Pan Am Seeks Way out of Woods Protection, Promised Financing May Help Carrier Survive, but Not as One of the Mega-Carriers. BANKRUPTCY FILING

Article excerpt

THEN there were six.

The number of major United States airlines that have avoided bankruptcy slipped to six this week as Pan American Corporation filed for protection from its creditors.

The move, announced Tuesday, means that the New York-based airline - once the flagship US carrier - will join Continental and Eastern airlines in bankruptcy court. It plans to maintain a full schedule of flights. But, analysts expect pressure to mount on weak carriers as long as high jet-fuel prices and the recession continue.

In the long run, the airline industry will be dominated by mega-carriers.

"I think the consolidation will continue," says David Pizzimenti, airline analyst for Nomura Research Institute America Inc.

Under this scenario, a handful of huge carriers will dominate the market. Three of the top spots are already taken by United, American, and Delta airlines, analysts say. The other carriers will have to vie for the remaining one to three top spots. Pan Am almost certainly will not be one of the contenders, they add.

"It's always chancy when a carrier reduces its size and sells off its valuable assets," says Lee Howard, chief executive officer of Airline Economics Inc., a Washington, D.C., consulting firm. In Pan Am's case, it will be especially difficult, he adds.

The carrier's troubles date back to the 1960s, when it made costly acquisitions of new airplanes. When the industry was deregulated in the 1970s, Pan Am was unprepared for the heated competition, and didn't build a network of domestic flights to feed its overseas operations. …