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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.
