The Man Who Tried to Rescue Pan Am : Transportation: Russell Ray was hired to save the troubled airline. Instead, his 100-day term ended with its dismantling.
Russell L. Ray Jr. was prepared to breathe new life into ailing Pan American World Airways when he was hired as airline president last October.
Two tumultuous months later, however, the 56-year-old Los Angeles native and former Douglas Aircraft executive oversaw the death of Pan Am. And earlier this month, Ray lost his job as president of the bankrupt shell that had once been the nation’s premier international airline.
Ray had been president of Pan Am for 100 frantic and frustrating days. During that short period of time, Pan Am attempted to transform itself from a ward of a New York bankruptcy court into a nimble, Latin American carrier partly owned by powerful Delta Air Lines.
The strategy, however, proved to be fatally flawed, and Ray found himself dismantling the airline he had worked to save.
“My heart was not in this work (the liquidation), anyway,” said Ray, who was replaced by former Pan Am executive Peter McHugh, 44, at the urging of the airline’s creditors committee on Jan. 8.
“I felt that we could get through it,” said Ray last week in a telephone interview from his Miami office. “I thought that right up until the end.”
Ray, unemployed for the first time in his 35-year career, joined the ranks of about 10,000 jobless Pan Am workers. However, unlike the rank and file, Ray will receive a $700,000 severance payment. Ray’s predecessor, Thomas G. Plaskett, received $1.25 million when he resigned.
Delta Chairman Ronald W. Allen had asked Ray to take the helm at the new Pan Am in late September. Known for his marketing savvy at Douglas, Ray also had gained an intimate knowledge of the airline industry as a marketing official at now-defunct Eastern Airlines and then as president of Pacific Southwest Airlines (which was acquired by USAir) before joining Douglas in 1988.
“I think Russ always thought of himself as an airline person,” said a former colleague at Douglas Aircraft, where Ray had been vice president and general manager of commercial aircraft marketing. “He realized he had an uphill struggle (at Pan Am) to keep it going. The ship was sinking, but Delta was the lifeboat.”
Even some Pan Am union officials were impressed with Ray’s credentials and down-to-earth manner, which contrasted sharply with that of previous corporate executives. “He didn’t have French cuffs. He didn’t have $400 shoes with those damn tassels,” said M. John Grainger, president of Pan Am’s flight engineers union. “I basically thought he was a regular guy.”
Ray said he knew that it was a risk taking the job. But the former Huntington Harbour resident looked forward to returning to the airline industry and to Pan Am’s new home base in Miami. Ray had lived there while working at Eastern, and he and his wife, Audrey, now call the city home.
“Who wouldn’t want to have been president of Pan Am?” asked Ray, who took over Oct. 1.
The airline Ray presided over changed dramatically in the weeks before he came aboard. After selling off its Northeastern shuttle and the bulk of its transatlantic routes to Delta, Pan Am was left with a smaller, yet potentially profitable, route structure to Latin America. It was on this base that Ray was to have built the new Pan Am.
After a few weeks on the job, however, Ray was having second thoughts. Ray found that so much of management’s attention had been focused on bailing Pan Am out of bankruptcy court that operations had suffered. For example, Pan Am had no advertising budget, nor had it paid to be listed in many telephone directories.
But the most painful discovery came when Latin American revenue failed to live up to estimates in a business plan that mapped out Pan Am’s recovery.
Instead of a marginal loss, the airline was losing $3 million a day and was nowhere near returning to financial stability by the end of 1991, as outlined in the plan.
“It’s something that sounds stupid,” Ray said, “but I probably should have made some deeper inquiries about the business plan.”
By early November, Pan Am was living week to week, ticket agents balked at booking their customers on the airline and an ad campaign hastily organized after Ray joined the carrier failed to generate ticket sales, he said. “Then we just ran out of cash.”
During the weekend after Thanksgiving, as Pan Am prepared to emerge from bankruptcy court, Delta officials told Ray that they would stop advancing Pan Am cash. Delta had already sunk more than $100 million into Pan Am, which had failed to stem its losses and increase passenger reservations.
On the morning of Dec. 4, after desperate attempts to raise cash from other sources failed, Ray called up a team of workers at the Pan Am headquarters in Miami and told them: “Shut it down.”
“Those are three terrible words,” Ray said. “You just choke on them.”
Bio: Russell L. Ray Jr.Ray was president of bankrupt Pan Am for only 100 days before he lost his job.
Born: Los Angeles
Education: Received a B.A. in psychology and business from Occidental College in 1957.
Family: Ray and his wife, Audrey, have three adult children, one of whom works as a supervisor for American Airlines in Miami.
Resume: After serving as an Air Force officer in the Strategic Air Command, Ray worked at Lockheed Aircraft until 1971, when he left to become head of marketing for Eastern Airlines. In 1985, he was named president of Pacific Southwest Airlines. After USAir acquired PSA in 1988, Ray joined Douglas Aircraft as vice president of commercial marketing. He became president of Pan Am in October, 1991.
Airline industry view: Only four or five major airlines will survive the industry’s consolidation and carry the vast majority of the nation’s air traffic.
Quote: “This is the first time I have been unemployed in my 35 years in aviation. It’s kind of driving me nuts. I’m just starting out on my (new) life now.”