Delta Triples Bid for Pan Am to $904 Million
Delta Air Lines tripled the value of its bid for bankrupt Pan American World Airways to $904 million on Friday in what was widely viewed by the industry as a preemptive move against its competitors.
The Delta offer came just hours after United Airlines offered $465 million for certain Pan Am assets, including Pan Am’s Latin American routes. Delta’s new bid covers a broader range of holdings than its previous offers.
“What we’re doing now is detailing our plans for an investment in the remainder of Pan Am,” said Neil Monroe, a spokesman for the Atlanta-based airline. “We’ve said all along that we were going to do just that. It just took time to put all of the numbers together.”
Delta previously offered $310 million for most of Pan Am’s European routes, its lucrative Northeast shuttle and some planes and equipment. Under its new bid, Delta has agreed to pay $515 million cash for Pan Am, of which $205 million is earmarked as an investment in the airline’s Latin American operations. Delta has also offered to assume $389 million in Pan Am liabilities.
The buyout plan would save about 6,900 Pan Am jobs, Delta said in a formal statement.
Pan Am’s creditors, who objected to the previous agreement between Delta and the bankrupt airline, would receive the $515 million cash and at least 51% of the stock of the re-organized Pan Am under the new offer. New York-based Pan Am had no comment on Delta’s latest bid.
A federal bankruptcy court judge in New York will review all of the offers for Pan Am on Monday. Other bidders are Trans World Airlines, American Airlines and Northwest Airlines. Investors Jay Pritzker and Kirk Kerkorian also have separately expressed interest.
United, which previously offered $235 million for certain Pan Am assets, on Thursday sweetened its bid to $465 million. The offer includes $205 million for Pan Am’s Latin American routes and Miami-to-Europe routes, and $260 million for other holdings, such as Pan Am’s Frankfurt hub, its New York route authority to Paris and the Northeast shuttle.
Spokeswoman Lynn Martenstein declined to say whether United would raise its bid again.
Northwest Airlines, which is based in Minneapolis, on Friday renewed its bid for Pan Am’s Detroit-to-London and Los Angeles-to-Mexico City routes. The airline said it would pay $35 million. Northwest President and CEO John Dasburg said the city of Detroit supports his bid.
“The Detroit community has rallied in support of our efforts because we can operate daily service on larger jets,” he said. “Detroit is a very large Northwest traffic center and international gateway, and we can provide conveniences and connections not possible for any other airline.”
The other bid, offered by Trans World and American Airlines together, is $450 million for all of Pan Am, with the bulk of the financing coming from American.
Pan Am filed for Chapter 11 bankruptcy protection in January. Industry sources say the courts must approve a buyout plan soon because Pan Am is close to going broke. The airline’s creditors met on Friday to review the various proposals in advance of Monday’s hearing.