How Long Can Pan Am Keep Flying Solo?

To those who remember Pan American World Airways Inc. as the outward expression of the American dream, its slow decline has been particularly painful. Pan Am's China Clipper flying boats opened the Pacific. Juan Trippe, its pioneering chairman, ushered in the jet age. Pan Am was gutsy and sexy. But on Jan. 8, when it announced its bankruptcy in a cramped conference room, the carrier merely seemed tired.

The Chapter 11 filing was no surprise. Pan Am Corp. has been wounded for a decade. Chairman Thomas G. Plaskett, who has been trying to sell it since he arrived in 1988, hadn't been able to stop the bleeding. And when skyrocketing fuel costs drained the airline's cash reserves to $30 million, bankruptcy became inevitable. Pan Am will continue to fly all its routes and honor its tickets. Protected from his creditors, Plaskett hopes to restructure its complex debt. "It's a whole new ballgame," he declares.

UNITED WAY. Not quite. Plaskett, who agreed to sell his lucrative London routes to UAL Corp. in October, hopes to focus on Pan Am's European hub in Frankfurt and an expanding Latin American hub in Miami. The $400 million United deal includes an expansive marketing agreement intended to provide those routes the domestic feed traffic Pan Am could never generate on its own. Sounds reasonable. But what about Pan Am's aging fleet, its $490 million in unfunded pension liabilities, and the $400 million it needs for aircraft leases this year? "The odds are Pan Am won't emerge as an independent company," says Standard & Poor's Corp. analyst Philip Baggaley.

There's speculation United might buy it first. The London deal is already forging close links. And United Chairman Stephen M. Wolf is clearly interested in Pan Am's lucrative Latin American system. Purchasing it, or buying Pan Am whole, would enable United to keep pace with rival American Airlines Inc., which bought Eastern Air Lines Inc.'s Latin American routes in 1989. Pan Am's clout in Eastern and Central Europe would also be attractive. Merging, though, would be a sticky wicket. Pan Am's pension problem is onerous, its unions ornery.

United is doing its best to keep Pan Am aloft. Together with Bankers Trust Co., it wants to lend the carrier $150 million to tide it over until the London deal is complete. United would provide $50 million. Besides giving Pan Am cash to operate, the loan would enable Plaskett to spurn the advances of Carl Icahn, chairman of Trans World Airlines Inc. In December, the raider offered to buy Pan Am for $375 million, but Plaskett spurned the bid, citing insufficient information.

Plaskett will make a run at restructuring. He's negotiating to sell the East Coast shuttle and thinks the cash can steady Pan Am on a new, more focused course. But time may be running out. By late this year, Pan Am could be just a fond memory.

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