5,000 at Pan Am to Be Laid Off : * Bankruptcy: The cuts would reduce its current 22,300-member work force by 22%.
In a drastic attempt to conserve cash and cut expenses, ailing Pan Am Corp. said Friday that it planned to lay off 5,000 employees in the following weeks as part of a larger-than-normal reduction in flights this fall.
The New York-based airline, which filed for Chapter 11 bankruptcy earlier this year and is now the object of fierce bidding war between a number of other major carriers, said employees in all categories would be laid off. The cuts would reduce its 22,300-member work force by 22%.
In February, Pan Am let 4,500 workers go as a result of the Gulf crises, which reduced passenger traffic and raised fuel prices.
Pan Am is believed to be about $1 billion in debt, and the latest estimates from analysts said it had only $30 million left in working capital.
“Everybody always thought that Pan Am would run out of money, but it was thought that this would happen in the winter,” said airline analyst Timothy Pettee of Alliance Capital Group. “Now it appears they have run out money in the dead of summer. This is supposed to be their peak season. Their load factors should be at the highest levels at the beginning of August. This is unbelievable. They must be on the brink of collapse.”
But Pan Am spokesman Jeffrey Kriendler strongly denied that Pan Am was on the verge of collapse. “That is not correct. It is ridiculous.”
The airline, which announced the planned furloughs at the end of its quarterly financial statement, said that the layoffs reflect “significantly deeper schedule reductions from the summer peak than in prior years.” Kriendler said the carrier’s flight schedule would be reduced drastically in September and October.
The planned layoffs came as a surprise to Pan Am workers. When a passenger planning a trip to Moscow spoke to a Pan Am reservations agent late Friday and asked about the layoffs, the excited clerk replied that “we know nothing about this.”
George Miranda, the chairman of the Pan Am Teamsters union chapter, told the Associated Press: “It’s a sad day in Pan Am’s history. It’s not a pretty sight when we’re laying off those kind of numbers. It’s a catastrophe. It’s a disaster.”
In its second-quarter financial statement, Pan Am reported a $99.9-million profit compared to a $49-million loss in the same period last year. However, Pan Am would have reported a steep loss in the April-June quarter if it were not for a one-time, $260-million gain from the sale of some of its transatlantic routes.
The layoff announcement was revealed on the same day the Wall Street Journal reported that Pan Am Chairman Thomas G. Plaskett had appealed to its creditors for a $14-million compensation package for himself and 180 other executives of the carrier. Any such compensation would have to be approved by the bankruptcy court.
Pan Am has already agreed to sell its European routes and its Northeastern shuttle to Delta Air Lines, which promised to retain 6,000 Pan Am employees, for a price tag of $310 million. Trans World Airlines Chairman Carl C. Icahn has also vowed to take over Pan Am, with American Airlines as a partner.
