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Team Name: Aesthetic Aces
Team Members Names: ADHISRI S, AVINASH SAKTHIVEL P M,
ALEX SEBASTIN A.
Contact: 9345587338
E-Mail ID: adhima295@gmail.com
College: E.G.S. PILLAY ARTS AND SCIENCE COLLEGE,
NAGAPATTINAM.
Domain Selected: Airline Domain.
Company’s Name: Pan American World Airways (Pan Am)
Headquarters: New York City, Miami, Florida.
Key People:
Juan T. Trippe(CEO, 1927–1968
Harold E. Gray (CEO, 1968–1969)
Najeeb E. Halaby Jr (CEO, 1969–1971)
William T. Seawel (CEO, 1971–1981)
C. Edward Acker(CEO, 1981–1988)
Thomas G. Plaskett(CEO, 1988–1991)
Russell L. Ray Jr.(CEO, 1991)
Company’s Background :
Pan Am or Pan American World Airways was founded by two US Air Force
majors. It was initially an airmail service between Key West Florida and Havana
Cube in 1927. It was the United State's first scheduled International Flight .
Within a year , Aviation visionary Juan Trippe took controls and introduced the
first passenger services to Havana. They expanded the Pan Am's network after
their success .
By 1930 , they established flying routes through the most of Central and South
America. By 1958, Pan Am offered regular flights to every continent except
Antartica. On October 26, 1958 Pan Am becomes the first American airline to
fly jet aircraft from New York to Paris within eight hours. Thus , the world
entered the era of Jets.
Pan Am’s Peak Stage :
During its peak between the late 1950s and early 1970s, Pan Am was world-
renowned for its advanced fleet, experienced and highly trained staff, and
numerous amenities . It is well known for its aviation style even after decades .
During 1960's Pan Am amazed the world with its vast 150 destinations and 80
countries. After their massive success they titled themselves as "The most
experienced Airlines in the World".
At the time of Pearl Harbor, Pan American operated on 88,478 total route
miles serving 52 countries, and had 8,750 employees (including new Africa and
Air Ferry divisions), with 162 aircraft, 192 radio/weather stations and 300
airports. During the Second World War, Pan American operated many services
for the military and other branches of the government, performing many heroic
missions.
Pan Am Innovations: Creating Pleasant Airline Travel
A couple of Pan Am’s earlier innovations (late 1940s to early 1950s) in
passenger service between the continental U.S. and other places—predominantly
Hawaii, the Caribbean, and Europe—was the introduction of “Sleeperette
Service” and “Club Lounges” on Boeing 377 flights (more popularly known as
Pan Am’s Stratocruisers, specifically “The President” or “El Presidente” service).
Pan Am’s Sleeperette Service featured large, comfortable armchair seats during
the daylight portion of a flight, and at night the seats converted to bed-length
compartments, complete with curtains for passenger privacy. Also available on
Boeing 377 flights was Pan Am’s “Club Lounge,” which was located on the lower
deck of the airplane.
The Club Lounge was an informal place where passengers could congregate,
socialize, and order “anything from a demi-tasse to a tall cold one.” In an era
where airline travel still remained far more time-consuming and uncomfortable
than it is today, these innovations from Pan Am were instrumental in creating
comfortable environments and positive experiences for its passengers.
Before and after the flight, Pan Am endeavored to make flying as convenient as
possible for its customers. One way in which they tried to accomplish this was
with the construction of the Pan Am Terminal, later renamed the Worldport, at
JFK Airport. The terminal had a large, saucer-like roof that extended far beyond
the building and allowed aircraft to be parked underneath it. The impetus behind
this design was to bring the plane to the passenger, thus creating proximity and
convenience for Pan Am’s travelers. Another innovation that Pan Am introduced
to make travel more convenient was its helicopter flights. In 1965 they partnered
with New York Airways to provide helicopter service between the Pan Am
Building (now the MetLife Building) in Manhattan and JFK Airport in Queens.
Later, Newark Airport was also added to this rotation. Despite the convenience
that the helicopter service added for some passengers, Pan Am stopped these
flights in the late 1970s after a series of fatal crashes on the route.
In the 1980s, Pan Am debuted its WorldExpress program, which allowed their
passengers to bypass the hassles that came with connecting flights. Pan Am
advertised WorldExpress as “One Ticket. One Check-In. One Baggage Claim. To
The World,” and they made sure that connecting flights for their passengers were
“just steps away, not terminals away.” Pan Am’s WorldExpress program thus
strove to make airline travel as easy and convenient as possible for its passengers
by eliminating some of the logistical barriers that continue to make travel difficult
today.
After creating good airline experiences, of course, came the actual vacation or
occasion for travel. While we would probably all agree that the post-flight
experience is completely out of airlines’ hands, in the 1970s Pan Am decided to
team up with an insurance agency and guarantee its passengers a pleasant post-
flight experience. In 1971 Pan Am introduced the “Weatherproof Vacation,”
which it accomplished through a partnership with the American Home Insurance
Company. For an “attractive” premium, Pan Am’s passengers could purchase
Vacation Weather Insurance. This insurance plan ensured that if Pan Am’s
passengers experienced rain or otherwise adverse weather on their vacations, they
could receive a portion of their expenditures back. With its global reach well
established by the 1970s, the assurance of a pleasant vacation was an innovative
way for Pan Am to ensure that its passengers’ positive experience extended
beyond that of the flight.
Pan Am commissioned IBM to build PANAMAC, a large computer that booked
airline and hotel reservations, which was installed in 1964. It also held large
amounts of information about cities, countries, airports, aircraft, hotels, and
restaurants.
The computer occupied the fourth floor of the Pan Am Building, which was the
largest commercial office building in the world for some time.
DOWNFALLS :
The magic era ended with the passing on of Juan Trippe in 1981, and a
succession of managements were unable to regain profitability. The rapid rise of
world terrorism, culminating in the tragedy of Lockerbie, was the final
deathblow.
Downfall Factors:
1.OIL CRISIS:
The series of oil crises of the 1970s took their toll on Pan Am. The first crisis
emerged in October 1973 after the members of the Organization of Arab
Petroleum Exporting Countries (OAPEC) proclaimed an oil embargo, causing the
price of jet fuel to skyrocket. The price of oil had risen by 400% which led to the
serious downfall because Pan Am essentially became reliant on high‐priced
foreign fuel. The increase in fuel prices added some $200 million to the
company’s cost sheet in the year after the embargo.
Pan Am had invested in a large fleet of Boeing 747s expecting that air travel would
continue to increase. It did not, as the introduction of many wide-bodies by Pan
Am and its competitors coincided with an economic slowdown. Reduced air travel
after the 1973 Oil Crisis made the overcapacity problem worse. Pan Am was
vulnerable, with its high overheads as a result of a large decentralized
infrastructure. High fuel prices and its many older, less fuel-efficient
narrowbodied airplanes increased the airline’s operating costs. Federal route
awards to other airlines, such as the Transpacific Route Case, further reduced the
number of passengers Pan Am carried and its profit margins.
The acquisition of National Airlines for $437 million further burdened Pan Am’s
balance sheet, already under strain after financing the Boeing 747s 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.
The airlines had incompatible fleets (apart from the Boeing 727) and corporate
cultures (partly as a result of National 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.
Attempts To Build A US Domestic Network
Since the 1930s Juan Trippe had coveted domestic routes for Pan Am. Through
the late 1950s and early 1960s, and in the mid-1970s, there were talks of merging
the airline with a domestic operator such as American Airlines, Eastern Air
Lines, Trans World Airlines or United Airlines. As rival airlines convinced
Congress that Pan Am would use its political clout to monopolize US air routes,
the CAB repeatedly denied the airline permission to operate in the US, by growth
or by a merger with another airline. Pan Am remained an American carrier
operating international routes only (aside from Hawaii and Alaska). The last time
Pan Am was permitted to merge with another airline prior to the deregulation of
the US airline industry was in 1950, when it took over American Overseas
Airlines from American Airlines. After deregulation in 1978, more US domestic
airlines began competing with Pan Am internationally.
National Airlines Takeover
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's
Texas International that boosted National's stock price, but 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, already under strain after financing the Boeing
747s 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. The airlines had incompatible fleets (apart from the Boeing
727) and corporate cultures (partly as a result of National 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. To provide additional seating capacity for its 1983 spring/summer
season, the airline also acquired three passenger Boeing 747-200Bs from Flying
Tigers, who took four of Pan Am's 747-100 freighters in return.
Fleet restructuring:
Despite Pan Am's precarious financial situation, in summer 1984 Acker went
ahead with an order for new Airbus models in wide body and narrow-bodied
aircraft, becoming the second American company to order Airbus aircraft, after
Eastern Air Lines. These advanced aircraft, economically and operationally
superior to the 747s and 727s Pan Am operated at the time, were intended to make
the airline more competitive. In 1985 new A310-221s began replacing 727s on
the Internal German Services (IGS) and A300s flew in the Caribbean networks
later the same year while from early 1986 additional new longer range A310-222s
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). The
first A310 ETOPS transatlantic route was New
York to Hamburg, Detroit to London followed shortly after that. 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 US domestic and European feeder
routes, and most of its IGS services, continued to be flown with obsolete 727s
until the airline's demise. This put it at a disadvantage against rivals operating
state-of-the-art aircraft with 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.
Financial, operational and reputational setbacks:
In 1987, Towers Financial Corporation, led by its CEO Steven Hoffenberg and
his consultant Jeffrey Epstein, unsuccessfully tried to take over Pan Am in
a corporate raid with Towers Financial as their raiding vessel. Their bid failed.
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
bombing of Pan Am flight 103 above Lockerbie, Scotland, resulted in 270
fatalities. Faced with a $300 million lawsuit filed by more than 100 families of
the victims, the airline subpoenaed records of six US government agencies,
including the CIA, the Drug Enforcement Administration, and the State
Department. Though the records suggested that the US 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.
Terrorist Attack:
The 1988 Lockerbie disaster marked the end of a tough decade for the
operator. The bombing of Pan Am Flight 103 on December 21st, 1988, saw a
total of 270 people lose their lives. The tragedy was a public relations disaster
and led to a $300 million lawsuit. There was also a fine from the Federal Aviation
Administration (FAA) following 19 security failings. Pan Am flight 103,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. After this Pan Am lost many of its customers.
The first Gulf War triggered by the Iraqi invasion of Kuwait on August 2, 1990,
caused fuel prices to rise, which severely depressed global economic activity. This
in turn caused a sharp contraction of worldwide air travel demand, plunging once
profitable operations, including Pan Am’s prime transatlantic routes, into steep
losses. To shore up its finances, Pan Am sold most of its routes serving London
Heathrow — arguably Pan Am’s most important international destination — to
United Airlines.
Bankruptcy:
Pan Am was forced to file for bankruptcy protection on
January 8, 1991. Delta Air Lines purchased the remaining profitable assets of Pan
Am, including its remaining European routes (except one from Miami to Paris),
and Frankfurt mini hub, the Shuttle operation, 45 jets, and the Pan Am
Worldport at John F. Kennedy Airport, for $416 million. Delta also injected
$100 million becoming a 45 percent owner of a reorganized but smaller Pan Am
serving the Caribbean, Central and South America from a main hub in Miami.
The airline's creditors would hold the other 55 percent.
The Boston–New York LaGuardia–Washington National Pan Am Shuttle service
was taken over by Delta in September 1991. Two months later Delta assumed all
of Pan Am's remaining transatlantic traffic rights, except Miami to Paris and
London.
In October 1991, former Douglas Aircraft executive Russell Ray, Jr. was hired as
Pan Am's new president and CEO. As part of this restructuring, Pan Am relocated
its headquarters from the Pan Am Building in New York City to new offices in
the Miami area in preparation for the airline's relaunch from both Miami and New
York on November 1. The new airline would have operated approximately 60
aircraft and generated about $1.2 billion in annual revenues with 7,500
employees. Following the relaunch, Pan Am continued to sustain heavy losses.
Revenue throughout October and November 1991 fell short of what had been
anticipated in the reorganization plan, with Delta claiming that Pan Am was
losing $3 million a day. This undermined Delta's, Wall Street's and the traveling
public's confidence in the viability of the reorganized Pan Am.
After selling most of its international routes to raise operating funds, Pan Am
ended in bankruptcy in January 1991. According to the court filings, Pan Am
shared that its combined assets added up to $2.1 billion. However, its liabilities
totaled up to $2.8 billion.
Revival Strategies:
In hopes of saving money, Pan Am executives began talks with Trans-World
Airlines (TWA) for route-swapping. The route swap dictated that only one airline
would fly to a certain destination. These route swaps saved Pan Am between $17
and $24 million dollars in the first year. Pan Am had made money. Pan Am made
nearly $100 million dollars. People were traveling again, and the executives were
beginning to see the benefits of the route swaps. This had dragged the company
from near extinction.
Consequences:
The Airlines lost basic trust of security in its customers.
People started associating Pan Am as the major target for terrorists.
Despite company’s constant promises of commitment to increasing its
airline’s security the public was simply not willing to fly with Pan Am
anymore.
Ultimately company stood helpless to reinforce the diminishing
relations with its customers and people in general.
After three years of flying with empty seats since Pan Am flight 103
Disaster, company went Bankrupt and Shut down.
Conclusion:
On December 4th, 1991, Pan Am formally ceased operations after months of
financial distress , which ended an era for commercial aviation. The morning after
its collapse, The Day carried the headline, "Pan Am Takes Its Final Flight Into
History." For nearly 8,000 employees and millions of fans, the airline's demise
was an emotional moment that is remembered till now. Some crisis are too big to
recover from,Pan Am handled Lockerbie disaster as best as it could,but the
decline in public confidence proved too much leading to ultimately shutting down
of the airlines. Even after three decades Pan Am is well known for its brand,
iconography, and contributions to the industry even in this 21st century.