Why does Kerkorian want to buy TWA? Experts are puzzled over his bid for the ailing carrier.

Why does Kerkorian want to buy TWA?

If Kirk Kerkorian is successful in his attempt to acquire troubled Trans World Airlines, the Beverly Hills investor will face several major obstacles in turning the carrier into a profitable operation, industry analysts said.

They said TWA currently lacks most of the key ingredients of a successful airline and Kerkorian, chairman of holding company Tracinda Corp., would have a difficult time turning the once-venerable carrier around.

"You need four things to have a viable airline and TWA has none of those," said Thomas Trantum, an airline industry analyst with J.C. Bradford, a securities firm in Nashville, Tenn.

"I really don't know why he wants to buy it," Trantum added.

Kerkorian, whose holding company operates MGM Grand Inc., which includes luxury airline MGM Grand Air, reached an agreement with TWA's unions late last month to buy the international carrier. Under terms of the agreement, Tracinda would initially own about 65 percent of the airline and the unions would own the rest.

The agreement, however, hinges on whether the U.S. Department of Transportation approves the sale of some TWA London routes to American Airlines. If the DOT approves the route sale, the proposed deal would be called off, said Kerkorian spokesman Alex Yemenidjian.

The analysts said TWA does not have new aircraft, a productive workforce, a good route system or access to substantial amounts of capital, all of which are necessary to operate a successful airline.

Trantum said in order to return TWA to profitability, Kerkorian would have to buy new planes and restore labor peace and efficiency, which the carrier has been lacking for several years.

"This is absolutely the worst time to buy new equipment because the backlog of orders is tremendous and . . . TWA has one of the most inefficient labor forces in the industry. The unions don't even talk to each other," he said.

The analysts said TWA's financial condition has been steadily deteriorating, even though it lost less money last year than in 1989. Last week TWA said it lost $237.6 million in 1990, compared to a net loss of $298.5 million the year before.

Operating revenues for TWA were $4.81 billion in 1990 compared to $4.51 billion the previous year. The carrier, a private company owned by Carl Icahn, blamed the loss on high fuel costs brought on by the Persian Gulf crisis and a drop in travel caused by the conflict.

Just before the financial results were released, the Wall Street Journal reported that TWA's cash on hand had dropped to $150 million. A year ago, Icahn had said the carrier had $1 billion in cash and securities. The carrier is in default on $99.3 million in debt payments.

Icahn, who acquired TWA in the mid-1980s, has called the Kerkorian proposal a "charade" that could lead to the demise of the airline.

Yemenidjian said if the agreement goes through, Kerkorian, a reported billionaire whose coffers were swelled by selling his majority interest in MGM/UA Communications Co. last fall, plans to put $250 million of working capital into the company.

"TWA is a flagship carrier and with proper management it can again be made a competitive company and airline. Mr. Kerkorian believes it can be made a viable airline or he wouldn't be doing this" said Yemenidjian.

He said unions that represent the carrier's machinists, pilots and flight attendents made the proposal to Kerkorian, who also owns about 10 percent of Chrysler Corp., about one month ago. He said when the initial discussions broke down, they were resurrected by civic leaders in St. Louis interested in saving the carrier.

The carrier's main hub is St. Louis but the airline is based in Mount Kisco, N.Y.

In addition to the luxury airline, MGM Grand Inc. operates casinos and hotels in Las Vegas.