Trans World Airlines Chairman Carl C. Icahn and the airline's creditors have made major concessions to make the airline's pension fund viable and to guarantee jobs for its pilots, according to people involved in the talks.
They said the concessions were an effort to reach an agreement on a reorganization plan that would enable the airline to emerge from bankruptcy.
The people, who spoke on condition of anonymity, said Mr. Icahn had offered to guarantee personally a significant part of the fund if it should run into trouble.
The struggle with the Pension Benefit Guaranty Corp. over how to make up a $1.2 billion shortfall in the pension fund has been one of the most difficult issues to resolve.
People involved in the negotiations said yesterday that major progress had been made, and that the gap between the agency and Mr. Icahn had been narrowed to about $150 million.
The focus has now shifted to members of the Air Line Pilots Association and the International Brotherhood of Machinists and Aerospace Workers who have been asked by the creditors' committee to accept 15 percent cuts in pay to help the airline get back on its feet.
The creditors are prepared to forgive about $1 billion in debt in return for a 55 percent stake in the airline. The unions, in return for their concessions, would get a 45 percent stake.
The Master Executive Council, the pilots' governing body, was meeting in St. Louis yesterday to decide whether to go along with the request for a pay cut that would come from wages and benefits -- not in "soft" dollars, which would come from changes in work rules.
Mr. Icahn said yesterday that the "future of the airline rests with Bill Compton and the MEC." Mr. Compton, the chairman of the council, has said that the pilots cannot agree yet because they have not received job protection for their members if the airline's assets are sold.
A person familiar with the negotiations, who did not want to be identified, said that the creditors' committee had offered to guarantee the jobs of 75 percent of the carrier's 2,800 pilots if assets were sold. The person said that this was a major concession by the creditors since such a guarantee would make it more difficult to sell the assets. Pilots account for about 10 percent of TWA's 28,000 workers.
Those involved in the talks also said that Mr. Icahn had increased the amount that he would put into the airline to $200 million from $150 million to strengthen its cash position, and that he had agreed to wipe out $175 million that is owed him in TWA bonds he holds.