I read this thread and I am hurt. But what hurts more, is the realization so many of you forgot the thousands of employees that the only man found UNFIT to run an airline, Frank Lorenzo, destroyed. The hundreds of thousands that directly and indirectly were affected by this man and how those good people seem to be forgotten. First, for all of the speculators out there I suggest you read something about Lorenzo’s history “Grounded” by Aaron Bernstein, “Hard Landings” by Thomas Petzinger, or “Flying the Line, Part 2”; before you state all these unreal assertions.
First thing you need to know that Lorenzo NEVER intended to buy National (his own words, read Grounded and Hard Landings!) His intent was to amass sufficient money to do what he did. To complete his agenda! To finish his “Final Solution!”
Let me give some of you, that don’t know the facts, the truth as they EXISTED and not as some want them to exist. This is about Pan Am, National and Lorenzo. The facts will help you see where most of your speculations just won’t play out.
On April 13, 1966, Juan Trippe placed the largest commercial aircraft order in aviation history at that time, $525 million, for 25 Boeing 747 jets. This equates to $6.94 billion in 2002 dollars based upon the relative share of GDP. Pan Am had to pony up $265 million in cash ($3.51 billion in 2002) on top of the cash $197 million ($2.6 billion today) they had to put up for the 19 B-707 they ordered. Trippe and Peter Grace (co-founder of Eastern) had a falling out and sold all their shares in Panagra (their South American operation) to Braniff. By December 1971 Pan Am cut its workforce in half and the Shah of Iran offered to buy the company but was struck down by the government. Pan Am made several attempts to merge, first with American and then with Delta and United. All those carriers turned down Pan Am and the feud between Pan Am and Eastern would not allow any talking what so ever. By the mid 70s interest rates were climbing and by 1978 Pan Am was paying in excess of 20% APR for their HUGH debt and constant losses from falling revenue and increased diverse competition.
CEO Sewell went after National in hopes to solve a myriad of problems the biggest of which was to level the playing field. Lorenzo, the weasel he is, smelled the blood and saw an opportunity to make a lot of money for himself.
At that time TI
was a nothing company with only a few old DC-9s flying out of Texas. Lorenzo’s shell companies Jet Capital and Texas Air Crop had only $1.8 million when they started this shell game. Alfred Kahn & Phil Bakes (from the old CAB) sat on the TXI board and gave them valuable routes in EWR
, NYC, DCA
and others. Lorenzo used these routes on the New York Air operation and borrowed money from Chase Manhattan Bank to “make the war” for National. The Chase money was virtually interest free with liberal “terms of payment.”
National’s stock was worth about $17 at the time Pan Am wanted to buy the operation. The $19.50 original offers for National WOULD HAVE been accepted by the board had Lorenzo not come in. With taxpayer money and slip-shod operations, Lorenzo ran the price of the stock up to over $50 a share. Lorenzo made a mint and got the critical cash mass needed to destroy the airline industry. Pan Am paid outlandish interest rates for the company had an unserviceable debt and the end was inevitable.
Secondly, Lorenzo had a Hitler-ish attitude toward the American worker (well any workers.) He had a zeal toward the worker the way Hitler had a zeal toward the Jews! It is far to in depth to discuss here but suffice it to say he would do, say or act however he wanted.
So for the speculators, Pan Am was dead by the time Lorenzo slammed the debt on them. Their debt was compounded by a myriad of things. The order for the B-747s at a time when the international aviation market was dropping like a rock. The fuel crises of 73-74 and the mandatory route they had. The deregulation of the domestic airlines which allowed strong house domestic airlines to operate in the international arena (Delta, National, etc.) Interest rates that ran over 20% and increased landing rights for foreign airlines in the USA. When Lorenzo came in it was all over. The results of Pan Am would have been the same UNLESS Lorenzo did not kill the bird. With the proper price for National (and some internal synergy) it may have survived.
As for the other merger combinations it is crazy. Most do not understand the hatred many of these individuals had for each other and under NO way would they operate together. There were some heavy hitters out there and names like Trippe, Six, Laker, Grace, CR Smith, even Rickenbacker (until 1963), Frye, Hughes, Woolman, etc. would not merge the way some Harvard been-counter will today for personal wealth.
Not until the junk bond yuppies of the 80s came around would the airline industry do what many are suggesting. But by then the downfall of the carriers was already written just like Pan Am was basically written in the late 60s and early 70s with Lorenzo sealing the casket!