Once-Mighty Pan Am Up for Grabs RISE OF AIRLINE OLIGARCHY?

By Guy Halverson, writer of The Christian Science Monitor | The Christian Science Monitor, July 26, 1991 | Go to article overview
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Once-Mighty Pan Am Up for Grabs RISE OF AIRLINE OLIGARCHY?

Guy Halverson, writer of The Christian Science Monitor, The Christian Science Monitor

THERE was a time - not too many years back - when Pan American World Airways was a shining symbol of United States economic and aviation prowess.

Pan Am planes, from the famed flying boats of the 1930s to the Boeing 747s of the jet age, roamed the air corridors of Europe, Latin America, and parts of Asia.

And always winging along in the distance in recent years was Pan Am's main US rival: Trans World Airlines. Taken together, Pan Am and TWA were the royal family of US international air travel - its flagship airlines.

Today the ruling family finds itself in deep trouble. Pan Am is in bankruptcy court. TWA, although not in bankruptcy, has substantial financial liabilities. Clearly, US air leadership is passing to a small group of carriers - American Airlines, United, Delta and Northwest.

"Those four carriers will likely dominate the (US) industry throughout the 1990s," says Earl Gaskins, who follows the airline industry for Provident Capital Management Inc. in Philadelphia. Because there are so few carriers involved, says Mr. Gaskins, the dominant survivors can be likened to an "oligarchy."

Geoffrey Dann, an analyst with Smith Barney, Harris Upham & Co., sees the same big four and possibly a fifth major player: Continental, which has an extensive route structure.

Eastern Airlines, which used to announce proudly that it carried more passengers than any other airline "in the free world," has disappeared into bankruptcy.

"The airlines that survive into the next century will be companies that have strong international operations as well as strength in the domestic US market," Gaskins says. "Load factors are higher on overseas routes than US runs," which means that overseas planes are more economically utilized.

In addition, passenger growth is expected to be faster abroad than in the US. Overseas revenue growth is also expected to climb faster than in the US market.

Financially strapped Pan Am now faces outright dismantling, underscored by the new bargaining this week for the carrier. TWA, in a linkup with American Airlines, has offered to pay $450 million to buy Pan Am. Under the complex deal, TWA would sell off Pan Am's routes to Italy, Spain, and Portugal (plus the domestic Pan Am Shuttle), to American Airlines for $250 million.

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Once-Mighty Pan Am Up for Grabs RISE OF AIRLINE OLIGARCHY?


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