.

TWA's creditors now own 70 percent of the airline while employees own 30, down from the 45 percent they owned prior to this latest retooling.

The reorganization ''will vault TWA and its employees miles forward in our race to restore competitive strength,'' said William Compton, chairman of TWA's pilot's union.

But not everyone is supportive of the airline's latest move. Victoria Frankovich, president of the Independent Federation of Flight Attendants, opposed a hefty bonus written into the plan for TWA's three top executives.

''What we did manage to do because of the union involvement and because of the employees' loud complaint, we cut the bonuses down so they are really a lot smaller,'' Ms. Frankovich says. ''This is less than half of what these guys were told they were going to get when they were hired.''

If TWA successfully emerges in the black, its chief executive officer, chief financial officer, and general counsel will each receive a $250,000 bonus.

For his part, Jeffrey Erickson, president and CEO of TWA, says he is pleased that the reorganization has proceeded quickly and as planned. ''The confirmation of TWA's plan of reorganization effectively concludes our prepackaged bankruptcy proceeding and clears the way for implementation of our financial restructuring later this month,'' he adds.

He says he doesn't expect any layoffs of TWA's 22,000 employees. No flights will be affected, and all tickets and frequent-flyer miles will remain valid.

The reorganization plan also stipulates that:

* TWA will issue new common stock when the reorganization takes effect. Existing shares will be worth 1.7 percent of their current value.

* Owners of existing preferred stock will get 0.124 shares of the new common stock for every share of the preferred stock.

* Trade creditors - vendors and suppliers - will be paid as if a bankruptcy never occurred.

TWA has twice entered bankruptcy since 1993, in part because of the heavy debt it accumulated under former owner Carl Icahn. But the previous reorganization plan had unrealistically high revenue expectations, in Mr. Erickson's opinion. The new plan is driven by efforts to control costs. ''It's much more conservative on the revenue side,'' he says.

Although only technical barriers remain before TWA exits bankruptcy, industry analysts say the company's long-term prospects are not encouraging.

The industry is extremely competitive, and TWA's fleet of aircraft is the oldest among the major airlines. Its employees have little left to give, analysts contend, and the company has not yet succeeded in expanding its lucrative routes to Europe.

Trans World Airlines, however, did report a $5 million profit for the second quarter of this year, its first in five years. The company has also cut $300 million in annual costs, much of it coming through wage concessions by employees and eliminating its Atlanta hub.