Business: Pan American: Carrier in Crisis

Running a huge corporation is not pure, unmitigated joy.—Najeeb Halaby

FOR "Jeeb" Halaby, now finishing his second year as chief executive of Pan American World Airways, the going has been anything but great. Losses are climbing steadily: $26 million in 1969, $48 million in 1970 and $39.5 million in this year's first half alone. Pan Am's archcompetitor, TWA, has lately been overtaking "the world's most experienced airline" in monthly passenger miles on the North Atlantic run. Talks with TWA about a possible merger, which Halaby once saw as the best route out of rough weather, have come to a halt. Two weeks ago Secor Browne, chairman of the Civil Aeronautics Board, disclosed that he had sent a memo to White House Presidential Assistant Peter Flanigan, raising the possibility of a Government subsidy or a Lockheed-type guaranteed loan for the ailing carrier.

Diplomatic Service. Halaby's defenders point out that difficulties were developing long before he came aboard. The airline has never had any "feeder" routes within the continental U.S. to link up with its extensive international network. By contrast, TWA can move passengers in its own planes from Tulsa to Tel Aviv. Even such "domestic" carriers as American, Braniff and Eastern have international routes to the Caribbean, Canada or Latin America. Under Pan Am's founder, Juan Trippe, now honorary board chairman, the airline took on unprofitable routes in Latin America, Africa and Eastern Europe at least partly at the behest of the State Department. On its New York-to-Moscow run, for example, Pan Am has been losing money since service was initiated in 1968. Some of its prime routes have been invaded by tough competitors. American, Braniff, Continental, Western, Northwest, United and TWA have joined the battle for mainland-to-Hawaii traffic. American and Eastern are competing with Pan Am for the Caribbean, where last year the line had its worst operational loss: $29 million.

In some of its suffering, Pan Am only reflects the ills of the rest of the industry. The introduction of jumbo jets last year increased the number of available seats at a time when the general economic downturn was sharply reducing the supply of available passengers. On the crowded North Atlantic run, where Pan Am and 23 other scheduled airlines are fighting it out with the aggressive charter carriers, the company lost $7,000,000 last year. Meeting the bargain-basement transatlantic fares recently announced by Germany's Lufthansa, Halaby estimates, could cost as much as $30 million in losses next year. And Pan Am's payroll is rising by an average of 16% a year. As Halaby notes: "The airlines have had the highest wage inflation of any industry —43% in the last four years."