Financially troubled Pan Am Corp. announced Tuesday that it has reached agreements with three unions calling for more than $330 million in concessions in exchange for an undisclosed stake in the company, but talks with the Teamsters broke off, union leaders said.
Pan Am is seeking the agreements from its five principal unions as part of a strategy to revive after a series of unsuccessful takeover overtures from outside suitors. If all five unions agreed to cut wages, they would receive a total equity share in Pan Am of 15% to 20%, sources told the Associated Press.
Pan Am said in a statement that it had reached accords with the unions representing pilots, flight engineers and flight attendants.
The Teamsters, however, set a strike deadline of Feb. 11 against Pan American World Airways, the company’s main subsidiary. The Teamsters’ threat followed a breakdown in contract negotiations between the 4,300-member union local and Pan Am management.
The company said that it had held discussions with the Teamsters and the other hold-out union, the transport workers, and that it would try to conclude concession agreements with them.
“It’s a step forward,” Anthony Hatch, an airline analyst for Argus Research Corp., said of the agreements with the three unions. He cautioned, however, that the Teamsters “could well be the gum in the works.”
To ensure its financial recovery, Pan Am would need labor concessions totaling around $540 million over three years, analysts and company sources estimate.
In its statement, released after a meeting of its board of directors, Pan Am also said its financial loss for 1987 would be “significantly in excess of published newspaper reports.”
The company said the increased loss estimate was due to losses on loans denominated in the Japanese yen, which has risen strongly against the dollar; lost revenue from a strike by ground employees in Mexico during the entire quarter, and rising fuel prices.
Recent press reports have predicted that the company would report a net loss of around $90 million for 1987. But Hatch and other analysts estimate that the loss for the year could approach $135 million. Pan Am’s net loss for 1986 was $462 million.
Pan Am stock rose 12.5 cents a share to close at $3.125 Tuesday on the New York Stock Exchange. The company’s announcement came after the close of trading.
The three-year labor agreements reached Tuesday with the 800-member flight engineers and 4,200-member flight attendants union will result in annual savings of $27 million and $31 million respectively, a union leader said. The accords, which are subject to approval by union membership, are retroactive to Jan. 1.
The company declined to provide any further details of the agreements, such as the equity share in Pan Am that the unions would receive in exchange for the labor concessions.
The 1,100-member pilots union announced last week that it was making $58 million in concessions in return for about 7 million shares of Pan Am stock to be distributed over a five-year period, but the company did not confirm those details. The company has about 140 million shares outstanding.
Some observers had expected the Pan Am board to formally oust Chairman C. Edward Acker and make other changes in senior management as part of its new strategy to survive as an independent airline company. Published reports have suggested that the Pan Am unions might demand Acker’s departure in exchange for the wage concessions.
A leading candidate being considered by the board to replace Acker was reported to be William R. Howard, former chairman of Piedmont Aviation Inc.
Pan Am made no mention of management changes following the board meeting, however. The next meeting is scheduled for Tuesday.
William F. Genoese, director of the Teamsters’ airline division, said the union had set a strike deadline for 12:01 a.m. EST on Feb. 11.
“We intend to strike at the end of 30 days. We tried to put together a (concessions) package for them but the company just dismissed it,” said George Miranda, a leader of Teamsters local 732 in New York.
Another union leader said, however, that the Teamsters may yet settle with the company. He also said they may not choose to strike since support from members was uncertain.
Could Disrupt Operations
A strike by the Teamsters could disrupt Pan Am’s operations, but observers believe that it would not shut it down entirely. The union represents passenger service, cargo and reservations agents, clerical workers, stock clerks and nurses.
Genoese said the strike would extend beyond the main airline subsidiary to three other units--the Pan Am Shuttle, which operates between New York, Washington and Boston; Pan Am Express, a commuter airline, and Pan Am World Services, which provides ground services to other airlines.
The Teamsters have been working under a contract negotiated with Pan Am in 1978.
Genoese said the Teamsters had not had a wage increase since 1981, while the other Pan Am unions had gotten raises of 21% or more. He said his union rejects the airline’s demands for pay cuts, reduced seniority and pensions, and cutbacks in medical insurance coverage.