Pan American Is on Verge of Halting Flights : Transportation: Delta refuses to pump $25 million more into the ailing carrier. It says Pan Am is no longer viable.
Pan American World Airways, which was on the verge of emerging from bankruptcy court protection, said Tuesday that it may stop flying before the weekend because Delta Airlines has refused to pump more cash into it.
The surprise announcement came as Pan Am and its creditors were rushing to win bankruptcy court approval for the airline’s reorganization plan, set to expire Tuesday. Under the plan, Pan Am would fly primarily to Latin America and its ownership would be split between Delta and its creditors.
Instead of winning approval, however, the Pan Am reorganization deal fell apart. A Pan Am lawyer told a New York bankruptcy court that Delta had refused to come up with an estimated $25 million needed to keep Pan Am afloat. Pan Am will be forced to shut down as soon as Saturday if funds can not be obtained, the court was told.
Pan Am officials were reportedly searching for other investors to raise $15 million to keep the airline operating through Saturday.
Before Pan Am announced its impending closure, its five unions agreed to $43 million in concessions, removing a major obstacle to a court reorganization.
Delta decided against further financial assistance amid concern over Pan Am’s viability, spokeswoman Frances Conner said. Officials at Delta became increasingly worried as Pan Am’s remaining Latin American passenger traffic continued to deteriorate while costs remained high, she said.
Delta had already pumped more than $200 million into the scaled-down Pan Am to keep it operating. The cash-starved carrier, however, recently asked Delta to speed up payments. Delta balked, throwing the reorganization plan out of whack.
“It just appeared to us that their business plan was not going to work,” Conner said. “After long deliberations, we decided we could not put any more funding in at this time. The viability isn’t there.”
Delta has already purchased most of Pan Am’s international route network as well as its Northeastern shuttle operations for about $1.2 billion in cash and the assumption of liabilities.
A shutdown of Pam Am, which filed for Chapter 11 bankruptcy protection at the beginning of the year, would be a major blow to the airline’s 2,000 workers and its creditors, who had forged the failed reorganization plan with Delta.
“From the creditors’ point of view, keeping the airline running is their best way to get at least some of their investment back,” said Paul Turk of Avmark, an aviation industry consulting firm that has advised creditors.
“The creditors obviously have some decisions to make as to what is going to happen next,” Turk said. But “I’m not sure anybody knows exactly what that is.”
Delta and United Air Lines may honor some Pan Am tickets if Pan Am halts operations, Pan Am said.
In recent weeks, Pan Am had relocated its headquarters from New York to Miami, the home of its Latin America hub, and named as its president Russell L. Ray Jr., former head of commercial aircraft marketing at Douglas Aircraft in Long Beach.
But while Pan Am’s Latin American routes were among its most profitable, it ran into trouble on them too. The recession cut down on air travel while American Airlines launched a major expansion into the region.
