Pan Am Wins Reprieve; Route Sale to Proceed

After nearly a year of bitter negotiating, British and U.S. transportation authorities reached an agreement Monday that will enable troubled Pan American World Airways and Trans World Airlines to sell their London routes to stronger U.S. carriers.

The agreement comes just in time for Pan Am, which faced an immediate seizure of its fleet if it failed to pay past due debts. “Without this agreement,” U.S. Transportation Secretary Samuel K. Skinner said at a news conference in Washington, “Pan Am would have gone out of business tomorrow.”

Pan Am had negotiated the sale of its London routes to United Airlines for $290 million and TWA had arranged to turn over its London service to American for $445 million. But until Monday, the British government would not allow the transfer of landing rights at London’s Heathrow Airport.

The agreement means an end to an era in transatlantic service for what were the United States’ premier international carriers, and underscores a new trend in international airline service in which carriers from different nations more easily cross borders to serve passengers and strengthen market positions.

In exchange for the transfer rights at Heathrow, the U.S. government granted concessions to British airlines flying into the United States. In particular, British Airways will have the right to fly passengers from Europe on to Canada, Latin America and Asia after stopping in U.S. cities.

United will begin flying to London in a couple of weeks, although the TWA sale must still be approved by the U. S. government. It is expected that tickets from Pan Am and TWA will automatically be transferable to United and American respectively.

“The most significant thing is that the consumer in both the United States and Britain is the big winner here,” said Timothy Pettee, airline analyst with Alliance Capital Management in New York. “The traveling public is getting significant alternatives in the marketplace.”

Upon completion of the sale of the routes, Pan Am and United will also forge a marketing partnership which, among other things, will join the frequent-flier programs of the two carriers and promote a transfer of passengers between the carriers. Pan Am is expected to gain between $100 million and $150 million in added revenues as a result of the marketing agreement.

American’s purchase includes six routes to Heathrow and two to Gatwick Airport.

“This is not insignificant for us,” said Jeffrey Kriendler, a Pan Am spokesman. “The agreement gives us an opportunity to complete that marketing agreement.”

Both United and American Airlines applauded the decision.

“We are glad that this has been finally resolved,” said an American spokesman in Dallas.

TWA Chairman Carl Icahn said that “while TWA has a very difficult road ahead, this is certainly a positive step in the right direction.” TWA has also failed to make payments to some of its creditors and bondholders because of a cash crunch.

United Chairman and President Steven M. Wolf said in a statement: “This agreement ushers in a new era of transatlantic air service. The traveling public and shipping public will benefit greatly.” Wolf said that the transaction will be completed in a few weeks.

Pan Am, in the meantime, is negotiating with Bankers Trust Co. for an extension of a $100-million loan which has been in arrears since last Friday. Pan Am was given the advance by the bank on Jan. 8, the day it filed for Chapter 11 bankruptcy. It was given an additional $50-million payment from United on that date and had already been advanced $20 million from United.

The loans were to be paid off when Pan Am receives the $290 million it is to get for the routes. With the U.S.-British agreement, “we’re certain they (Bankers Trust) are going to approve,” a Pan Am official said.

But most analysts said that Pan Am has not been permanently rescued. It has just gotten a reprieve, they maintain. “Pan Am has been selling off assets for 11 years,” said Edward Starkman, airline analyst with Paine Webber.

David Moss, undersecretary of the Ministry of Transport and head negotiator for the British, conceded that the negotiators might have been somewhat pressured because of Pan Am’s “deathbed” plight.

“I can see that the future of the U.S. airline may have given the discussions more urgency,” he said. “We agreed to compress the time scale and get on with it faster than is always the case.”

American carriers’ rights at Heathrow will increase over the next few years. The British immediately got broader rights to make code-sharing agreements with American carriers, which would allow the British airlines to fly British passengers on one or more segments in the United States.

The British carriers may also increase the number of cities in Latin America, Canada and Asia to which British flights can continue after stopping at points in the United States. In four of the 22 cities currently served by at least one British carrier, the agreement will give landing rights to additional British airlines.

British airlines may also begin a limited number of flights from six countries to the United States without the planes having touched down first in Britain. Included will be flights originating in Belgium, France, Germany, Ireland, Luxembourg and The Netherlands.

Dallos reported from New York and Johnston reported from Washington.