DAVID Kennedy just can't leave airlines. The former chief executive of Aer Lingus quit that post in 1988 to work in the private sector. Three years ago he represented the European Bank for Reconstruction and Development as a director in Czechoslovak Airlines. Now he is involved in trying to rebuild TWA, one of the world's bestknown airlines, as acting executive vice president and chief operating officer.

Mr Kennedy, who joined the board last November, is one of three board members appointed to run the troubled airline which last year lost £182.5 million. He was appointed on an interim basis while the company seeks a new chief executive.

Mr Kennedy, who worked at Aer Lingus for 26 years, has a tough task ahead of him. The once very successful TWA has already undergone two major restructurings and is still facing severe difficulties.

"Right now we are focusing on getting back to basics," he says, "ensuring the airline can offer clean, reliable and punctual aircraft." Mr Kennedy admits this may sound like a simple strategy, but says in recent years the company has performed very poorly in these areas.

The airline had an ambitious growth plan, but became overstretched. It overscheduled its aircraft and as a company had lost sight, to a significant extent, of what the customer was really paying for.

He says it doesn't matter what kind of grand strategy an airline has, whether it is planning alliances or not passengers must be able to turn up at the airport and get on a plane which leaves on time. "If you (as an airline) don't have that you are not at the races.

In the past few months, TWA has improved its "on time" performance and its schedule reliability has risen. "We can now go with confidence to the business traveller - who had deserted us to a significant extent - and say we are running a clean reliable, safe airline - we want the business back."

There is, of course, much more to rescuing TWA than that, but operational reliability has been what they've been concentrating on, he says.

As part of the restructuring process, the employees agreed to take significant wage cuts and now have a 30 per cent stake and four seats on the board in return. As a result, wages are around 80 per cent of the industry norm. However, this doesn't necessarily translate itself into cheaper unit operating costs.

Mr Kennedy says there are inflexibilities in working rules and in some respects some of the major contracts with unions are more restrictive than those of its competitors. The wage reductions have not led to the cost reductions that should be in place he says, but negotiations on the issue are ongoing.

He joined the company last October as a nonexecutive director, not expecting to get involved as an executive director.

Mr Kennedy believes TWA is a "marvellous airline with a terrific tradition".

However, over the past 10 years it has suffered from lack of investment. The company is beginning to get new aircraft - it will acquire 20 to 30 this year, and has begun updating its technology and refurbishing its airport lounges.

TWA is still a very important player in the market. In the US, it operates 370 flights per day to all over the US from its base at St Louis. It also flies to Britain, Spain, Portugal, France, Italy, Egypt and Saudi Arabia.

Like other airlines, TWA is watching the proposed merger between British Airways and American Airlines. It will require clearance from Brussels, but several other operators have already voiced concern about it.

Much of the opposition stems from the proposed alliance's focus on the transatlantic market, known as the world's busiest and most profitable scheduled air traffic corridor. BA has offered to give up 168 take off and landing slots at Heathrow as part of the deal.

Heathrow just cannot accommodate any more flights and the airport is seen as one of Europe's key hubs for connecting flights to the continent and the US. Mr Kennedy believes the BA deal will go through, possibly in the summer, but points out that the 168 slots may not amount to anything significant for other carriers. This has to be divided by the number of days in a week and it depends on what times are available.

Mergers and alliances are becoming the order of the day in the industry. Even Aer Lingus has been asked to present proposals on an alliance partner to the Government by the end of the year.

Mr Kennedy says alliances are not a panacea in themselves. However, that at its. simplest, the industry is heading towards two distinct types of airline operations. The first is the lowcost operator, concentrating mainly on the leisure passenger who wants to go from A to B with a reliable, cheap operator.

The second is a full service airline, big international brand name, offering a global product, with great strength in distribution. He says it is difficult for airlines who are in between these two types of operations. "In the US there has been a fair degree of consolidation at the in between level," he says. "I think in general terms that's what we are likely to see in Europe.

"As the markets become more globalised it is going to be more difficult but not impossible for airlines that are not clearly either the lowest cost, or most differentiated product, to earn a living," he says.

For the business traveller, he says service is the "predominant driver" as well as good onward connections and comfortable airport lounges with good facilities. "These factors have become very important and people are prepared to pay quite a bit more. for them."

The typical business traveller can also have complex routing needs. This is where the value of alliances and airlines working together to brand a package comes in, he says. "Alliances will be an important part of the future for many airlines," he says.

Mergers and alliances are also taking place within the aircraft building business. The latest is McDonnell Douglas; the top manufacturer of fighter aircraft is being bought by Boeing, the world's leading maker of civil aircraft. It now means that there are two main players in this industry sector - the second Airbus - compared to the 1980s when there were four.

Mr Kennedy describes this merger as "somewhat worrying". He points out that if one manufacturer decides not to build particular aircraft, airlines will be left to deal with what really amounts to a monopoly supplier, when trying to buy such aircraft.

As for the future - the airline business is notoriously cyclical - Mr Kennedy says it looks quite buoyant. Airlines plan 18 months to two years ahead when buying aircraft, he says.

Current patterns indicate that little extra capacity is being added and supply and demand are reasonably in balance. Load factors are also increasing, he says.

However, Mr Kennedy says it is not possible to say how long this will last. "You chase market share and throw in extra capacity at your peril," he says, because if there is a downturn in the industry you end up with "too many seats chasing too few customers".

In TWA's case, although it is bringing in new aircraft, it is consolidating its own position. The airline is actually shrinking capacity internationally and has closed two summer routes to Athens and Frankfurt.

Slots at Frankfurt Airport are considered very valuable assets in the battle to get key European hubs. He says it was better "to lose the slot than to keep losing money".

Mr Kennedy, who also has several other interests in Ireland, says the search for a chief executive for TWA will prove successful soon. Asked if he would remain in his post for at least a year, he said "hopefully way shorter than that".