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Pan Am-TWA (What Happened?)

Thu Dec 08, 2005 5:58 am

Ok, Pan AM closed its doors in the early 90's. My question is, what was happening in TWA at that time. Was it making money? I look at the Australian Airline scene and when Ansett collapsed, being Qantas's largest competitor, enabled Qantas to become more financially stable, almost guaranteeing Qantas's financial future for the next ten years. Did the same happen to TWA? Why would TWA allow itself to be bought out by American? Could TWA continue to operate to present day on its own, if American had not intervened?

What I think is strange is that TWA's main competitor collapsed yet TWA barely lasted 7 years longer? Any thoughts?
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RE: Pan Am-TWA (What Happened?)

Thu Dec 08, 2005 6:22 am

By 1990 TWA's list of main competitors did not include Pan Am. TWA lost more passengers and had far more to fear from other airlines like United, American and Delta. By the time Pan Am collapsed in 1991, it was virtually a ghost of its former self. While they were the dominant international carriers for most of the post World War II period, once deregulation hit they both found themselves in a bit of a bind, although Pan Am was a bit worse off. TWA and Pan Am had built impressive international networks, but lacked the domestic route structure needed to support them after deregulation. They both bought domestic operators (Pan AM bought National and TWA bought Ozark) to try an alleviate this problem, TWA having slightly more success at it.

In the early to mid 1980s the established major carriers faced some pretty severe financial problems. Brannif went bankrupt and disappeared, Continental went bankrupt (for the first time), United went through that nasty mess with the A and B pay scales, Pan Am's lack of domestic network was hurting them as former mostly domestic-service airlines like United and American got their own international flights, and TWA was facining the prospect of being absorbed by Texas Air, headed by Frank Lorenzo.

TWA faced a choice, purchase by Texas Air and face what some consider the evil of Mr. Lorenzo, or a buyout by financier Carl Ichan. They chose Ichan, and for a while it seemed to be working out, the purchase of Ozark strengthened TWA's domestic position and helped feed their international network. But things started going downhill after that. Ichan was more interested in his profit than TWA's and he spent a good deal of time making deals that benefited him, even at the expense of TWA's long-term viability. He sold off TWA's very lucrative Heathrow slots to AA and loaded TWA up with debt. By 1991, TWA was debt ridden, with an outdated fleet and few assets left to sell. Even after Ichan was forced out, TWA continued to suffer, partly because of the debt he left and partly because their best money making bits had been sold off. When the airline boom of the mid/late 1990s came, TWA was barely in a position to break even, let alone do any of the things that would have put them in a position to survive the current industry situation. Had AA not bought TWA, chances are they would not have survived on their own after September 11. Then again, considering what AA has done to TWA, that might not have been a worse scenario.

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