The troubles facing the air travel industry became more visible Friday, as Trans World Airlines Inc. defaulted on a $75.5 million bond payment and others prepared to scavenge the remains of Eastern Airlines.
TWA announced it would put off paying some debts because it needs to hang on to the cash in order to stay alive."While I am troubled by the need to withhold payment from certain of our creditors, I believe it is imperative for the survival of TWA," TWA Chairman Carl Icahn said.
TWA said it had $200 million in cash on hand at the close of business Thursday, but was nonetheless suffering extreme blows to bookings, which have also been hit hard by the recession and jet-fuel inflation caused by the Persian Gulf war.
TWA's chief lawyer said, however, there were no plans to file for Chapter 11 bankruptcy protection from creditors.
Even as TWA was hoping to find ways to restructure its debts, the industry's stronger carriers were preparing to meet privately Monday to bid for Eastern assets such as gates in various U.S. airports.
U.S. Bankruptcy Judge Burton Lifland ordered the auction after it became apparent that more than one carrier is seeking hunks of the grounded airline.
Airlines interested in Eastern's assets include Delta, United, American and Northwest. Eastern stopped flying last month after it ran out of money, despite recent cash infusions approved by the judge and a marketing program that offered first-class service at regular fares.