Hard Landing (73 page)

The irony was excruciating. Ron Allen and the rest of the Delta team were now down the hall, caucusing in Juan Trippe’s old conference room—the very room in which Trippe, 25 years earlier almost to the day, had sold Pan Am’s routes along the western side of South America to Braniff, which had subsequently sold them to Eastern, which had sold them to American—which was why Wolf had to get the other half, the eastern half, of the system that Juan Trippe and Charles Lindbergh had pioneered through South America.

Dividing the major pieces of Pan Am between them had been easy for Wolf and Allen: while United took Latin America, Delta would get a number of miscellaneous remaining Pan Am routes over the Atlantic, plus the East Coast flights. You get this, I get that. But there was one route on which the two men simply could not agree: London-Miami. Wolf would need it to feed Europeans into his new Latin American operation in Miami. He would need it to develop Miami fully into an intercontinental gateway for United. He would need it because Bob Crandall had picked up Continental’s Miami-London route when he got Eastern’s Latin division from Frank Lorenzo.

“Ron,” Wolf said to the Delta chairman,
“you
wouldn’t buy Latin America without the Europe feed. That’s
got
to be in my package.”

Remembering that these were markets they were trading for, and further realizing that the government frowned on corporations for subdividing markets, Wolf, at another point, turned to a United lawyer who was present.

“
Is this legal?” he asked. (In fact, it was.)

Allen and Wolf were still hung up on Miami-London at 2:20
A.M.
, when Plaskett gave up on them.

“
Screw it,” he said.

There would be
no joint deal for Pan Am. Wolf and Allen, United and Delta, went their separate ways.

Psychological stress overwhelmed the Pan Am organization at every level. Absenteeism rose. A psychologist from Cornell found elevated levels of headaches, sleeplessness, and digestive disturbances, symptoms she attributed to “grief.” A flight instructor shot himself. “He loved that airline,” his daughter said. A memo from the head of flight operations urged pilots and others to remain on guard against the effects of career anxiety on safety.

Plaskett, for his part, was rapidly becoming
persona non grata among the creditors of Pan Am. They began saying that he was hard to reach, that he was spending too much time at his home in Dallas, too much time playing racquetball or golf. Plaskett could not understand the criticism. “I have never refused to take a phone call,” he told
The Wall Street Journal
“I wear a pager. I carry a portable phone. As to my reputation for golf, I have played golf maybe
twice
this year.”

Leon Marcus, a lawyer representing some of Pan Am’s creditors, turned to Plaskett during one meeting and called him “
evasive and incompetent.”

“Listen,” Plaskett snapped, “we think we’re doing the right thing. Anytime you want the keys, you can have them,” to which Marcus said he would gladly take them right then and there. Plaskett, furious, began to stalk from the room; another participant coaxed him back.

As unpopular as Plaskett had become, there was no disputing his talent for keeping Delta’s Ron Allen focused on what Pan Am had to
offer. After failing to come to terms on a joint purchase with United, Allen was now more committed than ever to getting what he wanted from Pan Am and then some. Bidding principally against himself, Allen over the span of several days in late July and early August of 1991
raised his offer repeatedly, ultimately agreeing to buy nearly one half of the stock in a reorganized Pan Am. He agreed to take on many of Pan Am’s liabilities. Best of all, he said he would absorb a legion of Pan Am employees.

Finally it had happened. The Blue Meatball strategy had worked. Delta was bailing out Pan Am, what was left of it. Pan Am would continue to fly—as an independent company! Delta would control it, throw money into it, reorganize it, and nurture it. The bidding process had begun at only a few hundred million; by the time it was over, Delta had agreed to cough up well over a billion—$1,289,000,000, to be exact—for Pan Am’s remaining European routes, its East Coast service, and a controlling interest in the storied Latin American operation.

The ink was barely dry when Plaskett was pushed out the door by the creditors. Just like that, he was gone, left without a job in aviation for the first time since he had walked into American Airlines two decades earlier.

There was now one less player to take a chair the next time the music stopped.

Delta’s purchase of Pan Am’s East Coast routes closed on September 1, 1991. Delta took possession of Pan Am’s remaining routes over the Atlantic on November 1, 1991. Although none of those routes went to Heathrow, they were sufficient in number to make Delta, in conjunction with the transatlantic routes it already had, the biggest airline to Europe. It now flew to Brussels, Bucharest, Geneva, Helsinki, Moscow, Rome, Tel Aviv, and several other new destinations. But the routes were losing money, and the Pan Am employees acquired with them were cranky and dispirited.

And a month after that, on the same day that the remnants of Pan Am were scheduled to emerge from bankruptcy as an affiliate of Delta, Ron Allen said never mind.

The rest of the deal, he announced, was off. Delta would have nothing further to do with Pan Am. There would be no more money
for Pan Am, no purchase of equity, no saving of the 7,500 jobs remaining in the company. Pan Am’s passenger traffic in November, Delta said, was breathtakingly below forecast. There was no way Delta could be expected to go through with the deal after that kind of performance.

The following day, December 4, 1991, a Wednesday, the
Clipper Juan Trippe
taxied through a gauntlet of
water cannons and departed JFK for the last Pan Am flight from New York. Later the last Pan Am arrival reached Miami, where it made a low pass over the runway—a farewell to the world—before circling back to land. Pan Am employees waited at the gate, standing at attention.

Pan Am at last was dead.

The following evening back in Dallas, Tom Plaskett appeared before the Harvard Business School Club of Dallas. His remarks were full of blame casting and contrition.

While some may preach “survival of the fittest” and “that’s just business,” in my view what happened to Pan Am is a tragedy, to be shared by many who brought it about—its board of directors, its management, its unions, our government, and fate. Our experiences in recent months did not swoop down on us suddenly, nor were they something unique to Pan Am. Indeed, the result was the culmination of a long process and series of events that began in 1978. That’s when the drama really began. That’s when the old script was thrown out the window and all of us in the airline industry were pushed out on stage together and told by our government to improvise.

Now, more than a decade later … believe me, the show is far from over.…

Whether you blame it on deregulation and excessive competition, recession, poor management, recalcitrant unions, or just plain bad luck, the reality is that the U.S. airline industry is in terrible trouble.

In my view the state of our airline industry is a national embarrassment.

The judge in the bankruptcy case scheduled an emergency auction of Pan Am’s assets a few days after Pan Am’s final flight. Feverishly lawyers for all the principal airlines in the country milled around the courtroom in hopes of grabbing an asset here, an asset there, something
to help fill in the route maps of their clients. Jeffrey Kriendler, a 45-year-old Pan Am executive who had experienced a stroke amid all the stress of the preceding months, turned out to observe the melancholy spectacle. “It was like a
piece of flesh up there,” he later said.

Because the scene was such a zoo, Stephen Wolf could not let himself attend. He was
too conspicuous; he was sure people would recognize him. He remained instead at the Union League Club; his aides had to race to the courthouse pay phones to fill him in on what was occurring and obtain his instructions.

Before the night was out, the Latin American division of what was once Pan American World Airways wound up in the very large, very elegant hands of Stephen Wolf. The price was only $135 million, much less than United had offered Plaskett weeks earlier for the identical assets. Like Bob Crandall, Wolf was, at last, everywhere.

Each of them committed to victory, Wolf and Crandall had played to a tie. There was one round left.

CHAPTER 19

HARD LANDING

T
he ranks of the dearly departed were swollen by the early 1990s. Tom Plaskett was an entrepreneur in Dallas, devoting much of his attention to commercializing a breakthrough in car battery technology. In a sense he had returned to the automotive industry, which he had left to join American Airlines in 1974.

Frank Borman, also a car lover, was living in Las Cruces, New Mexico, helping to run the family automobile dealership. Charlie Bryan, laid off by the International Association of Machinists in the wake of Eastern’s failure, grew a beard and worked occasionally as a golf course groundskeeper in Miami.

Marty Shugrue, still the court-appointed trustee in Miami, was studying a plan to put Eastern back in the air. Gerald Gitner, once his fellow vice chairman at Pan Am, was an investment banker raising capital for small and medium-sized businesses, including a helicopter manufacturer in Russia. Their boss at Pan Am, Ed Acker, went back into the business directly, purchasing a small commuter operation on the East Coast and turning it into a major feeder operation for United Airlines at Dulles Airport. Acker strolled into his office in the late morning in a cardigan sweater, led by a pair of pug dogs on a leash.

Dick Ferris was also a successful entrepreneur. He went into business
with golfer Arnold Palmer and sports agent Mark McCormack, purchasing a Learjet and taking over a private airport in suburban Chicago. Ferris regularly commuted to the golf course from his home in suburban Chicago in a Porsche 9285-4, taking his corners fast.

Howard Putnam of Braniff, who had tape-recorded his conversation with Bob Crandall, was a consultant and motivational speaker. Putnam often yearned for an opportunity to explain to Crandall why he had tape-recorded that call in the first place, the only call he had ever recorded. In any case
Putnam noticed that chief executives did not telephone him as frequently as they once did.

John Robson, who had taken the first meaningful steps to deregulate the airlines, became deputy treasury secretary in the Bush administration and later a fellow specializing in “regulatory reform” at the Heritage Foundation. Stephen Breyer, who had convinced Sen. Ted Kennedy to lead the deregulation charge in Congress, was appointed by President Clinton to the United States Supreme Court.

Breyer’s protégé, Phil Bakes, remained in Miami. Though his association with Lorenzo effectively blocked him from running any airlines, he became the chief executive of a company that placed telephones and interactive videos on aircraft. Once at a Democratic Party function in Washington, Bakes was
accosted by Senator Kennedy, who angrily accused Bakes of misleading him about the effects of deregulation.

Bob Carney, Frank Lorenzo’s original partner, had cashed out of Jet Capital before the downfall of Texas Air and put his winnings into a company that sold discount tours and published travel and retirement magazines. Don Burr was divorced and living with Melrose Dawsey on Martha’s Vineyard, where they collaborated on a book about the virtues of the six Precepts established at People Express.

Lorenzo made plans to launch a new low-fare airline at Baltimore-Washington International Airport. Friendship Airlines, he called it. Fifty-seven members of Congress wrote letters to Transportation Secretary Federico Peña demanding denial of an operating permit. Lorenzo appealed the order, but at last count Lorenzo’s newly formed company had been deemed at every level of the process to be unfit to operate even a small airline.

Shortly after midnight on July 29, 1992, Lorenzo was driving the
family’s Ford Explorer along the bustling nightspots of Westheimer Road in Houston when a policeman noticed him driving erratically. Pulling him over, the officer got a whiff of alcohol through the window of Lorenzo’s car. When the patrolman instructed him to step out, Lorenzo “stumbled out of vehicle,” the arrest report said, “holding on to car door to keep from falling.” Lorenzo
pleaded no contest to drunk driving and was sentenced to two years’ probation. Eventually he and his family left Houston.

But four of the leading, longtime principals—Crandall, Kelleher, Wolf, and Sir Colin—remained on the scene, each with his own battles to conclude and his own demons to exorcise. From 1992 to 1995 a final consolidation phase played out among the airlines, toppling a giant, elevating an upstart, and otherwise thrusting the world’s aviation industry, after 25 years of trauma, into the state of delicate equilibrium in which it would approach the 21st century.