At those events it was difficult to visualize, watching him, that this stooped, pear-shaped figure had once been a giant. It was hard to remember that in his day Juan Trippe commanded the attention of kings, presidents, prime ministers. You could forget that Trippe, with his astonishing clarity of vision, had peered into the future of aviation—and then made it happen.
The famous vitality had left him. In his late years he could hardly remember anybody’s name, not without his wife Betty at his side to cue him. In conversation he rambled and digressed as he always had, but more so. His thoughts seemed to dwell in another time.
He kept his silence during the last years he sat on Pan Am’s board, when his hand-picked lieutenant, Jeeb Halaby, was faltering. And he likewise remained silent while Bill Seawell grappled with the problems of Pan Am’s immense debt and an indifferent government.
He listened stoically to the insinuations that it was he who had sown the seeds of Pan Am’s ruin by burdening the airline with a half billion dollars’ worth of 747s. He wouldn’t respond to such talk. It wasn’t Juan Trippe’s style to argue with the Primitives.
In September 1980, three months after his eighty-first birthday, Trippe suffered a massive cerebral hemorrhage. For another seven months the old Skygod clung to life.
His funeral was held, of course, in New York, in St. James Episcopal Church. They all came, those who had loved or despised or been compelled to reckon with Juan Terry Trippe. They sang the Mariner’s Hymn and listened to a reading from Ecclesiastes. Beneath a splendid April sun, his seven grandsons bore Trippe’s coffin, draped in the American flag.
It was a fitting farewell to the Imperial Skygod. Just as fitting was the rechristening a few weeks later of a Pan American 747: Clipper Juan T. Trippe.
The Primitives were still forced to look at Juan Trippe’s monument. Each morning of every day of the year, it stood there astraddle Park Avenue, smacking Trippe’s enemies in the eye. The Pan Am Building was the monument to Trippe’s triumph over the Primitives.
Back in 1963, when he first stuck the Pan Am logo up there on the Manhattan skyline, Trippe had also laid the groundwork for Pan Am to eventually take over the whole package. And so in 1969 and again in l978—following profitable years—the airline exercised its options to increase its ownership. Pan Am bought out the original British investors for $15 million, and then the estate of the developer, Erwin Wolfson, for $8.6 million. Pan Am wrapped up the whole package by buying the land under the building from the Penn Central Corporation for $25 million.
That was 1978, when the airline was making money. This was now, 1980, and Pan Am was in serious trouble. The banks had lost patience with Pan American and, particularly, with General Seawell. The year was shaping up as the grimmest in company history. The general’s nearly-billion dollar acquisition of National, had wiped out Pan Am’s reserves and propelled the company toward the financial gutter.
Now Pan Am was losing over a million dollars a day. Something had to go. Seawell began looking for a buyer for the Pan Am Building.
It didn’t take long. The Metropolitan life Insurance Company stepped forward, agreeing to a price of $400 million. Even in the inflationary early 1980s, it was an outrageous sum—the highest ever paid for an office building in Manhattan. It amounted to a $294 million profit on Pan Am’s investment.
With the stroke of a pen the deal was done. Juan Trippe’s monument became the property of an insurance company.
Outwardly, nothing much changed. Part of the deal was that the airline could lease its several floors of executive office space until the end of the century. More important, the building would still bear the company logo. Manhattan would still be smacked in the eye every morning with the fifteen-foot-high salute to Trippe’s Primitives: PAN AM.
But inwardly, everything had changed. To the executives and staffers who still rode the elevators to their respective floors in the airline headquarters, it wasn’t their building anymore. “We’re only tenants now,” said a staffer. “Just like the shopkeepers on the mezzanine.” The change in status spoke volumes to them about where the company was headed. The Imperial Airline had surrendered its crown jewel.
The worst part was, the monumental sum Pan Am had received for the building—$400 million—still wasn’t enough. The airline was losing money faster than even the sale of the world’s most expensive office building could cover.
After the ghastly losses of 1980—$248 million for the year—the sale of the Pan Am Building was mourned but accepted. At least the worst of the National Airlines assimilation was behind Pan Am. Now, it was hoped, the hemorrhage would stop and Pan Am could get back to the business of making money.
But the hemorrhage didn’t stop. The recession that began in the late seventies was paralyzing the airline industry. In the first quarter of 1981, the airline lost a record $115 million. Pan American World Airways, which had earned record profits of $118.8 million in 1978 and $76.1 million in 1979, had blown its cash reserves. Even the proceeds of the Pan Am Building sale evaporated like a vanished contrail. Pan Am’s debt and lease obligations swelled to more than $1.3 billion.
Seawell was in a corner. Feeling the hot breath of the bankers as well as his own board of directors, he frantically cast about for something else to sell.
It was then that the pilots—the Blue Pukes—came up with a good idea. They sent the suggestion to the chairman: Did Pan American want to sell something? How about National Airlines, General? Maybe you can sell it to Frank Lorenzo.
Chairman Seawell, even if he got the joke, didn’t respond. In any case, it was too late. National Airlines didn’t exist anymore. The general had spent a billion dollars making it disappear.
That summer Pan Am’s executives, led by Seawell, met with the airline’s lenders. Thc Pan Am officers delivered a briefing wherein they predicted the company’s losses for 1981. They would exceed $300 million, the greatest deficit ever sustained by an airline.
The bankers were stunned. They had had no idea it was that bad. “Do you really plan to lose that much?” asked one horrified financier.
Glum headshakes. “That’s the way it looks.”
The banker was speechless. He rose and stalked out of the meeting.
The bankers turned the screws on Pan Am. Led by Citibank, the lenders proceeded to slash Pan Am’s revolving credit in half. They demanded a first mortgage on all outstanding shares of one of Pan Am’s profitable subsidiaries, the Intercontinental Hotel chain, as well as a mortgage on nine of the Douglas DC-10s acquired from National..
But the losses continued. Pan Am’s cash crunch was getting worse, not better. It was hardball time. Something—or someone—had to go.
By now, even Pan Am’s lethargic board of directors, most of whom had been selected by William Seawell, had had enough of the general. And it wasn’t due just to the enormous losses and the National Airlines mess.
Nobody could get along with Seawell anymore. Reports were coming to the board about the tantrums and shouting matches on the forty-sixth floor. In November even easygoing Dan Colussy, whom Seawell had appointed president, stormed out after a series of fights with the chairman. Since the door slammed behind Colussy, the office of president had been empty. No one wanted it. Chairman Seawell was running the whole show, and not doing very well at it.
The August 8, 1981, Wall Street Journal reported the inevitable:
SEAWELL TO RETIRE EARLY. . .
The new president and interim chief executive officer was Bill Waltrip, a bright and bland forty-three-year-old executive vice president. Waltrip had taken the job with one crucial stipulation: he would not be accountable to Chairman Seawell. He would report directly to the board of directors. Though Seawell would continue to hold the title of chairman until his replacement was found, the job, for the time being, was mostly ceremonial.
“For Mr. Seawell, it would mean retirement a year before he reaches sixty-five, the normal retirement age at the airline,” said the press notice.
The official line was that the chairman was retiring early. The public relations department took pains to point out that General Seawell, after all, had been around for over eight years, longer than any other chairman except Trippe.
As part of the same shake-up, the board of directors announced that the corporation was being restructured to consist of three subsidiaries: the airline itself, Pan American World Airways, which would be headed by Waltrip; Pan Am World Services, Inc., an aviation services contractor under Tom Flanagan; and the Intercontinental Hotel chain, managed by Paul Sheeline.
What the announcement didn’t say was that one of the three subsidiaries was already gone.
Eleven days after the announcement of Seawell’s retirement, the August 19 Wall Street Journal reported a move that had been in the works for the past month:
PAN AM TO SELL ITS HOTEL UNIT; CANCELS PLANES
Pan American World Airways announced a series of drastic financial steps in an apparent attempt to avoid insolvency. The airline said it will sell its hotel subsidiary, Intercontinental Hotels Corp., its only major money maker. . .
Though the announcement didn’t name a buyer, the deal had already been cut. The new owner of the Intercontinental chain would be the omnivorous British conglomerate Grand Metropolitan. Its products included Alpo dog food and Watney’s beer. It would ante up $500 million for the luxury hotels.
The announcement went on to report that Pan Am was canceling its order for eight Boeing 727 jets costing $200 million. “While the order had been a firm one, Pan Am told Boeing it didn’t have the money to buy the planes. . .”
Besides canceling the 727s, Pan Am announced that it would also postpone delivery of two new Lockheed L-1011s with which it intended to service European destinations. Already the airline had sold eight 747s to a leasing company, then rented them back.
After this drastic surgery, Pan American would live on, at least for another season. But for how much longer? How long could its real estate business support its airline business?
“We’re selling the last of the family jewels,” said a Pan Am executive.
Around the system, pilots stood in front of the bulletin boards and read the company wire reporting the dramatic changes in the corporation. There was little celebration. There was no mourning whatsoever. Mostly they stood there, thinking.
It had been a hell of a ride. During the reign of Chairman Seawell their careers had undergone profound change. For many, their sweetest and most hopeful aspirations had turned to dust.
Gone was the SST.
Gone was all the prideful ballyhoo about flying to the moon.
Gone—at least for the thousand or so who’d been clotheslined by the Gill Award—was their chance to command a Pan Am jet.
Gone, literally, were the several hundred furloughed pilots whose jobs had vanished in the Seawell cutbacks.
Now Seawell was gone. And for most of the pilots reading the bulletin board, that was okay with them.
A special committee of the board was appointed to select Seawell’s successor. During the summer of 1981 the committee members combed the industry. They were looking for candidates from outside the company. They wanted a man who had both financial and airline experience, dual criteria that narrowed the list considerably. Most of the candidates who possessed those qualifications responded with words to the effect that they had no interest in taking command of the Titanic.
The search went on. What Pan Am needed, everyone agreed, was someone dynamic. Someone who would take command. Someone who would seize the faltering company by the scruff of the neck, give it a good shaking, and restore Pan American to its old imperial glory.
In short, they were looking for a Skygod.
Down South, at a little airline called Air Florida, they found someone who seemed to fit the description.
Part III
Impact
Chapter Twenty-three
The Texas Huckster
Never trust a man who uses an initial for his first name.
—Capt. J. P. Wood
He thrust out his hand and said, “Hi. I’m Ed Acker.”
The voice was forceful. Through the framed spectacles the eyes drilled into you like lasers. C. Edward Acker was a big man, well over six feet, and you could tell that he had once been an athlete. The jawline had gone a little soft, but the handshake was hard as granite. He was hoisting the liter-sized steins of Pilsner as if they were thimbles.
He had come to Berlin—as he came to all the other pilot bases—to introduce himself. So the pilots raised their beer steins with the new CEO and looked him over. And, generally, they liked what they saw. The guy was clearly in charge.
But what he was telling them wasn’t exactly what they wanted to hear. Here he was, new in the job, and he was talking pay cuts. It was hardly the way to endear yourself to the workaday grunts. But he was also talking growth. He intended to return Pan Am to profitability, Acker said, by increasing the volume of operations. “We’re going to fly our way to profitability,” he told the troops.
And to that they raised their beer steins and cheered. Finally someone up there was making sense. This guy Acker was light-years removed from the aloof and lordly Pan Am executives they’d known in the past, who used to talk down to them in their clipped old-school accents. Never before had they seen a chairman of the board like this one, knocking back beers and going on in a Texas twang about how Pan Am was going to rise up and kick ass again.
They were ready to believe it. Count us in, Ed!
For a while a kind of euphoria pervaded Pan American. General Seawell was gone, and that in itself was a reason for feeling good. The general, after all, had been the architect of the National debacle, which had done for Pan Am what tornadoes did for Kansas.
Now they had this fellow Acker, who seemed to be a real leader. He was encouraging them to believe that maybe. . . just maybe. . . they were still riding a winner. Pan American might just still be aimed at the stars.
The AWARE crowd, aware of which way the wind was blowing, got rid of all their old WE HAVE THE URGE TO MERGE pins. They stamped out several thousand new pins that proclaimed I’M AN ACKER BACKER. All over the airline, on uniforms and coveralls and blouses, the new pins appeared. Suddenly the place was full of Acker Backers.
Ed Acker was fifty-two years old. A native of Dallas, he was the first CEO in Pan Am history without an East Coast pedigree. Acker had never set foot within the ivied halls of Yale or Harvard. He had stayed close to home, graduating from Southern Methodist University, where he studied psychology and economics.
Acker had made his reputation in the airline business as president of Braniff International. That was back when Braniff was flying high. He left in 1975, with Braniff still declaring big profits, and for a year he worked as president of Transway International, a New York-based freight forwarding company. For another year he headed Gulf United Corporation, a financial holding company.
And then he went to a little regional airline called Air Florida. In 1977, the year Acker assumed the top post, the airline had an annual revenue of $7.8 million. In 1980, during its last year under Acker’s directorship, Air Florida took in $161.2 million. Air Florida was one of the deregulated era’s big success stories, and Acker was getting all the credit.
From the beginning it was clear that Ed Acker’s management style was unique. “You never knew what the guy was going to do,” said a soon-departed executive. “He was a vest-pocket CEO. He carried stuff around in his pockets—airplane deals, new routes, asset sales—that nobody else knew about. Then he’d spring them on you.”
Acker was as different from Seawell as a salesman was from a soldier. Acker dismantled the general’s bureaucratic management structure and instituted, instead, “round table” management, in which problems were aired in open sessions of department chiefs. Seawell appointees quickly began to vanish from the meetings. Acker brought in new managers from his old airline, Braniff, which in 1981 was teetering on bankruptcy. Bill Waltrip, who
had become the airline president just before Seawell’s departure, sniffed the air and concluded that Acker intended to be not only the chief executive officer but the chief operating officer as well. Waltrip took his leave.
As the CEO of Air Florida, Acker had tinkered constantly with the little airline’s southeastern routes, adding and removing destinations at his whim. Now Ed Acker had a global route system to tinker with. According to an industry article, “his favorite reading is the OAG (Overseas Airline Guide), which he thumbs through in search of new cities to connect.” The trade journal Aviation Economist predicted that “for an airline the size of Pan Am to be scheduled by a peripatetic one-man research department could lead to nothing but trouble.”
During the summer of 1982, Acker added dozens of new international destinations. By the end of autumn, he was closing most of them. He severed Pan American’s historic round-the-world route by eliminating the India-Bangkok-Hong Kong segments. Pan Am’s Caribbean destinations, which had been dropped because of their low profit yield, he cranked up again.
In the last year of the Seawell regime, a new marketing strategy had been announced: Pan Am would shift from its strong domestic presence, for which it had paid a total of nearly a billion dollars, to concentrating on its profitable international routes. In the new Seawell strategy, the only real purpose of the domestic system would be to feed the international routes.
Forget all that, said Ed Acker, the new CEO. Back to a domestic strategy. Pan Am’s domestic revenues, which accounted for 30 percent of Pan Am’s activity, would have to be increased to 40 percent.
Within six months, Acker had changed his mind. Forget domestic expansion. For the time being Pan Am was back to the old hub system—connecting its now-anemic domestic network to the international route system.
Skygods: The Fall of Pan Am Page 22
