Skygods: The Fall of Pan Am

by Gandt, Robert

  The matter had gone before a federal arbitrator named Arthur Fishbein. Fishbein listened to both arguments, and then decided. Part of his decision was based on what he saw happening at the two airlines. Pan Am was the Incredible Shrinking Airline. United was expanding. It was the old “expectations” formula carried forward from the National acquisition. The Pan Am pilots shouldn’t have high expectations.

  Forty-two. That was the number of pilots the arbitrator figured should go with the two 747s being transferred. Never mind the rest of the routes being sold that would be flown by United pilots.

  It was a crushing defeat for the Pan Am pilots. Even the United pilots were shocked at their success. United had just captured Pan Am’s premier routes, a prize that everyone knew would create employment for several hundred United Airlines pilots.

  It was almost a repeat of the sale to Lufthansa wherein Pan Am had cashed in one of its crown jewels, an operation flown by Pan Am pilots for over forty years. Not one airman had gone with the sale.

  Now London. The pieces of Pan Am were being peddled like furniture in a garage sale. And no pilots went with the pieces.

  The news spewed like a cloud of swamp gas through the cockpits and crew rooms. There was talk of mutiny. Plaskett had sold them out, they said. The chairman had it in his power—in his responsibility to his people—to negotiate a fair number of employees to go with the routes. And he wasn’t doing it. People were not part of the equation.

  And what about the Air Line Pilots Association, the union to which both Pan Am and United pilots paid serious dues? What the hell was a union for, asked the enraged Pan Amers, if not to protect the careers and livelihoods of its members?

  Such questions were academic. The pilots already knew the truth about unions and airlines. ALPA was unable to do anything to save their jobs. As a national union, ALPA had no clout in merger affairs because it subsisted on dues money from its member airline pilots. And of all ALPA’s member councils, none paid more dues or wielded more clout than the United Airlines council.

  Pan Am, in the big picture, didn’t really count.

  Rumors flew, literally, at the speed of light. They flashed between passing jetliners over the North Atlantic.

  “Rumor check,” a voice would say on 131.4, the company frequency.

  From somewhere in the night sky a voice from another airplane would answer. “Here’s the latest. We’re being bought out by the Yellow Cab Company.”

  Someone else would jump in. “I heard it was Greyhound Bus.”

  “Nah. They don’t want to bring Pan Am up to their pay scale.”

  There might be as many as half a dozen airplanes exchanging wild stories, six miles above the ocean. They spoke what was foremost on their minds.

  “Furlough letters are out.”

  “Already got mine. After this trip, I’m outa here.”

  “Where to?”

  “Anywhere. American’s hiring. So are Delta and United.”

  These were the young guys talking—real new hires. They would be the first to be furloughed. It was hard on them, being out of a job. But they were also the ones who could get jobs elsewhere. The old new hires were the ones who were unhirable.

  “Someone said he heard a team from Delta was looking over the property yesterday in New York. Does that mean Delta is buying us?”

  No one answered. In the darkened cockpits over the North Atlantic, pilots were shaking their heads. That was really a wild one. Of all the rumors, that was the wildest.

  Chapter Thirty-Two

  Delta

  For those who go to Delta, it’s a sunny day. For those who get furloughed, it’s raining like hell. For those who will stay with Pan Am, it’s. . . cloudy.

  —PAN AM CAPTAIN BOB FERREL, ALPA officer

  To the astonishment of everyone, the rumor contained truth.

  Delta? It caused a lot of head-scratching in the airline business. Why would an outfit like Delta Airlines, Southern and conservative, slow-moving as the Chattahoochee in August, do something so uncharacteristic as take on down-at-the-heels, teetering-on-the-brink-of-decrepitness Pan American?

  Because Delta Airlines was an awakening giant. Since its beginning back in 1928 as a crop-dusting outfit in Monroe, Louisiana, Delta had expanded in shrewd, cautious increments. By the end of the 1980s, after the first decade of deregulation, Delta had grown into the third-largest airline in the country. Delta was one of the first airlines to construct a hub-and-spoke system, concentrating its activity at “hubs” like Atlanta, Dallas, Cincinnati, and Salt Lake City, with feeder routes—“spokes”—radiating outward to its hundreds of satellite destinations.

  The “Big Three”—American, United, and Delta—had all prospered under deregulation, developing hub-and-spoke networks, frequent-flier programs, computer reservations systems, and sophisticated yield management strategies that enabled them to overwhelm their regional competitors. While American and United, both flush with cash, spent over a billion dollars buying up the routes of Pan Am, TWA, Continental, and Eastern, Delta had held back.

  “We sit around quietly doing our thing,” Delta’s president, Whit Hawkins, liked to say, “while the rest of them go around killing each other.”

  But now, down in Atlanta, the thought was occurring that perhaps they had sat around long enough. It was catch-up time. “Slowness is their hallmark,” said Ed Greenslet, an airline consultant, about Delta’s management, “but when they make a move, it’s a considered move and it has a lot of internal logic.”

  The logic in this instance was that Delta had no choice. Delta had to break out of its carefully constructed domestic shell and become a player in the global arena. It was the only way it could stay abreast of rivals American and United, which had just captured, respectively, the London Heathrow rights of TWA and Pan Am. With the collapse of communism, the markets of Europe were changing with each morning’s headlines.

  To begin building a European operation from scratch was not feasible. It would take decades, even if Delta could somehow get the reciprocal government concessions, an event as likely as a return of the Zeppelins.

  In April 1991, Delta had a $476 million stock offering, its first since 1962. The purpose was to raise money for expansion. And here was the Pan Am European system, already in place. It was a turnkey deal. All Delta had to do was change the paint schemes on the airplanes and print new schedules.

  Delta didn’t even have to hire more pilots. They went with the package.

  In the crew rooms and cockpits of the Financially Troubled Pan American, there were smiles. The broadness of the smiles was directly proportional to the seniority of the smilers.

  Delta was talking about taking seven hundred pilots. Naturally, that meant Pan Am’s senior seven hundred pilots, right?

  Sure. That much, at least, seemed cast in stone. After all, seniority was the name of the game in the airline business. How an entire seniority list merged into another airline’s seniority list was sometimes controversial as in the National and Pan Am merger in 1980. But within one’s own airline, one’s relative position on the list never changed. Since the infancy of the airline business, everything had been done by seniority. You could bitch about not having it. You could stew over the senior pilots getting the plums and the juniors getting the dregs. But everyone agreed it was the only fair system. All you had to do was wait your turn. Sooner or later even you, given enough patience, would be senior. It was a tyrannical, frustrating system, but no one had ever come up with a scheme that was more fair.

  And then came an announcement that struck the Pan Am pilots like a bolt of summer lightning: Delta wasn’t taking the senior pilots!

  In the crew rooms around the Pan Am system you could hear a single great blowing sound. It was the breath whooshing from the lungs of the Skygods.

  Delta didn’t want the lumbering old 747s, Pan Am’s senior flagships. Or the senior pilots who flew them. Delta Airlines wanted Pan Am’s newer and more efficient Airbus A-310s. And since Delta w
as buying the Northeast Shuttle, it wanted the 727s that were used on the shuttle. To operate this fleet of two and three-engine jetliners, Delta naturally wanted the crews who were already trained and qualified to fly them. Never mind that most of these—captains and copilots—came from the midlevels of the seniority list and, in the case of the junior copilots, right off the bottom.

  In short, to hell with seniority.

  Which made the jumbo pilots red-faced, hyperventilating, eye-bulging furious. What was going on here? Here they were, the senior captains in the whole damn airline. Skygods by temperament, seniority, and divine right. And here someone was spouting this ant-brained blather about the junior pukes, some of them fuzzy-cheeked new hires, being the ones transferred with Pan Am’s most historic routes—and guaranteed a secure job forever after. Could this be true?

  Well. . . yes, actually. . . that’s the way it was going down.

  Oh, the outrage! It was the fine, bubbling fury of the impotent victim. Someone was stealing their careers, patting them on the head, telling them to go their merry way. Don’t make a fuss. Have a nice life. What the Skygods really wanted now was to have their hands wrapped around the windpipes of the bastards who were doing this to them.

  And that was the problem. Who were the bastards?

  The most convenient culprit was ALPA—the Air Line Pilots Association—their own union, which had given them the seniority system to start with and which now, in the view of the senior Pan Am pilots, was allowing the system to be ripped to shreds and fed to the hogs.

  The left-behind Skygods formed a committee and pooled funds and hired a law firm. There was righteous talk about injunctions and lawsuits and shutting the bastards down. It didn’t change anything, at least for the moment, but it made them feel better. But only a little.

  Meanwhile, the sellout to Delta went ahead with the unstoppability of a Mississippi flood. Delta was in a hurry, because rival bidders were putting together their own, larger offers for the bankrupt airline. Tom Plaskett was in a hurry for the standard reason: Pan Am was out of money.

  The airline was still managing to lose two to three million dollars every day. Gone was the take from the Lufthansa sale, and gone were the long-awaited proceeds of the London sale to United. Pan Am’s cash on hand amounted to less than $40 million, which it had preserved mainly by not paying bills.

  Plaskett was in a bigger hurry even than the airline’s unsecured creditors, who could see their investments being repaid for pennies on the dollar. After the first outcry from the creditors committee, Delta’s opening offer of $260 million had been upped to $310 million.

  Plaskett and Delta chairman Ron Allen had already made an agreement in principle, but the price still didn’t suit the unsecured creditors committee. Throughout July and into August, they haggled in the bankruptcy court, nudging the ante ever skyward. Delta revamped its offer five times, offering a bigger cash infusion, rescinding it, briefly taking on United Airlines as an investment partner, then shedding it, all the while facing down challenges from TWA and American .

  On the morning of August 12, 1991, in the court of New York bankruptcy judge Cornelius Blackshear, Tom Plaskett unloaded most of Pan Am’s remaining assets to Delta Airlines for $416 million in cash and the assumption of $389 million worth of liabilities.

  To some, it still seemed like too good a deal for Delta. Several unsuccessful bidders, notably Carl Icahn, screamed that their own bids were being ignored. But Icahn’s bids were backed mostly by paper and pledges, with little hard cash. Delta was not only waving real money, it was immediately advancing $80 million of debtor-in-possession funding to keep Pan Am in operation.

  Even better, Delta was agreeing to invest in what was now being called the “restructured” Pan Am, the remaining sliver of the airline that would be based in Miami and fly to Latin America. Delta would own 45 percent of the Restructured Pan Am, and the creditors would hold the other 55 percent. And this was enough to persuade the bankruptcy judge as well as the creditors committee to give the go-ahead.

  After the agreements had been signed, Tom Plaskett and Ron Allen, Delta’s chairman, posed for photographs and appeared on televised business news programs. Was Plaskett being offered a job in the restructured airline? “It hasn’t been discussed,” said Plaskett.

  Allen was beaming about Delta’s new acquisition. “Now we go to work,” he told the reporters. Allen wanted Delta to begin operating the shuttle in September. On November 1 the North Atlantic operation was supposed to switch to Delta colors, and on December 1 the Restructured Pan Am was supposed to emerge from bankruptcy under its new operating plan.

  The Wall Street Journal carried a full-page ad:

  PAN AM NOW HAS A FUTURE. WE THANK EVERY ONE OF YOU WHO HELPED MAKE IT POSSIBLE.

  In a long paean signed by Tom Plaskett, the chairman assured the world:

  “While the Restructured Pan Am is a smaller airline, it will still be a financially sound carrier to what many see as major economic growth areas of the world: Latin America and the Caribbean. . .”

  The Restructured Pan Am.

  It had a brave, proud ring to it. But no one was kidding himself. This was not the old Imperial Airline, nor even the old Financially Troubled Pan Am. The Restructured Pan Am was going to be a little island-hopping, Latino-flavored, steel-drum outfit, propped up by Delta Airlines. For Delta, it was a trial balloon to see whether it made sense for Delta to commit bigger resources to a South American expansion .

  For the pilots it was a time of mad scrambling for position. The lifeboats were leaving, and it was every man for himself. To go to Delta, you had to be on the A-310 Airbus. Or else you had to be one of the senior 727 pilots who would go with the shuttle.

  Since Delta was taking more A-310 pilots than Pan Am currently had assigned, more would have to be trained. And since training time was short and expensive, first priority went to those who had ever been on the A-310, since it would be quicker and cheaper to requalify them. The next priority went to pilots who were holding assignments to the Airbus but had not yet been trained.

  Suddenly, a rating on the Airbus equated to a secure old age in the airline business.

  It was like the last flight out of Saigon. Grab any slot, pull any string, climb aboard anything that was leaving town. Get on the list. Pilots hounded the office, begging for a training slot. They pulled every company and union string they had ever heard of. One pilot, when told he wasn’t supposed to be in that Airbus class, threatened to chain himself to the simulator. Get on the list.

  A few actually turned Delta down, choosing to stay with the Restructured Pan Am. It had little to do with sentiment. They were mostly pilots pushing the mandatory retirement age of sixty. Pan Am was one of the few airlines that allowed retired captains to continue working as flight engineers. Flight engineers were not pilots, by job definition. They sat at their own panel in the cockpit and monitored aircraft systems—pressurization, fuel, hydraulics. They were not bound by the federally mandated age sixty retirement rule that applied to pilots, which meant they could keep working into their twilight years. But not at Delta. Delta’s policy was that captains retired at age sixty. Period. They didn’t come back in any form, even as flight engineers.

  Rob Martinside was one of the lucky ones. He was among the seven hundred, roughly a third of the original Pan Am pilots, who made the list. Another seven hundred or so would remain with what was left, the Restructured Pan Am. The bottom third, the most junior who happened also not to be on the Airbus, were furloughed.

  Those on the list were invited to Atlanta for a four-day Delta “orientation.” With his fellow inductees, Martinside stepped off the shuttle bus one October morning at the Delta headquarters complex. And then he stopped, his mouth open. He stared at the magnificent training building, filled with simulators and modern classrooms. He gazed in wonder at the sprawling administrative buildings. The place looked like the Doral Country Club.

  No doubt about it. Delta was doing well, and it sho
wed. It slowly came home to the Pan Am pilots that the other two megacarriers, United and American, were probably doing just as well. The Big Three—Delta, American, United—had been prepared for deregulation. During the turbulent eighties, while Pan Am was squandering its opportunities and assets, the Big Three had made smart choices. Or lucky ones. Either way, it amounted to the same thing.

  On the day of the transfer, Rob Martinside put on his new uniform. It was much like the Pan Am naval-style uniform he’d worn for twenty-six years. The black double-breasted coat had two rows of brass buttons. The sleeves bore four gold stripes. The cap was black instead of white.

  He checked in that evening for his flight to Europe. He felt like a kid on his first day in a new school. All the former Pan Amers looked self-conscious in their new brass-buttoned, black-hatted uniforms.

  In the parking lot he passed an old friend from his new-hire days, now a 747 captain, who was staying behind with the Restructured Pan Am. The old friend looked at him curiously, eyeing the new uniform. He didn’t stop to talk.

  Martinside hoped the feeling would go away soon. It was something very much like. . . guilt. And it was making him angry.

  He was a survivor. He’d gotten a toehold in the lifeboat and been saved. Now he could look back and see his old colleagues of the past quarter century. They’d been through it all together—the Clipper Skippers and the SST fizzle and AWARE and the Great Strike and Lockerbie and Chapter Eleven.

  Now this. It wasn’t the way they had expected it to end.

  Chapter Thirty-Three

  Tango Uniform

  What Pan Am looked like was a black hole.

  —DELTA AIRLINES EXECUTIVE to the Wall Street Journal,