Pan Am Says It Could Shut Down Soon

Pan Am Corp., which filed for bankruptcy protection in January, said in a document released Tuesday that tough competition from rival airlines could force it out of business as early as this year.

“The company has no available credit facilities and substantially all of Pan Am’s remaining assets are encumbered,” the 64-year-old airline said in a quarterly filing with the Securities and Exchange Commission.

The company said it anticipates a rebound in passenger traffic and yields, which plummeted worldwide during the Gulf crisis and ensuing war, causing the airline industry to suffer its worst year ever.

But Pan Am warned that it may not benefit from the anticipated rebound.

“The company . . . may not achieve such forecasted results as a result of competitive pressures from other carriers, which also are trying to rebuild their traffic, as well as other factors such as general economic conditions,” it said in the 10-Q report.

The company said that as of March 31, it had $30.6 million in cash and cash equivalents and $2.52 billion in liabilities.

Pan Am said it expected to raise a minimum of $100 million through asset sales or financing arrangement by the fall.

But the airline said its Northeast corridor shuttle was the only real asset it could afford to sell “without severely impairing the company’s ability to continue as a going concern.”

“There is no assurance that the funds will be available or, if available, that such an amount will be sufficient to fund losses during the balance of the year,” Pan Am said.

Earlier this year, Pan Am sold valuable London routes to United Airlines, posting a $260-million gain on the deal, but it still was forced to announce the layoff of 4,000 employees because of weak traffic.

Although the report said the airline has been stripped to the bone, Pan Am said it continues to “explore transactions with other airlines and third parties including the possible acquisition of the company . . . or the sale of all or a substantial portion of Pan Am’s remaining assets.”

Pan Am also raised the prospect that it could lose some of its airplanes because of lease problems.

Pan Am said it had $594.5 million in liabilities for unfunded or under-funded pensions. “At this point, management is unable to determine how these matters will be resolved,” the report said.

In the event of a liquidation, the report said, “it is likely that unsecured creditors would receive only a small fraction of their claims, if anything, and that equity holders would receive nothing.”

United, however, has agreed to guarantee at least $100 million in tickets so passengers don’t get stranded.