Bankruptcy for Pan Am : Airline Will Reorganize, Keep Flying

Pan Am Corp., starving for cash while seeking a buyer, filed for Chapter 11 bankruptcy today, making it the third major U.S. airline now operating under bankruptcy court protection.

The airline said it will maintain full flight schedules and customer services. In a Chapter 11 bankruptcy, a company gains protection from its creditors while it tries to reorganize its finances.

The airline also said it had scrapped possible merger talks with rival Trans World Airlines.

In the filing, Pan Am blamed its financial troubles largely on “external events beyond our control”--the bombing of Flight 103 over Lockerbie, Scotland, two years ago, soaring jet fuel prices caused by the Persian Gulf crisis and the sluggish world economy.

For the pioneer in air travel, the filing caps years of trying to become a viable and profitable carrier in the turbulent era of airline deregulation. Over the last decade, it has been selling off profitable assets to raise money and keep operations aloft.

Pan Am said the bankruptcy filing includes financing to provide “substantial additional liquidity.”

Providing fresh cash to Pan Am are Bankers Trust and UAL Corp., parent company of United Airlines.

UAL has an interest in helping its ailing competitor because of its tentative deal to buy Pan Am’s London routes and other assets for $400 million. If Pan Am were to fall into serious trouble, the sale might be threatened.

Pan Am operates Pan American World Airways Inc., which in the filing listed liabilities of $2.64 billion and assets of $1.55 billion as of Sept. 30.

Pan Am had been negotiating with Carl Icahn, owner of Trans World Airlines, who made a $375-million buyout offer but insisted that Pan Am go into bankruptcy as part of a takeover.

At a midafternoon news conference, Pan Am Chairman Thomas G. Plaskett said the bankruptcing filing and financing help meant the airline no longer was interested in merger talks with Icahn.

Plaskett said he now had “a better deal than anything he (Icahn) ever talked about.”

Pan Am spokeswoman Pamela Hanlon said she could not provide details about the nature of the financing but that it “is not connected in any way with Icahn.”

In the filing, the parent company listed total liabilities at $89.3 million and assets of $438 million. Pan Am also operates the Pan Am shuttle between New York, Washington and Boston.

With the filing, Pan Am joins Eastern Air Lines and Continental Airlines in bankruptcy court.

The news caused Pan Am’s stock to plunge to a record low. After a delayed opening on the New York Stock Exchange, Pan Am fell to between 62.5 cents and 75 cents a share, down from $1.125 at the close Monday. Its previous all-time low was $1; a year ago the stock traded at $4.

For Pan Am, whose Clipper flights were once synonymous with high-class travel, it has been a long slide.

In 1980 it sold its landmark Manhattan skyscraper for $400 million. A year later it sold off its profitable Intercontinental hotel chain to Britain’s Grand Metropolitan for $500 million.

In 1985 it decided to focus on transatlantic routes, selling its extensive Asian flights to United Airlines for $750 million.