Sunday, May 29, 2011

Pan Am - October, 1991

This is the last timetable from Pan Am. They were going broke in 1990-91 and sold their European route system and the Pan Am shuttle to Delta Air Lines in August, 1991. It tried to center its operations around a Miami hub, but it didn't last long. Pam Am would declare bankruptcy in December, 1991. But, before the bankruptcy filing, here's the details of the last ditch effort to survive:

NEW YORK — The bidding war for most of Pan American World Airway's assets ended Monday, after Delta Air Lines sharply raised its offer to $1.39 billion, securing for Delta a greatly expanded share of airline routes between the United States and Europe and Pan Am's prized Northeast shuttle.

TWA, United Airlines and American Airlines, which by Sunday night had raised their joint bid for Pan Am assets to $1.3 billion, withdrew their offer. TWA and United acknowledged defeat. American declined to comment.

Pan Am officials testified that without swift approval of the Delta offer, the airline probably would have been forced out of business next week, unable to meet its payroll. The Delta offer includes $80 million in interim financing to keep Pan Am going until the deal is completed in December.

Delta's purchase will give Pan Am's creditors $621 million in cash. Delta also will assume liabilities and make an investment that will allow Pan Am to survive in much smaller form and emerge from bankruptcy proceedings.

Once the dominant U.S. international carrier, Pan Am's operations mainly will be limited to its profitable Latin American routes served through its Miami hub. The agreement also guarantees jobs for 13,500 of Pan Am's 17,300 workers, with 6,600 to be hired by Delta and 6,900 to remain at the reorganized Pan Am. The airline has been in Chapter 11 bankruptcy proceedings since January.

Atlanta-based Delta, once exclusively a domestic airline, has muscled its way to becoming one of this nation's leading international carriers. Airline analysts said Delta now has a secure niche as the nation's third-largest airline, behind American and United.

Under its agreement with Pan Am, Delta will get Pan Am's shuttle linking New York with Boston and Washington and all of Pan Am's routes to Europe except for two that originate in Miami. Delta will take over Pan Am's European hub in Frankfurt, Germany. Delta also will acquire up to 45 Pan Am planes and airport landing slots in various U.S. cities, including coveted slots at New York's John F. Kennedy International Airport and La Guardia Airport.

Delta will end up with a 45% stake in the reorganized Pan Am. Pan Am's creditors will hold the other 55%. The two airlines will merge their frequent-flier programs. Once the deal is completed, Delta will honor Pan Am's tickets and has agreed to cover much of Pan Am's liability to current ticket-holders.

For weeks, TWA, American, United and Northwest Airlines had been vying with Delta for Pan Am's assets, forcing Delta to repeatedly increase its offer from its original proposal to buy some Pan Am assets for $205 million plus assumption of $60 million in debt. Pan Am Chairman and Chief Executive Thomas Plaskett had supported Delta's earlier lower offers. But Pan Am's creditors balked.

In recent days, TWA, American and United teamed up with a joint bid, with TWA Chairman Carl C. Icahn doing much of the negotiating with Pan Am and its creditors. On Sunday night Icahn dined with Pan Am creditors committee lawyer Leon Marcus, and proposed the group's final offer of $1.3 billion. That offer prompted Delta late Sunday night to boost its offer to $1.39 billion, from the $904 million it had offered on Friday.

Plaskett hailed Delta's new bid, noting that it will guarantee about 500 more jobs than earlier proposals and will provide financial aid to ensure Pan Am's post-bankruptcy survival. Earlier this month, Pan Am laid off 5,000 workers, nearly a quarter of the payroll.

Northwest, which is interested in acquiring Pan Am's routes between Detroit and London and between Los Angeles and Mexico City, continued to object to the Delta plan.

In addition to the $621 million in cash that will go to Pan Am's unsecured creditors, the Delta package includes assumption of $669 million of Pan Am's liabilities and an investment of $100 million in Pan Am to provide working capital.

Delta will make Pan Am's overdue lease payments on aircraft and engines. The $669 million includes up to $100 million that Delta agreed to pay to cover potential losses by the reorganized Pan Am, although Pan Am itself must cover the first $140 million of losses.

The deal is to close in two phases, with Delta acquiring the shuttle in September for $113 million. The rest will close when Pan Am's bankruptcy reorganization plan is approved by the court, which is targeted for Dec. 1.

Troubled TWA, which has announced that it too will go into bankruptcy proceedings under an agreement with its creditors, may benefit indirectly also. Longman said Delta's acquisition of Pan Am's European routes means that, if the other carriers want to buy additional transatlantic routes, they probably will have no choice but to buy them from Icahn.

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