Pan American World Airways, or Pan Am, was the largest international American airline for most of the 20th century.
Despite their achievements, Pan Am couldn’t survive the oil embargo of the 1970s or the subsequent recession.
Their operating costs skyrocketed due to rising oil prices and the fall in demand for international travel.
Ultimately, Pan Am filed for bankruptcy in 1991 and was mostly acquired by Delta Airlines. Yet, their influence lives on.
The Downfall of Pan Am – A Timeline
- 1927: United States Army Air Corp officers Henry Arnold, Carl Spaatz, and John Jouett formed Pan American Airways, Incorporated (PAA) as a shell company.
- 1930: Pan Am flies routes over most of Central and South America, using flying boats to land aircraft in destinations without concrete runways.
- 1958: Pan Am offered regular flights to destinations in all the continents, barring Antarctica.
- 1973: The Organization of Arab Petroleum Exporting Countries enforces an oil embargo against the United States for supporting Israel during the Yom Kippur War.
- 1974: Oil prices increased by 400% during the end of the embargo. The embargo badly affected Pan Am because their long-haul flights used large amounts of fuel.
- 1976: Pan Am lost $364 million in the previous 7 years and had an estimated debt of $1 billion.
- 1978: The Airline Deregulation Act was passed, preventing the US government from controlling air travel routes. As a result, Pan Am purchased National Airlines for $437 million to start domestic flight services.
- 1979: Pan Am lost $18.9 million despite selling their Manhattan head office for $400 million.
- 1988: Pan Am flight 103 flew from Heathrow to New York, but the plane blew up due to a small bomb. This incident was dubbed the ‘Lockerbie bombing’ because the plane blew up over the Scottish town of Lockerbie. All 259 people on board died. Pan Am was blamed for negligent security measures. Pan Am suffered more than $350 million in losses due to the Lockerbie bombing.
- 1991: Pan Am filed for bankruptcy.
3 Reasons Why Pan Am Failed
These are the 3 main reasons why Pan Am failed.
1. Energy Crisis and Recession
The oil crises in the 1970s caused the price of aviation fuel to skyrocket.
As Pan Am depended on expensive imported fuel, their operating costs significantly increased.
Next, economic recessions in the 1970s decreased demand for flights.
As an airline that focused on luxury and comfort, Pan Am was hit especially hard, with fewer people able and willing to take international vacations during these times of uncertainty.
2. New Government Policies and Airline Deregulation Act
The Airline Deregulation Act of 1978 made it easier for startup airlines to grow.
This act created new competitors, like Southwest Airlines, for Pan Am.
These newer and small airlines also had an easier time adjusting to changing market conditions, while large corporations like Pan Am struggled.
3. Fear and Anxiety Around Travel
Increasing terrorist attacks on US citizens during the 1980s greatly decreased public confidence in air travel.
For example, the hijacking of a Pan Am flight at Karachi airport in 1986 decreased demand for long-distance travel, which Pan Am specialized in.
Delta Air Lines Bought Pan Am After They Declared Bankruptcy
Delta Air Lines purchased a majority of Pan Am for $1.4 billion in 1991.
They secured Pan Am’s Europe and northeastern shuttle routes, along with their mini-hub in Frankfurt, Germany, their flagship Pan Am Worldport Airport terminal at JFK International Airport, and 45 jets from their fleet.
Related: What is an Airline Hub?
People Still Remember Pan Am to This Day
Pan Am is still remembered as “America’s airline” to the world because they’re credited with many achievements.
Pan Am introduced multiple innovations to the airline industry, including all-jet fleets, digital reservation systems, and the launch of jumbo jets.
They also helped introduce the modern pilot uniform.
Pan Am was also the premier American airline for most of the previous century.
They had a strong cultural impact and helped introduce luxury into air travel.
Also, Pan Am was noted for its focus on long-haul luxury travel.
Flying With Pan Am Was Always a Good Experience
Flying with Pan Am was a comfortable and luxurious experience, as Pan Am was designed to provide maximum luxury and comfort to passengers.
Most people would wear their finest clothes during a Pan Am flight, have plenty of space, even in economy, and receive refreshments.
Pan Am Was Involved in the Deadliest Aviation Accident in History
Pan Am suffered a total of 95 incidents between 1928 and 1988, some of which involved fatalities, and 16 hijackings.
The worst was the Tenerife airport disaster that occurred on 27 March 1977, when two Boeing 747’s collided on the runway at Los Rodeos Airport.
KLM Flight 4805 and Pan Am Flight 1736 collided on the runway, with the impact and resulting fire onboard KLM 4805 killing 583 people in total.
The Tenerife airport disaster is the deadliest accident in aviation history.
Pan Am Pilots and Flight Attendants Were Paid Well
Pan Am paid a competitive annual salary of $50,000 for junior pilots and $120,000 for senior captains.
Pan Am flight attendants were paid between $40,000 and $50,000 after adjusting for inflation.
The Last Pan Am Flight Was in 1991
Pan Am Flight 436 on December 4, 1991, was the airline’s last flight.
This flight flew from Bridgetown, Barbados to Miami, Florida on a Boeing 727.
Pan Am’s Competitor, TWA, is Also Defunct
Trans World Airlines was another very popular major American airline that is now defunct.
TWA filed for bankruptcy in 2001, and American Airlines then acquired TWA and laid off many of its employees after the September 11, 2001 attacks. Yet, TWA continued as an LLC under American Airlines until 2003.
- Pan Am was an initially successful long-haul airline that was devastated by the 1970s oil embargo and recession.
- Pan Am eventually declared bankruptcy in 1991 and was acquired by Delta Air Lines.
- Despite their eventual failure, Pan Am remains highly remembered today.
- Pan Am had a strong cultural impact on the airline industry by introducing pilot uniforms, digital reservation systems, and all-jet fleets, among other achievements.
- Pan Am is also remembered for providing a luxurious and comfortable air travel experience.
- Pan Am’s influence can still be seen in many modern airlines today.