Early Years
Juan Trippe
Pan American Airways, Incorporated (PAA) was founded as a shell company on March 14, 1927 by Air Corps Majors Henry H. "Hap" Arnold, Carl A. Spaatz, and John H. Jouett as a counterbalance to the German-owned Colombian carrier SCADTA, operating in Colombia since 1920. SCADTA lobbied hard for landing rights in the Panama Canal Zone, ostensibly to survey air routes for a connection to the United States, which the Air Corps viewed as a precursor to a possible German aerial threat to the canal. Arnold and Spaatz drew up the prospectus for Pan American when SCADTA hired a company in Delaware to obtain air mail contracts from the U.S. government. Pan American was able to obtain the U.S. mail delivery contract to Cuba, but lacked any aircraft to perform the job and did not have landing rights in Cuba.
On June 2, 1927 Juan Trippe formed the Aviation Corporation of the Americas (ACA) with the backing of powerful and politically connected financiers who included Cornelius Vanderbilt Whitney and W. Averell Harriman, and raised $250,000 in startup capital from the sale of stock. Their operation had the all-important landing rights for Havana, having acquired American International Airways, a small airline established in 1926 by John K. Montgomery and Richard B. Bevier as a seaplane service from Key West, Florida, to Havana. ACA met its deadline of having an air mail service operating by October 19, 1927 by chartering a Fairchild FC-2 floatplane from a small Dominican Republic carrier, West Indian Aerial Express.
The Atlantic, Gulf, and Caribbean Airways company was established on October 11, 1927 by New York City investment banker Richard Hoyt, who served as president. This company merged with PAA and ACA on June 23, 1928. Richard Hoyt was named as president of the new Aviation Corporation of the Americas, but Trippe and his partners held 40% of the equity and Whitney was made president. Trippe became operational head of Pan American Airways, the new company's principal operating subsidiary.
Flown cover autographed by pilot Cy Caldwell and carried from Key West, FL, to Havana, Cuba, on the first contract air mail flight operated by Pan American Airways, Oct 19, 1927
"Birthplace of Pan American World Airways", Key West, Florida
The U.S. government approved the original Pan Am's mail delivery contract with little objection, out of fears that SCADTA would have no competition in bidding for routes between Latin America and the United States. The government further helped Pan Am by insulating it from its U.S. competitors, seeing the airline as the "chosen instrument" for U.S.-based international air routes. The airline expanded internationally, benefiting from a virtual monopoly on foreign routes.
Trippe and his associates planned to extend Pan Am's network through all of Central and South America. During the late 1920s and early 1930s, Pan Am purchased a number of ailing or defunct airlines in Central and South America and negotiated with postal officials to win most of the government's airmail contracts to the region. In September 1929 Trippe toured Latin America with Charles Lindbergh to negotiate landing rights in a number of countries, including Barranquilla on SCADTA's home turf of Colombia, Maracaibo and Caracas. By the end of the year, Pan Am offered flights along the west coast of South America to Peru. The following year, Pan Am purchased the New York, Rio, and Buenos Aires Line, giving it a seaplane route along the east coast of South America to Buenos Aires, Argentina, and westbound to Santiago, Chile. Its Brazilian subsidiary NYRBA do Brasil was later renamed as Panair do Brasil. Pan Am also partnered with Grace Shipping Company in 1929 to form Pan American-Grace Airways, better known as Panagra, to gain a foothold to destinations in South America.
Pan Am's holding company, the Aviation Corporation of the Americas, was one of the most sought after stocks on the New York Curb Exchange in 1929, and flurries of speculation surrounded each of its new route awards. In April 1929 Trippe and his associates reached an agreement with United Aircraft and Transport Corporation (UATC) to segregate Pan Am operations to south of the Mexico – United States border, in exchange for UATC taking a large shareholder stake (UATC was the parent company of what are now Boeing, Pratt & Whitney, and United Airlines). The Aviation Corporation of the Americas changed 
its name to Pan American Airways Corporation in 1931.
Flight crews
Critical to Pan Am's success as an airline was the proficiency of its flight crews, who were rigorously trained in long-distance flight, seaplane anchorage and berthing operations, over-water navigation, radio procedure, aircraft repair, and marine tides. During the day, use of the compass while judging drift from sea currents was normal procedure; at night, all flight crews were trained to use celestial navigation. In bad weather, pilots used dead reckoning and timed turns, making successful landings at fogged-in harbors by landing out to sea, then taxiing the plane into port. Many pilots had merchant marine certifications and radio licenses as well as pilot certificates.[14][15] A Pan Am flight captain would normally begin his career years earlier as a radio operator or even mechanic, steadily gaining his licenses and working his way up the flight crew roster to navigator, second officer, and first officer. Before World War II it was not unusual for a captain to make engine repairs at remote locations.
Pan Am's mechanics and support staff were similarly trained. Newly hired applicants were frequently paired with experienced flight mechanics in several areas of the company until they had achieved proficiency in all aircraft types. Emphasis was placed on learning to maintain and overhaul aircraft in harsh seaborne environments when faced with logistical difficulties, as might be expected in a small foreign port without an aviation infrastructure or even an adequate road network. Many crews supported repair operations by flying in spare parts to planes stranded overseas, in some cases performing repairs themselves.
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Clipper era
PAA's "Clipper" routes in "The Americas" (1936)
1941 advertising mailer for Pan Am's "Flying Clipper Cruises" to South America
Pan Am inaugurated its South American routes using Sikorsky S-38 and S-40 flying boats. The latter were three large passenger craft put in service by Trippe in 1931 to provide greater carrying capacity than the eight-passenger S-38. Carrying the nicknames American Clipper, Southern Clipper, and Caribbean Clipper, they were the first of the series of 28 Clippers that came to symbolize Pan Am between 1931 and 1946.
In 1937 Pan Am turned to Britain and France to begin seaplane service between the United States and Europe. Pan Am reached an agreement with both countries to offer service from Norfolk, Virginia, to Europe via Bermuda and the Azores using the S-40s. Starting in June 1937, a joint service from the U.S. mainland to Bermuda was inaugurated, with Pan Am using Sikorsky flying boats and Imperial Airways using the C class flying boat RMA Cavalier.
On July 5, 1937 the first commercial survey flights across the North Atlantic were conducted. The Pan Am Clipper III, a Sikorsky S-42, landed at Botwood in the Bay of Exploits in Newfoundland from Port Washington, New York, via Shediac, New Brunswick. The next day Pan Am Clipper III left Botwood for Foynes in Ireland. The same day, a Short Empire C-Class flying boat, the Caledonia, left Foynes for Botwood, and landed July 6, 1937, reaching Montreal on July 8 and New York on July 9. These test flights marked the first steps toward commercial transatlantic flights in heavier-than-air craft.
PAA's China Clipper service cut the time of a transpacific crossing from as much as six weeks by sea to just six days by air.
Trippe then decided to start a service from San Francisco to Honolulu, and from there to Hong Kong and Auckland following existing steamship routes. After negotiating traffic rights in 1934 to land at Pearl Harbor, Midway Island, Wake Island, Guam, and Subic Bay (Manila), Pan Am shipped $500,000 worth of aeronautical equipment westward in March 1935 using the North Haven a 15,000 ton merchant ship it chartered for the purpose of provisioning each island that the clippers would stop at on their 4 to 5-day flight. Pan Am ran its first survey flight to Honolulu in April 1935 with a Sikorsky S-42 flying boat. The airline won the contract for a San Francisco – Canton mail route later that year and operated its first commercial flight carrying mail and express (no passengers) in a Martin M-130 from Alameda to Manila amid massive media fanfare on November 22, 1935. The five-leg, 8,000-mile (12,875 km) flight arrived in Manila on November 29 and returned to San Francisco on December 6, cutting the one way travel time in either direction between the two cities via the fastest scheduled steamship service by over two weeks. (Both the United States and Philippine Islands issued special stamps for the two flights.) The first passenger flight left Alameda on October 21, 1936. The fare from San Francisco to both Manila and Hong Kong in 1937 was $950 one way (about $14,700 in 2010) and $1,710 round trip (about $26,400).
Stamps issued by the United States and Philippine Islands for Air Mail carried on the first flights in each direction of PAA's Transpacific "China Clipper" service between San Francisco, CA, and Manila, PI. (November 22 – December 6, 1935)
On August 6, 1937 Juan Trippe accepted United States aviation's highest annual prize, the Collier Trophy, on behalf of PAA from President Franklin D. Roosevelt for the company's "establishment of the transpacific airline and the successful execution of extended overwater navigation and the regular operations thereof." Later, Pan Am used Boeing 314 flying boats for the Pacific route: in China, passengers could connect to domestic flights on the Pan Am-operated China National Aviation Corporation (CNAC) network, co-owned with the Chinese government. Pan Am flew to Singapore for the first time in 1941, starting a semi-monthly service which reduced San Francisco–Singapore travel times from 25 days to six days. The Boeing 314s were used on transatlantic routes starting in 1939.
Flown cover carried around the world on PAA Boeing 314 Clippers and by Imperial Airways, June 24 – July 28, 1939
Pan Am's flying boat terminal at Dinner Key in Miami, Florida, was a hub of inter-American travel during the 1930s and 1940s.
Six large, long-range Boeing 314 flying boats were delivered to Pan Am in early 1939. The new type enabled commencement of a regular weekly transatlantic passenger and air mail service between the United States and Britain on June 24, 1939. The route was from New York via Shediac, Botwood, and Foynes to Southampton. After the outbreak of World War II, the terminal became Foynes until the service ceased for the winter on October 5; transatlantic service to Lisbon via the Azores continued into 1941. Throughout the war, Pan Am flew over 90 million miles (145 million kilometers) worldwide in support of military operations.
In 1940 Pan Am and TWA began using the Boeing 307 Stratoliner for passenger services. It was the first pressurized airliner to go into commercial service and the first to include a flight engineer as a member of the crew. The Boeing 307's airline service proved short-lived, as all five models built were commandeered for military service at the outbreak of World War II.
The "Clippers" — the name hearkened back to the 19th century clipper ships – were the only American passenger aircraft of the time capable of intercontinental travel. To compete with ocean liners, the airline offered first-class seats on such flights, and the style of flight crews became more formal. Instead of being leather-jacketed, silk-scarved airmail pilots, the crews of the "Clippers" wore naval-style uniforms and adopted a set procession when boarding the aircraft. The China Clipper became well known for its South Seas routings.
In 1942, while waiting at Foynes, County Limerick, Ireland for a Pan Am Clipper flight to New York, passengers were served a drink today known as Irish coffee by Chef Joe Sheridan.
During World War II most of the Clippers were pressed into military service. Pan Am pioneered a new air route across Western and Central Africa to Iran, and in early 1942 the airline became the first to operate a route circumnavigating the globe. Another first occurred in January 1943, when Franklin D. Roosevelt became the first U.S. president to fly abroad, in the Dixie Clipper. During this period Star Trek creator Gene Roddenberry was a Clipper pilot; he was aboard the Clipper Eclipse when it crashed in Syria on June 19, 1947.
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Growing competition after WWII
Air transport's growing importance in the post-war era meant that Pan Am would no longer enjoy the official patronage it had been afforded in pre-war days to prevent the emergence of any meaningful competition, both at home and abroad.
Although Pan Am continued to use its considerable political influence to lobby for protection of its position as America's primary international airline, it encountered increasing competition — first from American Export Airlines (American Overseas Airlines (AOA) from November 1945) across the Atlantic to Europe, and subsequently from others including TWA to Europe, Braniff to South America, United to Hawaii and Northwest Orient to East Asia, as well as five potential rivals to Mexico. This changed situation resulted from a more enlightened approach of the Civil Aeronautics Board (CAB) towards the promotion of competition between major U.S. carriers on key domestic and international scheduled routes compared with pre-war U.S. aviation policy.
Overseas expansion and fleet modernization
AOA was the first airline to begin regular landplane flights across the Atlantic, on October 24, 1945. In January 1946 Pan Am scheduled seven DC-4s a week east from LaGuardia Airport, five to London (Hurn airport) and two to Lisbon. Time to Hurn was 17 hours 40 minutes including stops, or 20 hours 45 minutes to Lisbon. A Boeing 314 flying boat flew LaGuardia to Lisbon once every two weeks in 29 hours 30 minutes; flying boat flights ended shortly thereafter.
TWA's transatlantic challenge – the impending introduction of its faster, pressurized Lockheed Constellations – resulted in Pan Am ordering its own Constellation fleet at $750,000 apiece. Pan Am began transatlantic Constellation flights on January 14, 1946, beating TWA by three weeks.
In January 1946 Miami to Buenos Aires took 71 hours 15 minutes in a Pan Am DC-3, but the following summer DC-4s flew Idlewild to Buenos Aires in 38 hr 30 min. In January 1958 Pan Am's DC-7Bs flew New York to Buenos Aires in 25 hours 20 minutes, while the National – Pan Am – Panagra DC-7B via Panama and Lima took 22 hours 45 minutes. Convair 240s replaced DC-3s and other pre-war types on Pan Am's shorter flights in the Caribbean and South America. Pan Am also acquired a few Curtiss C-46s for an freight network that eventually extended to Buenos Aires.
In January 1946 Pan Am had no transpacific flights beyond Hawaii, but they soon resumed with DC-4s. In January 1958 the California to Tokyo flight was a daily Stratocruiser that took 31 hours 45 minutes from San Francisco or 32 hours 15 minutes from Los Angeles. (A flight to Seattle and a connection to Northwest's DC-7C totaled 24 hours 13 minutes from San Francisco, but Pan Am was not allowed to fly that route.) The Stratocruisers' double-deck fuselage with sleeping berths and a lower-deck lounge helped it compete with its rival. "Super Stratocruisers" with more fuel appeared on Pan Am's transatlantic routes in November 1954, making nonstop eastward and one-stop westward schedules more reliably.
In June 1947 Pan Am started the first scheduled round-the-world airline flight. In September the weekly DC-4 was scheduled to leave San Francisco at 2200 Thursday as Flight 1, stopping at Honolulu, Midway, Wake, Guam, Manila, Bangkok and arriving in Calcutta on Monday at 1245, where it met Flight 2, a Constellation that had left New York at 2330 Friday. The DC-4 returned to San Francisco as Flight 2; the Constellation left Calcutta 1330 Tuesday, stopped at Karachi, Istanbul, London, Shannon, Gander, and arrived LaGuardia Thursday at 1455. A few months later PA 3 took over the Manila route while PA 1 shifted to Tokyo and Shanghai. All Pan Am round-the-world flights included at least one change of plane until Boeing 707s took over in 1960. PA 1 became daily in 1962–63, making different en route stops on different days of the week; in January 1963 it left San Francisco at 0900 daily and was scheduled into New York 56 hr 10 min later. Los Angeles replaced San Francisco in 1968; when Boeing 747s finished replacing 707s in 1971 all stops except Tehran and Karachi were served daily in each direction. For a year or so in 1975–76 Pan Am finally completed the round-the-world trip, New York to New York.
In January 1950 Pan American Airways Corporation officially became Pan American World Airways, Inc. (The airline had begun calling itself Pan American World Airways in 1943.) In September 1950 Pan Am completed the $17.45 million purchase of American Overseas Airlines from American Airlines. That month Pan Am ordered 45 Douglas DC-6Bs. The first, Clipper Liberty Bell (N6518C), inaugurated Pan Am's all-tourist class Rainbow service between New York and London on May 1, 1952 to complement the all-first President Stratocruiser service. From June 1954, DC-6Bs began replacing DC-4s on Pan Am's internal German routes.
Pan Am introduced the Douglas DC-7C "Seven Seas" on transatlantic routes in summer 1956. In January 1958 the DC-7C nonstop took 10 hours 45 minutes Idlewild to London, enabling Pan Am to hold its own against TWA's Super Constellations and Starliners. In 1957 Pan Am started DC-7C flights direct from the West Coast of the United States to London and Paris with a fuel stop in Canada or Greenland. The introduction of the faster Bristol Britannia turboprop by British Overseas Airways Corporation (BOAC) between New York and London from December 19, 1957 ended Pan Am's competitive leadership there.
In January 1958 Pan Am scheduled 47 flights a week east from Idlewild to Europe, Africa, the Middle East and beyond.
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Jet age
With growing competition on many of its routes, Pan Am began investing in such upcoming innovations as the new jet airliners and widebody types.
A Boeing 707–120 at the Pan Am Worldport in 1961. The terminal was once the center of the airline's New York operations; it was sold to Delta Air Lines in 1991. Delta is demolishing the terminal.
Pan Am was the launch customer of the Boeing 707, placing an order for 20 in October 1955. It also ordered 25 of Douglas's DC-8 for additional revenue-generating capacity due to this type's ability to seat six across (as opposed to five-abreast seating Boeing had originally offered on its 707). The combined order value was $269 million. To maintain its competitive lead as the first U.S. aircraft manufacturer to offer a jetliner and meet its rival's competitive challenge, Boeing modified the initial design of the 707's fuselage to seat six passengers across as well. The airline inaugurated transatlantic jet service from New York Idlewild to Paris Le Bourget (stopping at Gander to refuel) on October 26, 1958, with Boeing 707–121 Clipper America (N711PA) with 111 passengers.[48][50]
Introduction of the 320 "Intercontinental" series 707 in 1959, and the Douglas DC-8 in March 1960, enabled non-stop transatlantic crossings with a viable payload in both directions. The later 707s' increased capacity reduced seat-mile costs, helping Pan Am dominate the transatlantic market.
Widebody era
Pan Am was the launch customer of the Boeing 747, placing a $525 million order for 25 in April 1966. On January 15, 1970 First Lady Pat Nixon christened a Pan Am Boeing 747 Clipper Young America[53] at Washington Dulles in the presence of Pan Am president Najeeb Halaby. During the next few days Pan Am flew several 747s to major airports in the United States as a public relations effort, allowing the public to tour the airplanes. Pan Am began its final preparations for the first 747 service on the evening of January 21, 1970, when Clipper Young America was scheduled to fly from New York John F. Kennedy to London Heathrow. An engine failure delayed the inaugural flight's departure by several hours, necessitating the substitution of another 747 which eventually flew to London Heathrow. Passengers cheered and drank champagne as the jet finally lifted off from the runway at John F. Kennedy Airport.
Pan Am carried 11 million passengers over 20 billion miles (32,186,880,000 km) in 1970, the year it revolutionized air travel with the first widebodied airliner.
Supersonic plans
Pan Am was one of the first three airlines to sign options for the Aérospatiale-BAC Concorde, but like other airlines that took out options – with the exception of BOAC and Air France — it did not purchase the supersonic jet. Pan Am was the first U.S. airline to sign for the Boeing 2707, the American supersonic transport (SST) project, with 15 delivery positions reserved;[56] these aircraft never saw service after Congress voted against additional funding in 1971.
Computerized reservations, Pan Am Building and Worldport
Pan Am commissioned IBM to build PANAMAC, a large computer that booked airline and hotel reservations, which was installed in 1964. It also held large amounts of information about cities, countries, airports, aircraft, hotels, and restaurants.
The computer occupied the fourth floor of the Pan Am Building, which was the largest commercial office building in the world for some time.
The airline also built Worldport, a terminal building at John F. Kennedy Airport in New York. It was distinguished by its elliptical, four-acre (16,000 m²) roof, suspended far from the outside columns of the terminal below by 32 sets of steel posts and cables. The terminal was designed to allow passengers to board and disembark via stairs without getting wet by parking the nose of the aircraft under the overhang. The introduction of the jetbridge made this feature obsolete. Pan Am built a gilded training building in the style of Edward Durell Stone designed by Steward-Skinner Architects in Miami.
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Pan Am at its peak
At its peak in the late 1960s and early 1970s, Pan Am advertised under the slogan, the "World's Most Experienced Airline". It carried 6.7 million passengers in 1966, and by 1968, its 150 jets flew to 86 countries on every continent except for Antarctica over a scheduled route network of 81,410 unduplicated miles (131,000 km). During that period the airline was profitable and its cash reserves totaled $1 billion. Most routes were between New York, Europe, and South America, and between Miami and the Caribbean. In 1964 Pan Am began a helicopter shuttle between New York's John F. Kennedy, LaGuardia and Newark airports and Lower Manhattan, operated by New York Airways. Aside from the DC-8, the Boeing 707 and 747, the Pan Am jet fleet included Boeing 720Bs and 727s (the first aircraft to sport Pan Am — rather than Pan American — titles). (The airline later had Boeing 737s and 747SPs (which could fly nonstop New York to Tokyo), Lockheed L-1011 Tristars, McDonnell-Douglas DC-10s, and Airbus A300s and A310s.) Pan Am owned the InterContinental Hotel chain and had a financial interest in the Falcon Jet Corporation, which held marketing rights to the Dassault Falcon 20 business jet in North America. The airline was involved in creating a missile-tracking range in the South Atlantic and operating a nuclear-engine testing laboratory in Nevada. In addition, Pan Am participated in several notable humanitarian flights.
At its height Pan Am was well regarded for its modern fleet and experienced crews: cabin staff were multilingual and usually college graduates, frequently with nursing training.[63] Pan Am's onboard service and cuisine, inspired by Maxim's de Paris, were delivered "with a personal flair that has rarely been equaled.
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Downturn
Fallout from 1973 oil crisis
Pan Am had invested in a large fleet of new Boeing 747s in the expectation that demand for air travel would continue to rise. This was not the case as the simultaneous introduction of a large number of these high-capacity aircraft by Pan Am and its principal competitors coincided with an economic slowdown. Reduced demand for air travel following the 1973 oil crisis made the airline industry's overcapacity problem worse, leaving Pan Am with its high overheads and fixed costs as a result of a large decentralized infrastructure in a vulnerable position. In addition, high jet fuel prices and the large number of older, less fuel-efficient narrowbodied airplanes in its fleet significantly increased the airline's operating costs. Federal route awards to other airlines, such as the Transpacific Route Case, further reduced the number of passengers Pan Am carried, as well as its profit margins.
On September 23, 1974, a group of Pan Am employees published an advertisement in The New York Times to register their disagreement over federal policies which they felt were harming the financial viability of their employer.[78] The ad cited discrepancies in airport landing fees, such as Pan Am paying $4,200 to land a plane in Sydney, while the Australian carrier, Qantas, paid only $178 to land a jet in Los Angeles. The ad also contended that the United States Postal Service was paying foreign airlines five times as much to carry U.S. mail in comparison to Pan Am. Finally, the ad questioned why the Export-Import Bank of the United States loaned money to Japan, France, and Saudi Arabia at 6% interest while Pan Am paid 12%.
By the mid-1970s, Pan Am had racked up $364 million of accumulated losses over a 10-year period, and its debts approached $1 billion. This threatened the airline with bankruptcy. Former American Airlines vice president of operations, William T. Seawell, who had replaced Najeeb Halaby as Pan Am president in 1972, began implementing a turnaround strategy that entailed trimming the network by 25%, slashing the 40,000-strong workforce by 30% including wage cuts, introducing stringent economies and rescheduling debt, in addition to reducing the size of the fleet. These measures aided by the use of tax-loss credits enabled Pan Am to avert financial collapse and return to profitability in 1977.
Attempts to build a U.S. domestic network
Since the 1930s, Juan Trippe had coveted domestic routes for Pan Am. Throughout the late 1950s and early 1960s, as well as in the mid-1970s, the airline attempted to merge with American Airlines, Eastern Air Lines and Trans World Airlines.[35] As rival airlines convinced Congress that Pan Am would use its political clout to monopolize all U.S. air routes, the CAB repeatedly denied the airline permission to operate within the United States, either as a result of organic growth or a merger with another airline. As a consequence, Pan Am remained an American carrier operating international routes only (aside from Hawaii and Alaska). The last time Pan Am was permitted to merge with another airline prior to the deregulation of the airline industry in the United States was in 1950, when it took over American Overseas Airlines.Following the U.S. airline industry's deregulation in 1978, a growing number of U.S. domestic operators began competing with Pan Am internationally.
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National Airlines takeover
In order to acquire domestic routes, Pan Am, under president Seawell, set its eyes on National Airlines. Pan Am wound up in a bidding war with Frank Lorenzo, which greatly raised the price of National's stock. Nevertheless, Pan Am was granted permission to buy National in 1980 in what was described as the "Coup of the Decade." The acquisition of National Airlines for $437 million further burdened Pan Am's balance sheet, which was already under strain as a result of financing the large number of Boeing 747s that were ordered in the mid-1960s. This acquisition did little to improve Pan Am's competitive position in relation to nimbler, lower-cost competitors in a deregulated industry as National's North-South route structure provided insufficient feed at Pan Am's transatlantic and transpacific gateways in New York and Los Angeles respectively. In addition, both airlines had incompatible fleets (apart from the Boeing 727) and corporate cultures (partly as a result of the former being perceived by some Pan Am employees as mainly a regional "backwoods" carrier with few trunk routes), and the integration was poorly handled by Pan Am management who presided over an increase in labor costs as a result of harmonizing National's pay scales with Pan Am's. Although revenues increased by 62% from 1979 to 1980, fuel costs from the merger increased by 157% during a weak economic climate. Further "miscellaneous expenses" increased by 74%.
Disposal of non-core assets and operational cutbacks
As 1980 progressed and the airline's financial situation worsened, Seawell began selling Pan Am's non-core assets. The first asset to be sold off was the airline's 50% interest in Falcon Jet Corporation in August. Later in November, Pan Am sold the Pan Am Building to the Metropolitan Life Insurance Company for $400 million. In September 1981 Pan Am sold off its InterContinental hotels chain. Before this transaction closed, Seawell was replaced by C. Edward Acker, Air Florida's founder and ex-president as well as a former Braniff International executive. The combined sale value of the InterContinental chain and the Falcon Jet Corp stake was $500 million.
Acker followed up the asset disposal program he had inherited from his predecessor with operational cutbacks. Most prominent among these was the discontinuation of the round-the world service from October 31, 1982, when Pan Am ceased flying between Delhi, Bangkok and Hong Kong due to the sector's unprofitability.[87] To provide additional seating capacity for its 1983 spring/summer season, the airline also acquired three Boeing 747-200B passenger aircraft from Flying Tigers, who took four of Pan Am's 747–100 freighters in return.
Fleet restructuring
Despite Pan Am's precarious financial situation, during the summer of 1984, Acker went ahead with an order for new Airbus A300/A310/A320 wide- and narrowbodied aircraft.[89] These technologically advanced aircraft, which were economically and operationally superior to the 747s and 727s Pan Am operated at the time, were intended to make the airline more competitive. Brand-new A300s began replacing aging 727s on the Internal German Services (IGS) and Caribbean networks later the same year while subsequently delivered new A310s replaced some of the 747s on the slimmed-down transatlantic network following ETOPS certification (approval by the Federal Aviation Administration (FAA) of transoceanic flying with twin-engined aircraft). Pan Am's decision not to take delivery of the A320s and to sell its delivery positions to Braniff meant that the majority of its short-haul U.S. domestic and European mainline feeder routes, as well as most of its IGS services, continued to be flown with technologically obsolete 727s until the airline's demise. This put it at a commercial disadvantage against rivals operating state-of-the-art aircraft with a greater passenger appeal. In September 1984 Pan American World Airways created a holding company called Pan Am Corporation to assume ownership and control of the airline and the services division.
Sale of Pacific division
Given the airline's dire state, in April 1985, Acker sold Pan Am's entire Pacific Division, which consisted of 25% of its entire route system, to United Airlines for $750 million. This sale also enabled Pan Am to address fleet incompatibility issues related to the earlier acquisition of National Airlines as it included Pan Am's Pratt & Whitney JT9D-powered 747SPs, its Rolls-Royce RB211-powered L-1011s and the General Electric CF6-powered DC-10s inherited from National, which were transferred to United along with the Pacific routes.
Establishment of local feeder networks
In the early 1980s, Pan Am contracted several regional airlines (Air Atlanta, Emerald Air, Empire Airlines, Presidential Airways and Republic Airlines) to operate feeder flights under the Pan Am Express branding.
The acquisition of Pennsylvania-based commuter airline Ransome Airlines for $65 million (which was finalized in 1987) was meant to address the issue of providing additional feed for Pan Am's mainline services at its hubs in New York, Los Angeles and Miami in the United States, and Berlin in Germany. The renamed Pan Am Express operated routes mostly from New York, as well as Berlin, Germany. Miami services were added in 1990. However, the regional Pan Am Express operation provided only an incremental feed to Pan Am's international route system, which was now focused on the Atlantic Division.
U.S. East coast shuttle
In an attempt to gain a presence on the busy Washington–New York–Boston commuter air corridor, the Ransome acquisition was accompanied by the $100 million purchase of New York Air's shuttle service between Boston, New York, and Washington, D.C. This parallel move was intended to enable Pan Am to provide a high-frequency service for high-yield business travelers in direct competition with the long-established, successful Eastern Air Lines shuttle operation. The renamed Pan Am Shuttle began operating out of LaGuardia Airport's refurbished historic Marine Air Terminal in October 1986. However, it did not address the pressing issue of Pan Am's continuing lack of a strong domestic feeder network.
Financial, operational and reputational setback
Thomas G. Plaskett, a former American Airlines and Continental executive, replaced Acker as president in January 1988 (joining Pan Am from the latter). While a program to refurbish Pan Am aircraft and improve the company's on-time performance began showing positive results (in fact, Pan Am's most profitable quarter ever was the third quarter of 1988), on December 21, 1988, the terrorist bombing of Pan Am flight 103 above Lockerbie, Scotland, resulted in 270 fatalities.[96] Pan Am's iconic image had made it a repeated target for terrorists, resulting in many travelers avoiding the airline as they had begun to associate it with danger. Faced with a $300 million lawsuit filed by more than 100 families of the Pan Am flight 103 victims, the airline subpoenaed records of six U.S. government agencies, including the CIA, the Drug Enforcement Administration, and the State Department. Though the records suggested that the U.S. government was aware of warnings of a bombing and failed to pass the information to the airline, the families claimed Pan Am was attempting to shift the blame.
Also, in December 1988 the FAA fined Pan Am for 19 security failures, out of the 236 that were detected amongst 29 airlines.
Failed bid for Northwest Airlines
In June 1989 Plaskett presented Northwest Airlines with a $2.7 billion takeover bid that was backed by Bankers Trust, Morgan Guaranty Trust, Citicorp and Prudential-Bache. The proposed merger was Pan Am's final attempt to create a strong domestic network to provide sufficient feed for the two remaining mainline hubs at New York JFK and Miami. It was also intended to help the airline regain its status as a global airline by re-establishing a sizable transpacific presence. The merger was expected to result in annual savings of $240 million.[99][100] In the event, billionaire financier Al Checchi outbid Pan Am by presenting Northwest's directors with a superior proposal.
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Bankruptcy
Pan Am was forced to declare bankruptcy on January 8, 1991. Delta Air Lines purchased the remaining profitable assets of Pan Am, including its remaining European routes and Frankfurt mini hub, the Shuttle operation, 45 jets, and the Pan Am Worldport at John F. Kennedy Airport, for $416 million. Delta also injected $100 million becoming a 45 percent owner of a reorganized but smaller Pan Am serving the Caribbean, Central and South America from a main hub in Miami. The airline's creditors would hold the other 55 percent.
The Boston–New York LaGuardia–Washington National Pan Am Shuttle service was taken over by Delta in September 1991. Two months later Delta assumed all of Pan Am's remaining transatlantic traffic rights, except Miami to Paris and London.
In October 1991 former Douglas Aircraft executive Russell Ray, Jr. was hired as Pan Am's new president and CEO.[109] As part of this restructuring, Pan Am relocated its headquarters from the Pan Am Building in New York City to new offices in the Miami area in preparation for the airline's relaunch from both Miami and New York on November 1, 1991. The new airline would have operated approximately 60 aircraft and generate about $1.2 billion in annual revenues with 7,500 employees.[103] Following the relaunch, Pan Am continued to sustain heavy losses. Revenue throughout October and November 1991 fell short of what had been anticipated in the reorganization plan, with Delta claiming that Pan Am was losing $3 million a day. This undermined Delta's, Wall Street's and the traveling public's confidence in the viability of the reorganized Pan Am.
Pan Am's senior executives outlined a projected shortfall of between $100 million and possibly $200 million, with the airline requiring a $25 million installment just to fly through the following week. On the evening of December 3, Pan Am's Creditors Committee advised U.S. Bankruptcy Judge Cornelius Blackshear that it was close to convincing an airline (TWA) to invest $15 million to keep Pan Am operating. A deal with TWA owner Carl Icahn could not be struck. Pan Am opened for business at 9:00 am and within the hour, Ray was forced to withdraw Pan Am's plan of reorganization and execute an immediate shutdown plan for Pan Am. Over 9,000 employees lost their jobs. As a result of this action, Delta was sued for more than $2.5 billion on December 9, 1991 by the Pan Am Creditors Committee. Shortly thereafter, a large group of former Pan Am employees sued Delta. In December 1994 a federal judge ruled in favor of Delta, concluding that it was not liable for Pan Am's demise.
Pan Am ceased operations on December 4, 1991 following a decision by Delta's CEO, Ron Allen, and other senior executives not to go ahead with the final $25 million payment Pan Am was scheduled to receive the weekend after Thanksgiving. As a result, some 7,500 Pan Am employees lost their jobs, thousands of whom had worked in the New York City area and were preparing to move to the Miami area to work at Pan Am's new headquarters near Miami International Airport. Economists predicted that 9,000 jobs in the Miami area, including jobs at companies not connected to Pan Am that were dependent on the airline's presence, would be lost after it folded. The carrier's last flown scheduled operation was Pan Am flight 436 which departed that day from Bridgetown, Barbados at 2 pm (EST) for Miami under the command of Captain Mark Pyle flying Clipper Goodwill, a Boeing 727–200 (N368PA).
Pan Am was the third major airline to shut down in 1991, after Eastern Air Lines and Midway Airlines.
ATR 42 (N4209G) of Pan Am Express at Sylt Airport, 1991
After serving only two months as Pan Am's CEO, Ray was replaced by Peter McHugh to supervise the sale of Pan Am's remaining assets by Pan Am's Creditor's Committee. Pan Am's last remaining hub (at Miami International Airport) was split during the following years between United Airlines and American Airlines. TWA's Carl Icahn purchased Pan Am Express at a court ordered bankruptcy auction for $13 million, renaming it Trans World Express. The Pan Am brand was sold to Charles Cobb, CEO of Cobb Partners and former United States Ambassador to the Republic of Iceland under President George H.W. Bush and Under Secretary of the U.S. Department of Commerce under President Reagan. Cobb, along with Hanna-Frost partners invested in a new Pan American World Airways headed by veteran airline executive Martin R. Shugrue, Jr, a former Pan Am executive with 20 years of experience at the original carrier.
In his book, Pan Am: An Aviation Legend, Barnaby Conrad III contends that the collapse of the original Pan Am was a combination of corporate mismanagement, government indifference to protecting its prime international carrier, and flawed regulatory policy. He cites an observation made by former Pan Am Vice President for External Affairs, Stanley Gewirtz:
"What could go wrong did. No one who followed Juan Trippe had the foresight to do something strongly positive … it was the most astonishing example of Murphy's law in extremis. The sale of Pan Am's profitable parts was inevitable to the company's destruction. There were not enough pieces to build on".
—Stanley Gerwitz
Under the terms of bankruptcy, the airline's International Flight Academy in Miami was permitted to remain open. It was established as an independent training organization beginning in 1992 under its current name, Pan Am International Flight Academy. The company began operating by using the flight simulation and type rating training center of the defunct Pan Am. In 2006, American Capital Strategies invested $58 million into the academy. Pan Am International Flight Academy is the only surviving division of Pan American World Airways.
