Impact on TWA may hinge on cause Firm not financially secure despite turnaround: TRAGEDY OF FLIGHT 800

July 19, 1996|By Suzanne Wooton | Suzanne Wooton,SUN STAFF

The crash of TWA's Flight 800 could result in a financial nightmare for the once-bankrupt airline that has recovered dramatically during the past year. But, experts say, passengers' reaction to TWA likely will hinge on whether a bomb caused the crash.

"If they can determine quickly enough that it was outside interference, as opposed to some internal screwup by the airline, it probably won't impact TWA," said Alex Hart, airline analyst with Ferris Baker, Watts Inc. in Baltimore.

"People probably wouldn't single out TWA then, although the whole airline industry would be affected by yet another crash."

In fact, the explosion of the Paris-bound flight Wednesday night shortly after takeoff from Kennedy Airport in New York was the fourth incident this year that has focused Americans' attention on airline safety. The others included the April 3 crash of a military plane in Croatia that killed U.S. Secretary of Commerce Ron Brown and 34 others, a ValuJet crash on May 11 in the Florida Everglades that killed 110 people, and an engine problem that killed two Delta Airline passengers in Pensacola, Fla. on July 6.

"All that's happened in a very short space of time," Hart said. "So it may cause people to think twice about flying."

But Tim Neale, a spokesman for the Air Transport Association in Washington, which represents most of the nation's airlines, said traffic this year has not been affected by the crashes.

"We definitely have had enough, and I hope there's no more," he said. "But none of the accidents have a common thread that says, 'We have a problem with the system that needs a major change.' "

He said certain incidents, such as the Persian Gulf war and terrorism, hurt the industry and contributed to the industry's $13 billion in losses from 1988 through 1994. Last year, U.S. airlines recovered with $2.4 billion in profits, the industry's best year ever.

The domestic airline industry, Neale said, also has experienced healthy traffic growth this year, even after the ValuJet crash.

"I think the industry has continued to grow because people recognize that while these tragedies occur, they're very rare when you look at the total number of flights by U.S. airlines each day, which is well over 20,000," Neale said.

Often, however, crashes have a serious impact on an airline's image and bottom line. USAir suffered millions in lost revenues after a series of crashes over five years. ValuJet was shut down by the Federal Aviation Administration after its Florida crash.

"The thing in TWA's favor is they haven't had any kind of problems in a long while," Hart said. "I don't think they'll face the public relations problem that USAir had, for instance."

It may be too early to speculate about how seriously the TWA crash will affect the airline. But it did devastate what had been a day of celebration. Hours before the crash, TWA reported second quarter earnings of $25.3 million, compared to $5.2 million a year ago. Revenue rose 12 percent to $965.8 million from $860.5 million.

The airline also revealed more details about its plan to replace planes in its 189-jet fleet, the oldest in the country. The disaster coincided with a visit by TWA chief executive Jeffrey Erickson to London, where he was seeking permission to fly from Kennedy (( to Heathrow Airport, a profitable route. TWA sold the rights to fly that route three years ago when it was struggling to survive.

Despite its improved results last year, TWA -- which had been in and out of bankruptcy in recent years -- still is not financially secure. And that underscores the potential damage of the crash if passengers ultimately are reluctant to fly TWA.

In the first trading since the crash, TWA stock was down $1 on the American Stock Exchange, closing at $10.25.

"They'd done a reasonably good job of getting their feet back under them and were looking like they were out of the woods," Hart said. "Now it's hard to tell."

Pub Date: 7/19/96

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