what-happened-to-pan-am

What happened to Pan Am?

Pan Am was a pioneering American airline company founded in 1927 by Juan Trippe, by the 1980s its aircrafts were also cultural icons of the sky and the Pan Am brand came to symbolize the golden age of air travel. However, by the 1990s Pan Am experienced chronic cash flow issues for many years, exacerbated by the exorbitant price it paid for a domestic route network. Despite selling many assets, a mechanic strike and the Lockerbie disaster further helped the company go bankrupt.

Background

Pan Am, formally known as Pan American World Airways, was an American commercial airline company founded by Juan Trippe in 1927.

Pan Am was a pioneer of the aviation industry and was the largest international air carrier in the United States from 1927 until 1991. The company introduced the widespread use of jet aircraft, jumbo jets, and computerized reservation systems. Its aircraft were also cultural icons of the sky and the Pan Am brand came to symbolize the golden age of air travel

Despite its longevity and success, the company was forced to file for bankruptcy protection on January 8, 1991, after 64 years in operation.

The story of Pan Am’s demise is perhaps a little less clear than some other companies. Read on to get a sense of what contributed to its downfall.

Oil crisis

At its peak in the early 1970s, Pan Am had a new fleet of Boeing 747s allowing the airline to fly large numbers around the world with fewer stops. In 1970 alone, it carried 11 million passengers to over 86 countries.

Three years later, the Yom Kippur war broke out along the Sinai Peninsula when multiple Arab states attacked Israel. Oil embargoes were placed on the United States, leading to oil shortages that crippled the aviation industry.

Every airline was affected by the shortage and subsequent rise in fuel cost. But Pan Am felt it more intensely because it was already losing ground to competitors and had a fleet of large planes requiring a lot of fuel.

Stagnation and regulation

The mid-1970s were also a time of economic stagnation in the United States, with the outsourcing of jobs and inflation compounded energy shortages. Consumers took fewer international vacations which left Pan Am unable to fill its jumbo jets.

In 1978, the government deregulated the airline industry allowing individual carriers to make pricing more competitive. In response, Pan Am sold the rights to its Pacific routes to United Airlines for $750 million.

With ambitions to enter the U.S. domestic market, Pan Am then paid $437 million to acquire National Airlines and its route network in 1980. Ultimately, the acquisition was not a good fit for Pan Am. The company lost $18.9 million in the year after the deal was struck and had to sell its head office and chain of hotels to fund the business.

Mechanics strike

Pan Am mechanics went on strike in 1985 over low wages, and for good reason. They were the lowest-paid mechanics of any U.S. airline by a considerable margin, which only highlighted the gap between Pan Am and its competitors.

To remain viable, the company had drastically reduced its wages bill through mass terminations and wage cuts to retained employees. It also sold its flagship Pacific Division to United Airlines in 1985 – which cut the carrier’s route network by a quarter.

Lockerbie disaster

In 1988, a Pan Am Boeing 747 crashed outside the small Scottish town of Lockerbie with 259 people killed instantly. A further 11 people were killed on the ground. Forensic investigators found that a bomb had been carried aboard and detonated.

Pan Am was later sued for failing to implement proper security measures. It was forced to pay out more than $350 million in compensation and suffered immense reputational damage.

Bankruptcy

Oil prices began rising again with the advent of the Gulf War in 1990.

Pan Am suddenly found itself operating an aging fleet of airlines with demand for transatlantic flights low. What’s more, the company was still reeling from the Lockerbie disaster a couple of years previous.

The company made a last-ditch effort to stay in operation by selling off more core assets but was forced into bankruptcy in 1991. 

In the past 30 years, Pan Am has enjoyed a significant following from aviation enthusiasts and its legacy is protected by various historical foundations and online communities. The brand name itself has been used at Pan Am Railways since 1998.

Key takeaways:

  • Pan Am was a pioneering American airline company founded in 1927 by Juan Trippe. The company declared bankruptcy in 1991 after 64 years in the skies.
  • Pan Am began a slow and steady decline after a series of unrelated but detrimental events occurred in the 1970s. Oil prices were high because of embargoes placed on the United States. Economic stagnation also meant consumers were more averse to international travel. Lastly, the airline sector was deregulated which meant more competition.
  • Pan Am experienced chronic cash flow issues for many years, exacerbated by the exorbitant price it paid for a domestic route network. Despite selling many assets, the mechanic strike and Lockerbie disaster meant the company could not absorb a second oil crisis in 1990. 

Other Failure Stories

What Happened to WeWork

what-happened-to-wework
WeWork is a commercial real estate company providing shared workspaces for tech start-ups and other enterprise services. It was founded by Adam Neumann and Miguel McKelvey in 2010. WeWork’s business model was built on complex arrangements between the company and its landlords. There were also several conflicts of interest between Neumann and WeWork, which provided the impetus for the failed IPO and significant devaluation that would follow.

What Happened to Netscape

what-happened-to-netscape
Netscape – or Netscape Communications Corporation – was a computer services company best known for its web browser. The company was founded in 1994 by Marc Andreessen and James H. Clark as one of the internet’s first and most important start-ups. The Netscape Navigator web browser was released in 1995 and became the browser of choice for the users of the time. By November 1998, it had been acquired by AOL, which tried unsuccessfully to revive the popularity of the web browser. Ten years later, Netscape was shut down entirely.

What Happened to Musical.ly

what-happened-to-musically
Musically, or Musical.ly as it is officially known, was a Chinese social media platform headquartered in Shanghai. After passing 200 million users in May 2017, the platform was shut down by tech company ByteDance in November. After its acquisition, ByteDance suggested Musical.ly would continue to operate as a standalone platform. Company representatives noted that it would be able to leverage ByteDance’s AI technology and enormous reach in the Chinese market. Musically was ultimately absorbed into TikTok in June 2018, with the app no longer available in August of the same year. Existing users were offered technical support and several new features as a sweetener.

What Happened to Vine

what-happened-to-vine
Vine was an American video social networking platform with a focus on looping video clips of six seconds in length, founded by Dom Hofmann, Rus Yusupov, and Colin Kroll in 2012 to help people capture casual moments in their lives and share them with their friends. Vine went on to become a massively popular platform. Yet by 2016, Twitter discontinued the mobile app, allowing users to view or download content on the Vine website. It then announced a reconfigured app allowing creators to share content to a connected Twitter account only. This marked the end of Vine.

What Happened to CNN Plus

what-happened-to-cnn-plus
CNN Plus was a video streaming service and offshoot of CNN’s cable TV news network that was launched on March 29, 2022. The service was ultimately shut down just one month after it was launched. Trouble began for the platform when parent company WarnerMedia merged with Discovery. The latter was unimpressed with paltry viewer data and, with $55 billion in debt to clear, was not interested in funding CNN+ moving forward. Other contributing factors to CNN Plus’s demise include a lack of compelling content and streaming service market saturation.

What Happened to Clubhouse

what-happened-to-clubhouse
Clubhouse is a social app that allows thousands of people to communicate with each other in audio chat rooms. At one point, the company was worth $4 billion and boasted users such as Mark Zuckerberg and Elon Musk. Clubhouse declined because it rode the wave of pandemic lockdowns and suffered when people resumed their normal routines. The decision to remove the invite-only feature also caused a rapid influx of new members and removed any exclusivity. Clubhouse management also failed to define a business model and was unaware of the components of a successful social media site.

What Happened to Facebook

what-happened-to-facebook

Main Free Guides:

About The Author

Scroll to Top
FourWeekMBA