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When Did (original) Pan Am's Finances Go Bad?  
User currently offlineTango-Bravo From United States of America, joined Jun 2001, 3805 posts, RR: 29
Posted (5 years 10 months 3 weeks 6 days 20 hours ago) and read 8029 times:

For several decades, the original Pan American World Airways probably would have been the airline voted least likely to fail. Now that we have the benefit of hindsight...

When did the decline of Pan Am that led to its 1991 demise begin and what were the causes?

58 replies: All unread, showing first 25:
 
User currently offlineUSPIT10L From United States of America, joined Mar 2006, 3295 posts, RR: 7
Reply 1, posted (5 years 10 months 3 weeks 6 days 20 hours ago) and read 8005 times:



Quoting Tango-Bravo (Thread starter):
When did the decline of Pan Am that led to its 1991 demise begin and what were the causes?

It started the day Pan Am ordered the 747 and Juan Trippe retired. I'd say approximately May 7, 1968. The 1970s were mixed financially for Pan Am, the 1980s were simply awful. Their last full year profit was 1978, at appoximately $123 million. After the NA merger, it was all downhill. As you know assets were sold piecemeal the rest of Pan Am's existence.

As for the causes, let's see. Lack of a domestic system (partly Trippe's own doing) was a primary cause of Pan Am's demise. As the "chosen instrument" of US aviation policy, Trippe was never allowed access to domestic routes of any kind. Therefore, Pan Am made money in the summer and lost it hand over fist in the winter. Secondly, when they actually had accumulated actual money to spend on building the airline, it was used to buy a regional airline with little or no feed to the system. National was an east-west regional based in Florida. What Pan Am should have done is build their domestic operation from scratch. No one challenged Bill Seawell to try another angle. Pan Am spent over a billion dollars integrating National, and it backfired, big-time.



It's a Great Day for Hockey!
User currently offlineLAXintl From United States of America, joined May 2000, 25436 posts, RR: 49
Reply 2, posted (5 years 10 months 3 weeks 6 days 20 hours ago) and read 7999 times:

Pretty much with the arrival of the 747 in the early 1970s.

From the debt burden the airline had, to the global economic malaise in the 70s to the increase competition from foreign carriers and US carriers spreading their wings abroad, Pan Am began its slow descent which required continual asset sales to keep the ship above water.



From the desert to the sea, to all of Southern California
User currently offlineEISHN From Ireland, joined Feb 2007, 1509 posts, RR: 7
Reply 3, posted (5 years 10 months 3 weeks 6 days 20 hours ago) and read 7980 times:

A number of things contributed to this.

They invested in a big batch of 747s in the early seveties, then then a recession came, cupled with the oil crisis, so they had big, empty fuel guzzlers flying.
They had next to no domestic route network in the U.S, and were pretty much purely an International airline, so they weren't able to get feeder traffic.

When de-regulation came along, two things were to be included, all airlines could fly international routes (providing they had the credentials etc.) and Pan Am would be allowed to fly domestically, but there was strong opposition to the latter, and so that part was never included.

recession again in the eighties, two many international routes. They acquired an airline to gain a domestic presence overnight (which if I'm correct, just went bad). They were the target of many terrorist incidents, and Lockerbie was sorta the final nail in the coffin.

They sol off asset like the Pacific route network, th LHR rights, and the European netwrok to raise cash.

It was a long, slow, painful process, and a very sad one.

Once Juan Trippe left, no one had the vision to lead Pan Am.

A truly sad story of probably the greatest airline there ever was.





I'm not sure if i got it entirely right, but I think that's pretty much how it happened.



St. Flannan/ Fhlanain- She took off to find the footlights, And I took off for the sky
User currently offlineUSPIT10L From United States of America, joined Mar 2006, 3295 posts, RR: 7
Reply 4, posted (5 years 10 months 3 weeks 6 days 20 hours ago) and read 7934 times:

Quoting EISHN (Reply 3):

That's pretty much the jist of it. I never thought Trippe was that brilliant, however. I get the impression he was quite the arrogant sort who blew off important people (particularly US presidents who could've given him the domestic network he needed) just to get his way. The last time the US government really did Pan Am a favor was in 1950, when American's European subsidiary, AOA (American Overseas Airways) was sold to Pan Am. C.R. Smith didn't think traffic across the Atlantic would grow after WWII; it took AA about twenty-five years to return to Europe.

[Edited 2008-10-31 14:45:21]


It's a Great Day for Hockey!
User currently offlineKELPkid From United States of America, joined Nov 2005, 6392 posts, RR: 3
Reply 5, posted (5 years 10 months 3 weeks 6 days 19 hours ago) and read 7883 times:



Quoting EISHN (Reply 3):
recession again in the eighties, two many international routes. They acquired an airline to gain a domestic presence overnight (which if I'm correct, just went bad). They were the target of many terrorist incidents, and Lockerbie was sorta the final nail in the coffin.

One could say that they severely overpaid for National Airlines (many times the company's market cap) when they bought them up...that was definitely a financial blunder.



Celebrating the birth of KELPkidJR on August 5, 2009 :-)
User currently offlineViscount724 From Switzerland, joined Oct 2006, 25372 posts, RR: 22
Reply 6, posted (5 years 10 months 3 weeks 6 days 19 hours ago) and read 7850 times:



Quoting USPIT10L (Reply 1):
Trippe was never allowed access to domestic routes of any kind.

Except Alaska, Hawaii and U.S.territories (Puerto Rico, American Samoa, Guam etc.)

Re the original question, PA's finances were never very good even in earlier years. There weren't many years with substantial profits. The lack of a domestic feeder network was a major handicap. They also operated a lot of unprofitable routes. A good example was JFK-Rock Sound, Bahamas, on the island of Eleuthra, where PA operated a few relatively empty 707s a week (after PA paid to extend the runway to handle them) so Juan Trippe and his wealthy friends could travel to/from the private club Trippe built there (Cotton Bay Club). Some history of that venture here.
http://www.bahamapundit.com/2008/02/the-story-of-so.html


User currently offlineHAL From United States of America, joined Jan 2002, 2561 posts, RR: 53
Reply 7, posted (5 years 10 months 3 weeks 6 days 14 hours ago) and read 7582 times:

What it really boils down to was an inability to change with the times. If the aviation world hadn't gone through such a huge change and expansion from the late 60's through the 70's, PA could probably have held on to their niche of being the primary international airline from the US. However as other airlines expanded internationally (with their own feeds), PA was in trouble. They could easily enough have asked for expansion rights within the US and flown hub routes between LAX, JFK, MIA, BOS, SEA, and places inbetween. They should have seen the changes wrought by deregulation in 1978 and adapted their business model to lower fares. It wasn't the 747's per se that did them in, as other airlines have used them quite well, but it was the 'how' and 'where' that caused a problem for PA too.

In the end, I don't think there was one single tipping point that began their slide, but rather an almost imperceptable acceleration downward once everyone else began to do what they used to have an exclusive lock on - international flights from the US.

HAL

[Edited 2008-10-31 20:04:00]


One smooth landing is skill. Two in a row is luck. Three in a row and someone is lying.
User currently onlineMSYtristar From United States of America, joined Aug 2005, 6570 posts, RR: 51
Reply 8, posted (5 years 10 months 3 weeks 6 days 14 hours ago) and read 7554 times:

They actually had a small operating profit in late '87/early '88 I believe and things were looking up going into '89...and then the bombing of 103 took place.

User currently offlineAcNDTTech From United States of America, joined Jul 2008, 338 posts, RR: 0
Reply 9, posted (5 years 10 months 3 weeks 6 days 11 hours ago) and read 7450 times:

Tripp, Woolman, Smith, etc..........What would they think of the industry today?........What would they do different? I bet customer service would be on top again. I don't mean good service, GREAT SERVICE.

I've said it before - I remember when we used to dress up to take a plane trip to Florida. It was a big thing back then. The fares were high, but not overly expensive. Not too long ago, I found the old hand written ticket from my first plane trip in April 1975. Mom, Dad, my brother, sister, and myself - R/T CVG-TPA N/S $525.00. That was what mom and dad brought home per week combined back then, and that was pretty good money for the time. The following year, it went up to $605.00 for the family.


User currently offlineF9Animal From United States of America, joined Dec 2004, 5055 posts, RR: 28
Reply 10, posted (5 years 10 months 3 weeks 6 days 1 hour ago) and read 7115 times:

So National was a bad move. Is there any airline in mind that could have turned Pan Am into success? Did Pan Am look at any other airline besides National? Would Republic been any different for Pan Am?


I Am A Different Animal!!
User currently offlineMalaysia From United States of America, joined Nov 1999, 3354 posts, RR: 0
Reply 11, posted (5 years 10 months 3 weeks 6 days ago) and read 6934 times:



Quoting F9Animal (Reply 10):
So National was a bad move. Is there any airline in mind that could have turned Pan Am into success? Did Pan Am look at any other airline besides National? Would Republic been any different for Pan Am?

Pan Am should bought United Airlines around 1980.

The rest would be history Big grin



There Are Those Who Believe That There May Yet Be Other Airlines Who Even Now Fight To Survive Beyond The Heavens
User currently offlineL1011Lover From Germany, joined Oct 2003, 989 posts, RR: 14
Reply 12, posted (5 years 10 months 3 weeks 6 days ago) and read 6782 times:



Quoting F9Animal (Reply 10):
So National was a bad move. Is there any airline in mind that could have turned Pan Am into success? Did Pan Am look at any other airline besides National? Would Republic been any different for Pan Am?

Actually one of PA's last CEO's desperately tried to merge Pan Am with Northwest in 1988. The deal failed and the rest is history.

Many people (including myself) believe that if Thomas G. Plaskett would have been successful in merging the two carriers Pan Am would still be around today.

Best regards,

L1011Lover


User currently offlineUSPIT10L From United States of America, joined Mar 2006, 3295 posts, RR: 7
Reply 13, posted (5 years 10 months 3 weeks 5 days 23 hours ago) and read 6583 times:



Quoting L1011Lover (Reply 12):
Actually one of PA's last CEO's desperately tried to merge Pan Am with Northwest in 1988. The deal failed and the rest is history.

Many people (including myself) believe that if Thomas G. Plaskett would have been successful in merging the two carriers Pan Am would still be around today.

Best regards,

L1011Lover

Actually, that was early 1989. Al Checci outbid him for NW, and the rest is history. If Pan Am had actually gotten their hands on NW, they probably would've brought them down too because of Pan Am's current problems.



It's a Great Day for Hockey!
User currently offlineCF6PPE From United States of America, joined Mar 2006, 351 posts, RR: 0
Reply 14, posted (5 years 10 months 3 weeks 5 days 22 hours ago) and read 6227 times:

In the acquisition of the PanAm B747's (as mentioned above), PanAm ordered 25 frames for a buy-in discounted price of $575 million. Unlike when aircraft are purchased in multiples, usually the frames are paid for on an individual basis (at delivery), but in this PanAm - Boeing deal, the payment of $575M was due before the first aircraft was delivered.

I believe that the above paragraph is essentially correct, at least that is the way that my fading memory recalls back almost 40 years ago.


User currently offlineF9Animal From United States of America, joined Dec 2004, 5055 posts, RR: 28
Reply 15, posted (5 years 10 months 3 weeks 5 days 19 hours ago) and read 5831 times:



Quoting USPIT10L (Reply 13):
Actually, that was early 1989. Al Checci outbid him for NW, and the rest is history. If Pan Am had actually gotten their hands on NW, they probably would've brought them down too because of Pan Am's current problems.

Hard to say though. Look at what Republic did for NW. Republic was from what I understand in very rough shape. I don't know, but I would loved to have seen Pan Am still around today.



I Am A Different Animal!!
User currently offlineIntermodal64 From United States of America, joined May 2006, 124 posts, RR: 0
Reply 16, posted (5 years 10 months 3 weeks 5 days 4 hours ago) and read 5569 times:

The opening up of "internal gateways" to the "domestic" carriers sucked Pan Am's traffic away from their traditional JFK gateway that was gauged with 747's. The best examples are DL from ATL to Europe and AA from DFW to Europe.

User currently offlineEXAAUADL From , joined Dec 1969, posts, RR:
Reply 17, posted (5 years 10 months 3 weeks 5 days 4 hours ago) and read 5564 times:

Can anyone confirm: I read that PA's last profitable year was 1980.

User currently offlineUSPIT10L From United States of America, joined Mar 2006, 3295 posts, RR: 7
Reply 18, posted (5 years 10 months 3 weeks 5 days 2 hours ago) and read 5460 times:



Quoting EXAAUADL (Reply 17):
Can anyone confirm: I read that PA's last profitable year was 1980.

1978. 1980 was a bloodbath for Pan Am. The acquisition and intregation of National by itself cost over a billion dollars.



It's a Great Day for Hockey!
User currently offlineFrmrCAPCADET From United States of America, joined May 2008, 1720 posts, RR: 1
Reply 19, posted (5 years 10 months 3 weeks 5 days ago) and read 5321 times:

I have not seen an economic analysis along this line, am not competent to do it myself. My perception is that the huge momentum of overhead costs has played a dominant role in the decline of all of the pre-dereg. legacies. They cannot cut costs that seem necessary because that would affect short term revenue (actually for a few years), and the loss to cash flow would itself be fatal.


Buffet: the airline business...has eaten up capital...like..no other (business)
User currently offlineJcavinato From United States of America, joined Jan 2005, 520 posts, RR: 0
Reply 20, posted (5 years 10 months 3 weeks 5 days ago) and read 5299 times:

It's building on Park Avenue in New York was quite an icon for Pan Am. My wife and I still refer to that building as the PanAm building.

But, one thing I've noticed over the decades is that when a major corporation builds a great big icon building for its corporate headquarters (architectural extravaganza, etc.) the end of the company is usually within a decade. Union Carbide built a huge campus in Connecticut. Braniff's building was the talk of not only the industry but architects, CEOs, and the press for a long time. I could name dozens.

Anyone remember or know when the Pan Am building was opened?


User currently onlineMSYtristar From United States of America, joined Aug 2005, 6570 posts, RR: 51
Reply 21, posted (5 years 10 months 3 weeks 4 days 23 hours ago) and read 5287 times:



Quoting Jcavinato (Reply 20):
Anyone remember or know when the Pan Am building was opened?

Early 1960's...around 62 or 63. IIRC, it was the largest office building in the world when it was opened in terms of leasable office space. New Yorker's didn't really care for the building all that much.


User currently offlineJcavinato From United States of America, joined Jan 2005, 520 posts, RR: 0
Reply 22, posted (5 years 10 months 3 weeks 4 days 23 hours ago) and read 5266 times:

Trippe was one of the people who not only built a company but he was one who helped build an industry. All new industries grow because of entrepreneurial, pushy, extraverted, show-man, with a strong dose of arrogance. Otherwise the things they built would not have been built. This is the story of airlines, railroads, trucking companies, broadcasting, oil, even the computer world.

Problem is when the second generation of CEOs and general management come along, the companies often flounder. The second tier of managers were often survivors who lasted politically within the eclipse of the strong main guy. Few of these second tier people had built or were tested with the problems that the head guy experienced and got their scars with. Where the original guy was a builder, the second tiers were bureaucrats -- and few of them had the experience of running all departments of a large corporation. I remember vice presidents standing around for an hour debating the exact wording in a document that was going to Trippe for his signature. There was more fear for job than there was discussion of the substance of the document (no different, by the way, than most very large corporations in the world today).

Most of these original builders stepped down in a short period with a) huge new jet order financing overhang, b) big productivity with the jets that grew seat capacity much faster than passenger market growth, d) early 60s and early 70s recessions, and d) a remake of the industry into very definite mainline versus regional carriers -- jets or turboprops. In the early 50s nearly everyone was flying 100 - 300 flight segments or shorter. By the late 60s it was long legs or short hops. That was not an easy transition.

Trippe created a CEO legacy that very few human beings could ever have stepped in and kept the growth going.


User currently offlineIsitsafenow From United States of America, joined Feb 2004, 4984 posts, RR: 23
Reply 23, posted (5 years 10 months 3 weeks 4 days 23 hours ago) and read 5242 times:

Pan Am's real headaches started with de-reg in 1978. Prior to de-reg, only PA and TWA(in USA carriers) flew to Europe from the USA...Only PA and NW flew the Pacific from the US.
South America was competition with Braniff. DL had a route to Caracas from MSY.
After de-reg, it was a free for all in the international markets. Everybody got in on the act and more USA cities were served by foreign carriers. Compounded by a really stupid merger with National, the die was cast.
They held out as long as they did because of the gradual selling off of assets...the PAN AM
building in Manhatten, the maintenance facility at JFK, the geographic routes, pacific and South American, and singular routes as in the ORD-London.

MY TWO CENTS WORTH IS........................
The cure-all would have been TWA & PAN AM merger around 1980, but both carriers, in heated competiton for years across the Atlantic, were both too bull headed to pursue it.
Thats my catch on the demise of a great world airline.

By way, did I mention after de-reg, fares across the pond nose dived thanks to a guy named Freddie Laker? PAN AM wasn't used to flying folks to England for $99. This was another nail in the heart of PAN AM...British air wasn't too excited either, but survived as we all know.
safe

[Edited 2008-11-02 10:23:51]


If two people agree on EVERYTHING, then one isn't necessary.
User currently offlineDtwclipper From , joined Dec 1969, posts, RR:
Reply 24, posted (5 years 10 months 3 weeks 4 days 23 hours ago) and read 5211 times:



Quoting Isitsafenow (Reply 23):
Prior to de-reg, only PA and TWA(in USA carriers) flew to Europe from the USA...

International service was not involed when the US airlines were deregulated.

Correct me on this one, but I belive NW had already started service to Europe prior to deregulation, and Braniff had already started limited service to Europe prior to '78 as well.

My two cents:

A three way combo of PA/NA and Braniff 1 would have given PA the critical mass and domestic feed to have made it viable.


25 Isitsafenow : Hiya Clip.....glad to see you chime in.... According to my NW book(their history) the PAX flights to Europe started 4-27-80 from BOS and NYC to Amste
26 SEPilot : This is true, but it omits the real reason. Trippe built the airline largely by backroom political maneuvering (watch "The Aviator" for a good exampl
27 EA CO AS : Wouldn't that simply magnify the problem, though? TW didn't have much of a domestic operation either at that point.
28 DesertJets : TWA was one of the major trunk carriers pre-deregulation. While I don't know if they were as large as United or American.... even Eastern or Delta. B
29 Viscount724 : National was a major/trunk carrier, not a regional (called local-service pre-deregulation). Regional carriers didn't have route networks stretching f
30 Post contains links and images Viscount724 : Not quite. National Airlines started MIA-LHR service in 1970 and Braniff's DFW-LGW service started in March 1978. As already mentioned, deregulation
31 EA CO AS : I understand that TW did have some domestic feed, but it wasn't much - they were primarily a transcon player and unless I'm mistaken, didn't really g
32 Isitsafenow : Right you are, friend. After I posted, I looked at a couple of old National scheds and saw that. I'm thinking our disagreement on the NW european ser
33 Jfk777 : For the complete and FULL Pan AM history read, "The Chosen Instrument" and "Pan Am's First Lady by Trippe's wife". The Trippes meet with all kinds of
34 Post contains links and images Viscount724 : Both of the following photos taken at ARN are dated 1978. It appears that the date on those photos is wrong based on the following NW press release d
35 Isitsafenow : Yep, that was it. In some months, it continued on to Frankfort from LHR. On July 4, 1969 I was on NW flight 54, MSP-DTW. It was a PA 707-320 with a N
36 Tango-Bravo : A sometimes overlooked chapter in Pan Am's history is their extended coverage of Latin America through airlines in which they held a controlling inter
37 TAN FLYR : I'd add that the lack of an aircraft in the DC10-L1011 size untill the 12 ordered later (too little and too late). BY late 1973 , with the Arab oil em
38 L1011Lover : But didn't deregulation open up more international gateways in the US therefore enabling US carriers like DL and AA to fly from their main hubs nonst
39 MSYtristar : I agree. They got it right towards the end with the extensive use of A310-200's and 300's for JFK-Europe flights. Those airplanes were a better fit f
40 LTBEWR : I also suspect that the end of special subsidies in the late 1970's by the USA government to Pan Am and the costs of serving far flung locations like
41 Milesrich : No, but international agreements with other nations were entered into in the late 70's that opened up interior US cities to European carriers and non
42 Dtwclipper : US deregulation only dealt with domestic flying. "the maintenance of safety as the highest priority in air commerce; placing maximum reliance on comp
43 Bobnwa : The first transatlantic flight for NWA was Feb 1979 to PIK and CPH .
44 Jfk777 : Only if Pan AM had purchased United or AA. Chicago would have been the perfect mid-continent gateway.
45 L1011Lover : But didn't the deregaulation act contain two clauses? "Clause A" allowed domestic carriers to begin operating on international routes while"Clause B"
46 USPIT10L : Correct. The primary purpose of the Airline Deregulation Act of 1978 was to eliminate the bureaucracy of the Civil Aeronautics Board (which told airl
47 WA707atMSP : NW was awarded authority to serve Scandinavia in 1977, before deregulation. Basically, NW was awarded all of Pan Am's rights to Iceland, Norway, Swed
48 L1011Lover : I knew all that. What I didn't know is that the opening of the US interior cities for international flying was not part of the deregulation act, but
49 L1011Lover : Very interesting... Thanx for the info. But there we go... part of the US regulated market was to assign certain longhaul international routes only t
50 Tango-Bravo : Which, while altogether true, tends to be somewhat confusing to any but the most serious students of U.S. airline history inasmuch as the same time p
51 USPIT10L : Another key part of Pan Am's demise included the increase of competition by foreign and domestic airlines on their key international routes. Acquirin
52 TrijetsRMissed : I suppose after the recession in the early 70's, adding an additional fleet type was not one of Pan Am's greatest concerns. But as you mentioned, the
53 WA707atMSP : Pan Am almost bought DC-10-30s in 1972 / 73, but decided to buy 747 SPs instead, because the 747 SP could be used on a wider range of routes than the
54 TrijetsRMissed : I was remiss in not mentioning the SP. Although I conisder it a derative of a type already in the fleet. PA may have considered the DC-10 early on, b
55 Tan Flyr : Ditto, the cost of fuel, etc on a quad was more than a tri. PA also made a huge error in trading the NA DC-10's to AA for the remaining 747's AA had.
56 WA707atMSP : Negotiations between PA and McDonnell Douglas were quite advanced in the early 1970s. Years afterward, one top McDonnell Douglas official was quoted
57 SWABrian : I think it started just after World War II when TWA and AA (in the guise of American Overseas Airlines) started flying to Europe, and when UA and NW s
58 TrijetsRMissed : That is the first I have heard of the negotiations being far long. If the SP was the main reason for not ordering the DC-10, why not keep the fleet i
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