Skygods: The Fall of Pan Am

by Gandt, Robert

  “. . .the best damn flying club in the world.”

  “. . . shouldn’t be selling out. We built this operation right up from the rubble.”

  “I’ve been here for twenty years. Berlin is, you know, my hometown.”

  The party amounted to more of a wake than a celebration. They downed several crates of Berliner Kindl beer and talked about the glory days—Chicken Man and the AWARE caper and the Deacon and the Great Strike and Beaver Man and the countless low-visibility approaches.

  For some it was a good time to give Plaskett and his people a rough time about selling the Berlin operation. The trouble was, there was nobody—really—to be mad at. They wanted to argue that, damnit, Pan Am shouldn’t be selling out to Lufthansa. They wanted to believe that Pan Am, by God’s will and Allied decree and manifest destiny, had a right to be in Berlin forever.

  But they knew better. History had dealt them a joker. Every day they flew over the meandering scar in the earth that used to be the Berlin Wall. They had seen the throat-rasping, eye-wetting zeal of Germans reuniting with Germans. The Cold War was indisputably over. Like it or not, it was time for the Ausländer to pack up their flight kits and go home.

  By the time the party broke up, it was past three in the morning. Everyone was properly soused, and anyway, the Kindl was gone. The Lufthansa ground staff had already come in. They were taking down the Pan Am signs and schedules. They wanted to be ready for business first thing in the morning.

  “What are you going to do when Pan Am shuts down?”

  It was a question Martinside had taken to asking other pilots. The response was usually something like “Oh, I don’t know. Get another job, I guess.”

  “What kind of job? Where?”

  At this, a flash of annoyance. Pilots were uncomfortable talking about such things. It was like discussing your own funeral. “A flying job. I’d go to work for some other airline.”

  What the pilot meant was, he didn’t want to think about it. Among most there was a deep-seated conviction that Pan Am wouldn’t. . . not really. . . go Tango Uniform. Hell, the government would never allow such a thing. Pan Am was just too vital to America’s overseas presence. And all that baloney about astronomic losses—a million dollars a day, two million—well, they’d been hearing that twaddle for twenty-five years. How could that be true? If so it added up to a number like the national debt. Why would Pan Am’s creditors underwrite losses like that? Clearly those were paper losses, not real money. It had to be a charade to satisfy the banks and the IRS and to keep the unions from pushing for a raise, right?

  For some, this line of thinking gave comfort. It made it easier to keep their heads in the sand. But there were a couple of grim precedents out there. Braniff had gone Tango Uniform back in the early eighties, dumping its legion of pilots out on the street. For a decade they turned up everywhere, wandering the backwaters of commercial aviation, flying nonscheds and cargo and start-up commuters, joining the bottom of the list at surviving major airlines. Those were the lucky ones. For many it was the end of their flying days altogether.

  And now, most shockingly, Eastern Airlines. The fratricidal war and bloody death of Eastern sent a shudder through the Pan Am ranks. Every Pan Am pilot knew someone over there, an Eastern guy with a career and a life and a set of aspirations like his own, who had lost his job. Many had believed it would never happen. Nah, not Eastern, for Christ’s sake. Eastern is one of the oldest companies in the business, started by Rickenbacker himself. . .

  But there it was. Tango Uniform.

  Some of the tales were chilling. Former senior Eastern captains, accustomed to six-figure salaries, were losing homes, cars, airplanes, boats. Families were disintegrating. Divorce was devouring their community like a prairie fire. A disturbing number of mature, accomplished, professional airline pilots, unable to cope with the chaos of their lives, had committed suicide.

  So, thought a few realists over at Pan Am, maybe it could happen. And if it did. . . if the very worst happened and I hit the street like an evicted squatter. . . what am l gonna do?

  What Rob Martinside did, while Chairman Plaskett was handing over Pan Am’s Heathrow routes to United Airlines, was look for a job. Most of the jobs he found were in Pacific Rim countries—Japan, Korea, Taiwan.

  He was interviewed in Dallas by a company called Japan Air Services. It was a contract job, meaning that he would be retained for a finite time—five years—as an Airbus captain based in Tokyo. The salary was generous, considerably better than he made at Pan Am. The Japanese interviewers were polite, businesslike, utterly expressionless. They stared at Martinside as if he were a laboratory specimen.

  After the interview he was given a check flight in a simulator. A Japanese check pilot sat in the jump seat. He observed without comment or the slightest change of expression.

  A couple of weeks later they invited Martinside to Tokyo for a physical exam and an “orientation.” He talked to one of the contract pilots already there.

  “We’re hired help,” said the pilot, a former Eastern captain. “Behind all the bowing and shuffling, they’re just tolerating us. We have no place at their table over here. Just remember that. Fly their airplanes, deposit the checks, go home when it’s over. Play the game and you’ll get on fine.”

  Martinside wasn’t so sure. There were jobs in other countries. Most were not so good—freight-hauling operations and start-up charter outfits where you earned about the same wages as a New York taxi driver.

  The next month, Martinside received a formal offer of employment from the Japanese. They wanted him to report in five weeks. Martinside told them he wanted to think it over.

  For a week he thought it over. Then he declined. He didn’t know why. Pan Am hadn’t gone Tango Uniform yet. Now Martinside felt as if he were riding a raft in a rapids. It was too late to get out and walk. Besides, he wanted to stick around and see what happened.

  It didn’t take long. The next week something happened.

  Chapter Thirty-One

  The Yawning Abyss

  PAN AM SEEKS CHAPTER ELEVEN SHIELD

  — Header, Wall Street Journal, January 9, 1991

  The article covered the entire page. The phones in Pan Am’s public relations department rang all day. Was this it? Tango Uniform?

  “Certainly not,” declared the Pan Am spokesperson. “Pan Am definitely isn’t going out of business. The airline will continue to fly exactly as scheduled. And certainly no one is being laid off.”

  Nothing, really, was changing. It was just, you know, a routine bankruptcy.

  That was the party line. No one believed it, of course, least of all investors. Pan Am stock, which had once sold at $75 a share, bottomed that day, January 9, 1991, at 75 cents. Pan Am was, literally, a penny stock. Pan Am bonds, now junk grade, sold for 9 cents on the dollar.

  The real news was that Pan Am had made it through the first week of 1991. In December the European consortium Airbus Industrie had yanked the leases on twenty-one Airbuses operated by Pan Am. The airline was nearly a year in arrears on the lease payments and wasn’t able to give assurances that even the current payments could be made. The sale of routes to United, which was originally supposed to have netted $400 million—enough to survive this passengerless winter—had become mired in endless talks between the United States and British governments, whose blessings were needed to make the transfer.

  In the meantime, Pan Am had run through its cash reserve, including the $150 million from Lufthansa for the IGS. Now it was January of 1991. There wasn’t enough left in the kitty to make the mid-month payroll. A cessation of operations was imminent.

  But no one wanted to see Pan Am go under. Not yet. Not until everyone had gotten what he wanted from the corpse.

  The Bush administration certainly didn’t want to see it, and not because of any maudlin sentiment for a pioneering American institution. The Reagan-Bush people had already proved that they weren’t into saving airlines, but at this point they didn’t want
any more blood on their hands. They had already taken enough flak over Eastern Airlines, having been accused of coddling Frank Lorenzo and helping him bleed Eastern to death. Now Pan Am? No, if Pan Am was to go Tango Uniform, it had better be somebody else’s fault.

  And United Airlines desperately wanted to keep Pan Am alive. United wanted the London operation, which was still hung up waiting on a decision from the administration as well as the British government. Pan Am mustn’t be allowed to liquidate before closing that deal. After the routes were handed over to United, of course, then whatever happened to Pan Am was irrelevant.

  Thus was formed an unlikely Save Pan Am coalition. During the first week of January, they put together a labyrinthine scheme: if Pan Am would agree to file Chapter Eleven, and if the Bush administration, in the form of the Department of Transportation, would give the go-ahead to the sale of the London operation to United, then Bankers Trust New York would provide to Pan Am $150 million in operating funds, $50 million of which would be guaranteed by United Airlines.

  It wasn’t a deal that filled everyone with happiness, but it saved them all the messiness of a dead airline on their hands. And for Tom Plaskett, it bought time. He could still shop around for a buyer.

  There was something faintly humiliating about flying for a bankrupt airline. Especially for an airline that had soared as far and as high as Pan American World Airways. The tattered carpets in the Worldport, the fading paint on the airplanes, the understaffed check-in counters—it affronted the pilots’ dignity. An Airbus captain in New York summed it up: “It’s as if the queen mother was reduced to cleaning the johns.”

  The worst part was dealing with passengers—what few they had. Passengers figured that if the airline couldn’t pay its bills, it might be skimping on things like fuel and maintenance.

  “Captain, since the company is bankrupt, does that mean the airplanes don’t get fixed like they used to?”

  “No, sir. Our maintenance is the best in the business, just like always.” But these beat-up old airplanes need more than just fixing, the captain felt like saying. These clunkers need to be retired.

  “Pardon me, young man. Do you pilots have to work longer hours now that your airline is out of money?”

  “Not at all, ma’am. Our duty limits are set by the FAA. We fly the same number of hours as we always have.” But we sure don’t get paid like we ought to. We gave up a third of our compensation to save this goddamn company.

  Sometimes the little old ladies would put on a Mother Teresa smile and pat the pilot on the arm. “We’re all praying for your airline to make it, you know.”

  And that was the part they hated the most. Screw the little old ladies and their pieties. It was almost too much to bear, these patronizing ignoramuses praying that Pan Am, the airline of the Skygods, would make it.

  So they strode purposefully through the terminals, their heels clacking on the marble, eyes straight ahead. Things might be falling down around their heads. The bills might have gone unpaid. But, by God, Pan Am pilots could still comport themselves like Skygods.

  It happened sometimes that a pilot in full Skygod regalia—gold stripes, shiny brass wings, captain’s hat with gilded visor—would be standing outside his hotel, awaiting his limo to the airport. Up would come a little old lady—the same one with the Mother Teresa smile—from Iowa or Oklahoma. “Excuse me, bellman,” she would say. “Would you take my bags inside, please?”

  This happened to Captain Eric Archer. Archer’s handlebar mustache twitched slightly, and he drew himself up to full Skygodly height. For an entire second he beamed his fearsome gaze—the Look—down the length of his imperious nose at the little old lady.

  But only a second. Archer was a real Skygod, which is to say, one in full possession of his dignity. He doffed his cap. “Why, certainly, madam,” he said, and took the lady’s bags inside. He cheerfully accepted the tip.

  “We cannot absorb revenue loss without taking severe steps to lower our costs commensurate with the reduced revenue.”

  It was a classic Plaskettism, worthy of Yogi Berra. What the chairman meant was that he was pink-slipping another four thousand employees. Back in August when Iraq ventured into Kuwait and traffic slumped, Pan Am had eliminated two thousand jobs. Now, with this latest announcement, a full 20 percent of Pan Am’s work force had become casualties of the Gulf War.

  On January 17, 1991, international air traffic aboard American flag carriers virtually stopped. Desert Shield, the massive American and allied buildup on the border of Kuwait, was now Desert Storm. American warplanes were plastering Iraq.

  The only good news for Pan Am about the war and the resultant fear of flying was CRAF—the military’s Civil Reserve Air Fleet. Pan Am 747s and their crews were kept busy shuttling troops and supplies to the desert. But the rest of the Pan Am system looked like a ghost airline. Passengers stayed home, mesmerized by the televised images of laser-guided bombs dismantling Baghdad.

  It was the same old story. No passengers. Record losses. And no new cash, because the sale of the London operation to United still had not gone through. Even though the U.S. Department of Transportation had approved the transfer and the Department of Justice had cleared the transaction of antitrust problems, the British were still deliberating.

  No government in the world was more protective of its flag carrier than the United Kingdom. Juan Trippe himself had battled for most of a decade for the right to land his flying boats in British ports. The British were exasperatingly skilled at doing nothing at all until so much time had passed it no longer mattered.

  The coalition that had contrived to save Pan Am—the Bush administration, United Airlines, and Pan Am’s major creditors—pointed indignant fingers across the ocean. The blood would be on British hands now. After fifty-two years of service to Britain, in time of peace and war, Pan Am was about to collapse because of British dithering.

  Everything—routes, airplanes, typewriters, trash cans—was for sale. Most of all, Tom Plaskett wanted to sell the Northeast Shuttle—Ed Acker’s creation—which was a marginal moneymaker on its own but had done nothing to augment Pan Am’s troubled international business.

  There were a few shoppers. A company in Portland, Oregon named PacifiCorp declared an interest in buying the shuttle for $150 million and having it operated by Northwest. Another group based in Iowa and headed by a Pan Am pilot named Neil Sapp launched a quixotic effort of its own to take over the shuttle.

  One of the most persistent shoppers—and most irritating—was TWA owner Carl Icahn. Icahn was like a horsefly around Tom Plaskett’s head. Icahn had bought out TWA and was managing it in much the same enervating fashion as Frank Lorenzo had run Continental and Eastern.

  Like Lorenzo, Carl Icahn was a predatory creature, an animal of the roaring, deregulated eighties. What he lacked in hard cash he made up for in hubris. Although TWA was in scarcely better health than Pan Am, and even though Icahn was about to sell TWA’s own London gates to American Airlines, Icahn was talking about building a merged TWA-Pan Am airline into a new American megacarrier. He was offering $1.50 per share for Pan Am’s outstanding 150 million shares, and an additional $1 per share in subordinated notes.

  Pan Am and TWA? The notion caused head-shakes among those who remembered Juan Trippe’s own frustrated merger talks with TWA when it was controlled by Howard Hughes. Virtually every CEO since Trippe had fantasized about such a merger. It was a tantalizing prospect—a single American flag carrier that would span virtually the entire planet.

  The trouble was, it was too late. It would be a marriage of the enfeebled. And no one in the industry was taking Carl Icahn seriously as a builder of such an enterprise. Icahn’s style was to buy on the cheap, in a highly leveraged takeover, and then sell off assets to fund his huge indebtedness.

  These days Tom Plaskett was ignoring Icahn’s phone calls. And that was making Icahn furious. “Plaskett will go down in history,” Icahn told the Wall Street Journal, “as the General Custer of the airlin
es.” Almost every day’s business paper carried a revised condition of Icahn’s bid to buy out Pan Am. Pan Am would have to file Chapter Eleven before Icahn would make a deal. The shuttle would have to be included. And, oh, yes, that damn obstructionist Plaskett would have to go.

  In March 1991, after a hundred hours of ground war, Kuwait was retaken. Desert Storm was over. Spring was coming. Another travel season was at hand.

  During that same month, Her Majesty’s Government saw fit to grant approval to the transfer of Pan Am’s London operation to United Airlines. And so it was done. Thus did $290 million find its way into Pan Am’s empty coffers.

  As with the previous Pan Am-United deal, Pan Am pilots expected that a proportional number of them would go to United with the transfer. They were wrong.

  Screwed again!

  It was the most frequent utterance, or words to that effect, when the pilots read the item on the company wire.

  Forty-two airmen would go to United.

  Forty-two! No one could believe it.

  The route sale was a done deal. United would take possession of everything associated with Pan Am’s Heathrow operation—routes, gates, offices, vehicles, two 747-200 jumbo jets.

  The only unresolved issue had been, how many pilots?

  The Pan Am pilots contended that, based on the number of crews it took to service the routes being sold, 351 airmen should be transferred from Pan Am to United Airlines. The United pilots, who wanted to see no more senior Pan Am refugees added to their roster, insisted that the number ought to be only what it took to fly the two 747s— about forty.