- Pan Am was once the largest international airline in the United States.
- In 1970 alone, it carried 11 million passengers to 86 countries worldwide.
- Visit the Business section of Insider for more stories.
Following is a transcript of the video.
Irene Kim: Pan Am was once the largest international airline in the US. In 1970 alone, it carried 11 million passengers to 86 countries worldwide. Pan Am is also known as the pioneer of multiple features of modern air travel, and it also holds cult status for its iconic aviation style. But after 60 years of flight and decades of financial turbulence, Pan Am went bust. So what happened?
Pan American Airways was founded by two US Air Force majors. It began as an airmail service between Key West, Florida, and Havana, Cuba, in 1927 and was the United States’ first scheduled international flight. Within a year, aviation visionary Juan Trippe took the controls, and Pan Am introduced its first passenger services to Havana. An ad campaign cosponsored by Pan Am and Bacardi successfully encouraged Americans to fly away from alcohol prohibition in the US to drink rum in the sun in Cuba. And Trippe quickly expanded Pan Am’s network.
By 1930, Pan Am was flying routes through most of Central and South America. Crucially, it used a fleet of flying boats, or clippers, to land aircraft on the water at destinations that didn’t have concrete runways for traditional planes. Since they flew seaplanes, Pan Am pilots wore sea captains’ uniforms, a decision that still influences aviation uniforms today. And there were far more important innovations that Pan Am developed in its early days of flight.
David Slotnick: Everything from things we take for granted today, like air traffic control and different flight procedures, different ways of forecasting the weather, of flight planning. Pan Am was the first airline to fly around the world. They actually set a few different records about that. They were the first to fly from the US across the Pacific. It was really a lot. They launched this international service that really helped define what we have today as just regular air travel.
Kim: By 1958, Pan Am offered regular flights to every continent on the planet except Antarctica, giving itself the title of “The world’s most experienced airline.” Pan Am’s modern fleet of pressurized aircraft could fly smoothly above turbulent weather, which provided a comfortable experience for passengers. Its lavish cabins were staffed by a multilingual, college-educated flight crew who served luxurious meals like steak, Champagne, and caviar.
Commercial: On October 26, 1958, Pan Am becomes the first American airline to fly jet aircraft. A Pan Am Boeing 707 streaks from New York to Paris in eight hours. The world enters the jet age.
Kim: The powerful new jet engines, which could fly nonstop over long distances, allowed Pan Am to introduce daily flights to London and Paris. And with the introduction of economy class, Pan Am opened the world of air travel to tourists, not just the rich and famous. In 1970, Pan Am carried 11 million customers over 20 billion miles. Thinking that air travel would only continue to grow, Pan Am invested half a billion dollars in a large fleet of Boeing 747 jetliners.
But this would turn out to be a big mistake.
In October 1973, the Organization of Arab Petroleum Exporting Countries declared an oil embargo against nations, including the US, that were supporting Israel in the Yom Kippur War. By the end of the embargo in March 1974, the price of oil had risen by more than 400%. This hit Pan Am harder than other airlines because of its exclusively long-haul flights, which required more fuel.
Slotnick: They were the launch customer for the Boeing 747. At the time, that was a great airplane for them to buy. That was the right choice, but the oil crisis really changed things for Pan Am. It was all of the sudden the wrong plane to have. It wasn’t the most efficient. It was flying routes that really weren’t selling that well because demand for travel was going down, and that was a very difficult time. But when they made the decision to buy the planes, who would’ve known?
Kim: While Pan Am’s operating costs skyrocketed, the economy slowed, and America’s appetite for international air travel greatly reduced, leaving Pan Am dangerously overcapacity, with huge, half-empty jets taking to the skies. As a result, between 1969 and 1976, Pan Am lost about $364 million and was estimated to be $1 billion in debt.
Pan Am had long hoped to add domestic flights within the US to its operation and even talked to a number of domestic operators, including American and United Airlines, to propose a merger. But rival airlines convinced the US Congress that Pan Am threatened to monopolize US aviation, and the Civil Aeronautics Board repeatedly denied Pan Am permission to operate domestically. But in 1978, the Airline Deregulation Act was passed into United States federal law, meaning the government could no longer control airline routes. Pan Am was now allowed to acquire a domestic system, and it hastily purchased National Airlines for $437 million.
Barnaby Conrad III: It cost a tremendous amount of money to acquire this particular airline, to get the routes. They obviously made a choice. They couldn’t build from scratch. They needed to go out and buy something. You basically had two cultures going on: Pan Am, very worldly, sophisticated, international. Then you had National Airlines. They were sort of puddle jumpers. They were considered country pilots, so there was a mix of culture that didn’t work there. Then you had different kind of aircraft, and so mechanics had never worked on certain airplanes. I think there was a mismatch there too, personnel, different airports. Just in general, it was really a small southern airline that was matching up with an international airline.
Kim: Within a year of the National Airlines purchase, Pan Am lost $18.9 million, even after selling its iconic Manhattan head office for $400 million. Pan Am continued to self-liquidate to offset its losses. In addition to trading its hotel chains, it sold its entire Pacific division to United Airlines.
But Pan Am still had a global reputation as the flagship US airline. However, this claim to fame would attract a devastating terrorist attack above the skies of Lockerbie, Scotland.
Kenny MacAskill: On the 21st of December, 1988, Pan Am Flight 103 took off from Heathrow. It was bound for New York. It was never scheduled to either touch down or land in Scotland. A bomb that had been placed on board accordingly blew up over a small town in the southwest of Scotland called Lockerbie. 259 people all aboard the plane were killed, passengers and crew, and 11 citizens in the small community of Lockerbie were also killed. Pan Am were held culpable and negligent in failing to have adequate security measures. You can have some sympathy for Pan Am, because their defense, if it was a defense at the time, was simply that they had carried out the normal security measures that the entire aviation industry did. But the courts took the view that that was inadequate. They had failed to properly secure the airplane, and as a consequence, a bag had got on board that shouldn’t have been on board in the first place. But Pan Am, you can say, took the hit metaphorically as well as literally for an industry where security standards had not got up to speed.
Kim: The Lockerbie bombing cost Pan Am more than $350 million and proved to be the final blow to the once giant airline.
Just two years later, on January 8, 1991, Pan Am filed for bankruptcy.
After a bidding war, Delta Airlines purchased the majority of Pan Am for $1.4 billion, acquiring its European routes, its northeastern shuttle routes, 45 jets, its mini-hub in Frankfurt, Germany, and its flagship Pan Am Worldport terminal at JFK International Airport. Pan Am hoped to emerge from bankruptcy court, but after realizing it was losing $3 million per day, Delta stopped its cash advances. After failing to raise money from other sources, a phone call was made to Pan Am’s head office on December 4, 1991. The message was: “Shut it down.”
Conrad: Pan American Airways went bankrupt, and they shut down services. It broke people’s hearts, really, not just the people that worked for the airline, but for many other people that flew it and knew it, and it was the flagship airline of America. Pan Am, this legendary airline with its legendary logo, was the second most recognized trademark in the world at the time. A group of friends of mine actually bought those trademarks, and, in fact, I was one of the investors in that group. We bought those trademarks. Unfortunately, Charles Cobb, who was the largest investor, wanted to start the airline again, and we said, “But it didn’t work last time.” We parted ways. He bought us out. He slapped the Pan Am globe on this airline, which is sort of like putting the Pan Am globe on a Greyhound bus. It lasted a couple of months, and it crashed. All the other attempts to do something else with the trademark have failed.
Kim: But Pan Am’s legacy continues to be felt almost 30 years after its collapse. Its innovations remain the pillars of modern air travel. Its brand style has survived throughout the decades as an iconic mid-century fashion statement, with products featuring its sleek, retro logo still being sold. And the Pan Am lifestyle is still romanticized in TV and movies. But the airline itself remains grounded.
EDITOR’S NOTE: This video was originally published in February 2020.