What was once one of the main and largest airlines in the world, initially called Pan American World Airways System, was born as a small company that operated in Central America and the Caribbean. By the end of the 1920s, its routes covered the entire American continent.
The objective of this case study is to show you the historical journey of the American airline Pan American and understand how it went from being the most important in the world to ending up bankrupt due to poor management of its process analytics.
Pan American World Airways: The world from the air
Pan American was the most important international airline in the United States, from 1930 until its bankruptcy in 1991. It contributed greatly to the development of air transport worldwide, opening transoceanic routes, through the Pacific and Atlantic oceans.
In the early 1930s, Pan American decided to embark on the conquest of the oceans, and to achieve this, it had large seaplanes, which its first founder named Clippers. These were the Sikorsky, the Martin M-130, and, above all, the Boeing B-314 Clipper.
Pan American was one of the first companies to introduce to the market innovations in communications, air traffic control, aircraft security systems, and services that guaranteed a better flight experience, such as the inclusion of stewardesses during trips to the delight of passengers.
Founded in 1927 by Henry Arnold and Carl Spaatz, it had originally been conceived as a postal company. However, it was the first to include a trip to Havana by air.
In 1958 it was already offering routes around the world and providing passengers with a unique flight experience. His staff was highly trained and the trip included a very lavish menu of food with options like champagne and caviar.
However, despite being the company that introduced the world to airplane flight as we know it today, and being the first to implement modalities such as tourist class or flying over the Atlantic Ocean, it could not save itself from going to bankrupt for its bad decisions.
The oil crisis and an exaggerated investment led to its ruin
Before the oil crisis in the 1960s, Pan American had invested half a million dollars to grow its aircraft fleet. However, due to said crisis, the travel demand was greatly reduced and the company suffered catastrophic losses with that investment.
This was reflected in the number of people traveling on planes. From full flights, they became almost empty. Faced with this disastrous situation, Pan American made unsuccessful attempts to ally itself with other airline companies, such as United and American Airlines, but failed due to the fear of competitors that it would become an aeronautical monopoly.
In this sense, although a strategic alliance would have been a good alternative to overcome the crisis or at least recover the investment quickly, it was not convenient for these airlines to ally themselves with a company so large that it could use them as a strategy for its recovery since they ran the risk of being absorbed.
But time continued to pass and its debts increased, so its continuity hung by a thread. In 1988 a new setback ended up giving it the final blow when it suffered a terrorist attack, where all the passengers on an airplane died from a bomb implanted during the flight.
This generated a growing mistrust of the airline and the authorities soon accused it of negligence for not having adequate security measures. Two years later, Pan American declared bankruptcy, and Delta Airlines ended up buying its aircraft fleet, also absorbing its routes and airports.
The final fall of Pan American
In the same way that large companies do not give up in the face of obstacles and despite losing around 300 million dollars a day, Pan American continued to fight until 1990. But in 1991, it received a call requesting its closure.
This news was heartbreaking not only for the company but for all those who were loyal to it, collaborators, and above all customers. An airline that once was legendary, it was now suffering one of the biggest failures in history.
However, after 1991, Pan Am was reopened twice, under different owners. The second Pan Am operated from 1996 to 1998 focused as a low-cost airline for long-haul flights between the US and the Caribbean. The third, based in Portsmouth, New Hampshire, stopped operating in 2004. The latter used the same IATA and ICAO codes as the original (unlike the second, whose ICAO code was PN).
As we have seen so far, the international airline Pan American World Airways had everything to last over time and continue providing the most ambitious air transport service of the 20th century. But a mistaken administration of resources during the oil crisis generated irrecoverable losses that led the company to bankruptcy three decades later.
Also, let's not forget the terrorist attack with its fatal victims that ended up sinking the solid image of the airline and that they did not make any significant changes in their processes to reverse those disastrous results.