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Why Did Pan Am Turn To Ua For Assets, Snubbing Aa?  
User currently offline727LOVER From United States of America, joined Oct 2001, 6631 posts, RR: 21
Posted (5 years 5 months 1 week 3 days 22 hours ago) and read 8286 times:

When PA wanted to shed its Pacific division, it negotiated secretly with UA, not even considering AA.

When the LHR routes & slots needed to be sold, PA again turned to AA. At the time Crandall had stated his airline would have paid easily $500 million for those assets. AA had to scramble to get TWA LHR assets. (who approached who first?) AA wound up paying 445 million for 3 LHR routes and slots.

Wouldn't a bidding war have brought in a higher bid?

So again, why did PA always turn to UA for important asset sales?


I feel woozy....what did you put in that Pudding Pop?
38 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 5 months 1 week 3 days 22 hours ago) and read 8238 times:

Quoting 727LOVER (Thread starter):
When PA wanted to shed its Pacific division, it negotiated secretly with UA, not even considering AA.

When the LHR routes & slots needed to be sold, PA again turned to AA. At the time Crandall had stated his airline would have paid easily $500 million for those assets. AA had to scramble to get TWA LHR assets. (who approached who first?) AA wound up paying 445 million for 3 LHR routes and slots.

Wouldn't a bidding war have brought in a higher bid?

So again, why did PA always turn to UA for important asset sales?

Crandall was too tough to deal with, period. UA overpaid big-time for PA's pacific assets simply because the opportunity was never going to come again. PA's route network was a once-in-a-lifetime prime route system that could never be replicated.

Icahn also drove the price up on AA for LHR because he knew they would pay any price for Heathrow access. TW did not need to sell the assets, BTW, PanAm had no choice either time. Their cash flow was dropping drastically by the day each time.

[Edited 2009-07-18 14:26:58]

In short, it was never about getting the best deal, it was about getting a deal done and getting the money into the coffers as fast as possible.

[Edited 2009-07-18 14:27:40]


It's a Great Day for Hockey!
User currently offlineJfk777 From United States of America, joined Aug 2006, 8513 posts, RR: 6
Reply 2, posted (5 years 5 months 1 week 3 days 21 hours ago) and read 8068 times:
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PA didn't go to AA because of Crandall. Also in 1987 AA did make a bid for PA and a joint AAdvantage FF deal. AA never purchased PA and may have left a bitter taste in PA managements mouths. Tom Plaskett, the last CEO of PA when they still flew from JFK to Europe, was an AA alum, so he may have felt anti-Crandall.

When the Iraq WAR of 1990 came PA was bleeding cash and needed the quickest deal so a clean UA LHR deal is what they were looking for. Carl Icahn, the famous Wall Street Trader, owned TWA at the time and got lots of $$$ out of AA. First AA purchased the ORD to LHR route for $195 million, then Boston, LAX and JFK for $445 million. But AA had another deal to buy Eastern Latin American system which had a route from Miami to LGW. Thing is LHR was a designated gateway from MIA, so AA got the Miami to LHR for free. Icahn took the cash, TWA never got much if it and the rest is history. LHR took many of TWA 747's without service to that airport TWA was gone.


User currently offlineToltommy From United States of America, joined Dec 2003, 3308 posts, RR: 5
Reply 3, posted (5 years 5 months 1 week 3 days 16 hours ago) and read 7840 times:



Quoting 727LOVER (Thread starter):
At the time Crandall had stated his airline would have paid easily $500 million for those assets.

When did Crandall say that? After the deal was done? He could say anything he wanted after the deal was sealed. The truth didn't matter at all.....


User currently offlineOP3000 From United States of America, joined Jun 2009, 1786 posts, RR: 2
Reply 4, posted (5 years 5 months 1 week 3 days 13 hours ago) and read 7667 times:



Quoting USPIT10L (Reply 1):

Crandall was too tough to deal with, period.



Quoting Jfk777 (Reply 2):
PA didn't go to AA because of Crandall.

Anybody wish to share insights as to why Crandall was tough to deal with? Not knowing much about him or AA at the time, I've always been curious as to that.


User currently offlineUSPIT10L From United States of America, joined Mar 2006, 3295 posts, RR: 7
Reply 5, posted (5 years 5 months 1 week 3 days 3 hours ago) and read 7427 times:

Quoting OP3000 (Reply 4):
Anybody wish to share insights as to why Crandall was tough to deal with? Not knowing much about him or AA at the time, I've always been curious as to that.

Bob Crandall was one of the most brilliant, yet controversial, executives in airline history. He always wanted the highest quality for everything, but at the lowest possible cost or price. He came up with B-scale wages to grow his airline without over-inflating his cost structure. That, in turn, allowed him to make the biggest aircraft order anyone had ever seen at the time. He also had a very controversial role in the collapse of Braniff in 1982. AA started growing heavily out DFW, competing with BN to the point of obesssion. BN couldn't keep up or match the pricing AA tried on each route. Crandall even called the CEO of Braniff, Howard Putnam, to discuss a pricing fix.

AA took the slow, cautious, route-by-route plan when expanding internationally. But taking that path made growing in Europe and South America almost impossible. But with PA and TW dying a slow, painful death, options became available. However, Crandall's reputation made it all but impossible to get PanAm's main transatlantic and transpacific systems. Read "Hard Landing" by Robert Petzinger, Jr. for more information. It's probably the best airline book I've ever read. It covers the airline scene from the late '70s to the early '90s, including the collapses of Braniff, Eastern, and Pan Am, as well as TWA's asset sales to AA (LHR) and UA's explosive international growth (PA's pacific/LHR/LatAm routes).

[Edited 2009-07-19 08:59:53]


It's a Great Day for Hockey!
User currently offlineMayor From United States of America, joined Mar 2008, 10664 posts, RR: 14
Reply 6, posted (5 years 5 months 1 week 3 days 3 hours ago) and read 7346 times:

I also understood that when PA's European routes and such were up for bid in the bankruptcy court, Carl Icahn outbid Ron Allen and DL for them, not because he wanted them, but because he knew Ron Allen would increase DL's bid and therefore, probably pay too much for them.....which is what happened. Allen got caught up in the frenzy of having such a large European network, instantaneously as opposed to applying for each route, which could have taken years.


DL made many other mistakes during that transition, from not knowing how to deal with local officials and such, to paying too much per diem to the DL employees that went over to help with the transition. I know......I got $60 per day for meals (the hotel was paid for by PA)at TLV but I doubt if ever spent anywhere near that for meals. Instead of me putting down the exact amount I spent on meals, I was told to put down the max allowed, daily. I was only there about a month I came home with a very large wad of cash.


And I also heard that PA, in some countries, had been paying amounts under the table to officials for years but when DL took over, that stopped. Even though, supposedly, illegal, DL never did understand why they couldn't get the service from some officials that PA did.

Just a rumor.......I have no factual knowledge of this.



"A committee is a group of the unprepared, appointed by the unwilling, to do the unnecessary"----Fred Allen
User currently offline727LOVER From United States of America, joined Oct 2001, 6631 posts, RR: 21
Reply 7, posted (5 years 5 months 1 week 3 days 3 hours ago) and read 7165 times:

I don't follow.....

Quoting Mayor (Reply 6):
Carl Icahn outbid Ron Allen and DL for them, not because he wanted them, but because he knew Ron Allen would increase DL's bid and therefore, probably pay too much for them.....which is what happened.

DL got PA's entire transatlantic division, minus LHR, for $265 million. That's a steal. AA paid $445 million for BOS/JFK/LAX-LHR. Originally BWI, PHL and a 3rd airport I forget, but the government balked. So AA wanted to reduce the price, but Icahn stood firm.



I feel woozy....what did you put in that Pudding Pop?
User currently offlineMayor From United States of America, joined Mar 2008, 10664 posts, RR: 14
Reply 8, posted (5 years 5 months 1 week 3 days 2 hours ago) and read 7119 times:



Quoting 727LOVER (Reply 7):
I don't follow.....

Quoting Mayor (Reply 6):
Carl Icahn outbid Ron Allen and DL for them, not because he wanted them, but because he knew Ron Allen would increase DL's bid and therefore, probably pay too much for them.....which is what happened.

DL got PA's entire transatlantic division, minus LHR, for $265 million. That's a steal. AA paid $445 million for BOS/JFK/LAX-LHR. Originally BWI, PHL and a 3rd airport I forget, but the government balked. So AA wanted to reduce the price, but Icahn stood firm.

The way I heard it was that the original bid by DL was even less.....then Icahn upped the bid and in turn, so did DL.



"A committee is a group of the unprepared, appointed by the unwilling, to do the unnecessary"----Fred Allen
User currently offlineUtapao From Thailand, joined Jul 2005, 645 posts, RR: 8
Reply 9, posted (5 years 5 months 1 week 3 days 2 hours ago) and read 6951 times:



Quoting 727LOVER (Thread starter):
When PA wanted to shed its Pacific division, it negotiated secretly with UA, not even considering AA.

When the LHR routes & slots needed to be sold, PA again turned to AA.

With all due respect, I don't understand your two statements...
1) PA...negotiated only with UA, not even considering AA
2) PA again turned to AA

The two statements do not make sense.

Thanks.



Sawasdee khrab!
User currently offlineJJeff From United States of America, joined Nov 2003, 137 posts, RR: 0
Reply 10, posted (5 years 5 months 1 week 3 days 2 hours ago) and read 6927 times:



Quoting Utapao (Reply 9):
1) PA...negotiated only with UA, not even considering AA
2) PA again turned to AA

The two statements do not make sense.

In (2), he mis-typed. Should have been "UA."

Anyone know what became of Pan Am's SEA-LHR rights? Also purchased by UA but just never used?


User currently offlineKiwiandrew From New Zealand, joined Jun 2005, 8631 posts, RR: 13
Reply 11, posted (5 years 5 months 1 week 3 days 2 hours ago) and read 6910 times:
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Quoting JJeff (Reply 10):

Anyone know what became of Pan Am's SEA-LHR rights? Also purchased by UA but just never used?

UA definitely operated SEA-LHR for a while after the purchase .



Moderation in all things ... including moderation ;-)
User currently offlineUtapao From Thailand, joined Jul 2005, 645 posts, RR: 8
Reply 12, posted (5 years 5 months 1 week 3 days 2 hours ago) and read 6880 times:



Quoting JJeff (Reply 10):
In (2), he mis-typed. Should have been "UA."

Got it, JJeff. Thanks.

A rather drastic mis-type, consdering the post.  Smile

Safe travels...



Sawasdee khrab!
User currently offline727LOVER From United States of America, joined Oct 2001, 6631 posts, RR: 21
Reply 13, posted (5 years 5 months 1 week 3 days 2 hours ago) and read 6848 times:



Quoting Utapao (Reply 9):
With all due respect, I don't understand your two statements...
1) PA...negotiated only with UA, not even considering AA
2) PA again turned to AA



The two statements do not make sense.

Thanks.

Oops....my bad. Sorry for the confusion.

Quoting JJeff (Reply 10):
In (2), he mis-typed. Should have been "UA."

Correct.



I feel woozy....what did you put in that Pudding Pop?
User currently offlineUtapao From Thailand, joined Jul 2005, 645 posts, RR: 8
Reply 14, posted (5 years 5 months 1 week 3 days 2 hours ago) and read 6835 times:

Dupe message.

Thanks!

[Edited 2009-07-19 10:57:23]


Sawasdee khrab!
User currently offlineOP3000 From United States of America, joined Jun 2009, 1786 posts, RR: 2
Reply 15, posted (5 years 5 months 1 week 3 days 1 hour ago) and read 6756 times:



Quoting JJeff (Reply 10):
Anyone know what became of Pan Am's SEA-LHR rights? Also purchased by UA but just never used?

UA operated it for about a year or less in 1990, and then suspended it. But they still hold the rights, as also does NW, which operated the same segment from 2007 until this year. IMO we're unlikely to see another US airline on SEA-LHR until AS links up with someone.


User currently offlineKiwiandrew From New Zealand, joined Jun 2005, 8631 posts, RR: 13
Reply 16, posted (5 years 5 months 1 week 3 days 1 hour ago) and read 6740 times:
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Quoting OP3000 (Reply 15):
But they still hold the rights, as also does NW, which operated the same segment from 2007 until this year.

I dont quite understand what you mean by "they still hold the rights" ? surely under open skies there are no longer route-specific rights - any US carrier can now operate any route to the EU , cant they ?



Moderation in all things ... including moderation ;-)
User currently offlineOP3000 From United States of America, joined Jun 2009, 1786 posts, RR: 2
Reply 17, posted (5 years 5 months 1 week 3 days 1 hour ago) and read 6705 times:

Correct on that; my point was they did nothing with the rights after suspending the flight. In NW case the slots at LHR were actually KL's originally.

User currently offlineOA412 From United States of America, joined Dec 2000, 5373 posts, RR: 24
Reply 18, posted (5 years 5 months 1 week 3 days 1 hour ago) and read 6664 times:

As I recall, UA's SEA-LHR route had some strange restrictions placed upon it that ultimately made it unprofitable for UA to operate. For instance, IIRC, they could only sell a certain number of seats in the market per day regardless of the size of the aircraft.

Quoting OP3000 (Reply 15):
But they still hold the rights, as also does NW, which operated the same segment from 2007 until this year.

US-LHR is now open skies so no one technically holds rights to specific routes at this point.



Hughes Airwest - Top Banana In The West
User currently offlineViscount724 From Switzerland, joined Oct 2006, 26021 posts, RR: 22
Reply 19, posted (5 years 5 months 1 week 3 days ago) and read 6491 times:



Quoting Kiwiandrew (Reply 16):
Quoting OP3000 (Reply 15):
But they still hold the rights, as also does NW, which operated the same segment from 2007 until this year.

I dont quite understand what you mean by "they still hold the rights" ? surely under open skies there are no longer route-specific rights - any US carrier can now operate any route to the EU , cant they ?

Correct. Traffic "rights" are meaningless in an Open Skies market. All US and EU-based carriers can operate anywhere they want between the US and the EU.


User currently offlineTrojanclipper From United States of America, joined Nov 2008, 63 posts, RR: 0
Reply 20, posted (5 years 5 months 1 week 3 days ago) and read 6457 times:

The only time I remember that PA dealt with AA directly was when PA was possibly interested in a complete merger, something Crandall wasn't keen on. Crandall wanted bits and pieces that fit in well with his domestic and growing international network. From what I heard, he wasn't at all intereseted in the routes Pan Am got from National. Crandall also wasn't interested in PA's equipment, since they had tried the 747 and it didn't work for them, they had no interest in the L1011-500, so that left a few Airbuses and the planes PA acquired from National.

PA may truly have not wanted to deal with Crandall but both carriers also were interested in different things. Once PA sold their PAC routes, they were cooked as an airline. I was happy for a while because my dad went with United, got to stay on the 747, got a pay raise and I got to fly non-rev on both carriers. But my heart will always be with PA. They just don't make airlines like that anymore.

I was working for UA when they took Pan Am's LHR routes and I knew the airline was near the end. December 4, 1991 was a sad day for me and many others.


User currently offlineFlyCaledonian From United Kingdom, joined Dec 2003, 2104 posts, RR: 3
Reply 21, posted (5 years 5 months 1 week 2 days 22 hours ago) and read 6084 times:

How extensive were Pan Am's LatAm flights when UA acquired that network? Given UA's limited presence in LatAm, I'm curious to how large the network was at the time of purchase, and how many rights had become dormant.

Also, if AA wasn't interested in Pan Am's 747s or TriStars, if it had acquired Pan Am's Pacific network how would it have planned to operate the flights? Even UA had to take on the TriStar's (and I think some of the 747s) to be able to do this. The only other suitable aircraft at the time would have been the DC-10-30, surely? How many of these did AA have at hand?



Let's Go British Caledonian!
User currently offlinePITrules From United States of America, joined Jun 2000, 3256 posts, RR: 6
Reply 22, posted (5 years 5 months 1 week 2 days 21 hours ago) and read 6046 times:



Quoting Trojanclipper (Reply 20):
The only time I remember that PA dealt with AA directly was when PA was possibly interested in a complete merger, something Crandall wasn't keen on

Pan Am acquired AA's South Pacific routes in exchange for some of Pan Am's Caribbean routes. I believe this was in the seventies.

Also, in the 1950's Pan Am acquired AA's international subsidiary American Overseas Airlines. This consisted of routes to Europe.



FLYi
User currently offlineViscount724 From Switzerland, joined Oct 2006, 26021 posts, RR: 22
Reply 23, posted (5 years 5 months 1 week 2 days 21 hours ago) and read 6011 times:



Quoting FlyCaledonian (Reply 21):
The only other suitable aircraft at the time would have been the DC-10-30, surely? How many of these did AA have at hand?

AA had 11 DC-10-30s at the time of the UA purchase ot PA's Pacific routes, but they needed those aircraft for their Europe routes. They were all acquired used when AA was awarded the rights to several points in Europe in the early 1980s.

AA also bought 2 of TWA's 3 747SPs in 1987 when they were awarded the DFW-NRT route but had nothing in their fleet with enough range. The 747SPs were replaced by MD-11s in 1991 and AA sold the two SPs in 1992-93.


User currently offlineThestooges From , joined Dec 1969, posts, RR:
Reply 24, posted (5 years 5 months 1 week 2 days 21 hours ago) and read 5995 times:



Quoting FlyCaledonian (Reply 21):
Also, if AA wasn't interested in Pan Am's 747s or TriStars, if it had acquired Pan Am's Pacific network how would it have planned to operate the flights? Even UA had to take on the TriStar's (and I think some of the 747s) to be able to do this. The only other suitable aircraft at the time would have been the DC-10-30, surely? How many of these did AA have at hand?

I really don't know too much about this whole subject . . . but after reading this thread I can make a few assumptions.

If AA were indeed not interested in operating 747's and L-1011's and PA knew this (as a result of the failed merger negotiations) then PA would have known that approaching AA to buy their Pacific operations probably wouldn't have gone anywhere. PA then approached UA in secret and offered them the Pacific division for a ridiculously high price. UA might have thought they were being given the chance of lifetime and offered to pay the sum, even if in reality, one of their biggest potential competitors for those routes, AA, wouldn't have touched them anyway.

. . . but this is just a guess . . .


25 Jfk777 : PA had two types of 747, the 747SP for the Pacific and the classic 747-100 for Asia, Europe and Latin America. The 747SP are the one United purchased
26 Post contains images Viscount724 : Pan Am also operated 7 passenger 747-200s, acquired used from SQ between 1983-85, and 3 747-200F freighters. Two of the 742 freighters were factory-d
27 Jetstar : I believe the third airport was STL JetStar
28 USPIT10L : That actually sounds pretty realistic, especially knowing the lack of experince with acquisitions that UA's executives had at the time. UA had not bo
29 Trintocan : PA's South American system at the time of the airline's demise included CCS, GYE, SCL, MEX, EZE, GIG, MVD and GRU. They also served BGI, POS, SJU, SDQ
30 USPIT10L : PanAm's route authorities were far more valuable than what they were actually flying at the time. That is why UA jumped to get the assets as quickly
31 BMI727 : Was it? I could be wrong, but I think that the only service from St. Louis to London went to Gatwick. I have no idea about any one stop flights they
32 OP3000 : Had forgotten about that. It was in 1975, and the PA Caribbean routes were JFK-SDQ, JFK-BGI and USA-Bermuda. Around that time PA actually discussed m
33 ETA Unknown : Although highly competent, Crandall had a worldwide industry reputation for being a pain to deal with. His negotiation attitude was "win (us)-lose (yo
34 BMI727 : He supposedly did a lot of things in the 70s and 80s to screw with other airlines, especially Braniff.
35 OP3000 : Based on that I can see why Carty, Arpey and the rest who worked under Crandall all seem to be mild-mannered types, of the sort that would avoid conf
36 AADC10 : UA had reputedly been seeking Pacific routes for years, only obtaining SEA-NRT after many years of bids. They may have paid a high price for PA's rou
37 Sparky35805 : Pan Am and AA did an equipment trade in the mid 80s with AAs remaining 747s going to Pan Am for the ex National DC10s. Sparky
38 Viscount724 : And SEA-HKG. UA started SEA-NRT in April 1983 and SEA-HKG a month later. Until the PA Pacific route purchase in 1986, those were UA's only internatio
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