Pan Am and the Airline Industry

In December 2006, approximately 15,000 former employees of the now defunct Pan American World Airways will receive partial repayment for lost wages, vacation days, and pensions from their former employers. Pan American, commonly referred to as Pan Am, went out of business in 1991 due to financial problems and the memory of Flight 103, which was hijacked and brought down over Scotland. The settlement is based on money received from the Libyan government, who claimed responsibility for the attack in 2003. The meaning of this move by Pan Am, aside from former employees receiving a slight piece of the larger pie for which they earned, is significant to faltering legacy airlines like Southwest.

Pan Am's failures began before the tragedy in Scotland, though the event was significant as a last nail in the airline's coffin. The problems of the former industry leader involved too much overhead, struggles with ticket costs, and poor marketing. These failings are all too familiar at present, with the legacy airlines declaring bankruptcy, embroiled in labor disputes with pilots and flight staff, and generally losing out to smaller carriers like Midwest Express and JetBlue. It is not inconceivable to see Northwest, Southwest, or Delta airlines going under like Pan Am in the next two decades. More so than anywhere else in the American market, customers aren't loyal to a particular airline but a particular price.

Because legacy airlines have had their share of legal and financial problems, they should view the growth of competitive airlines as a God send. It seems that a confederation of sorts could be built between smaller carriers like Midwest and legacy airlines like Southwest. There is no reason, with the increase in air traffic after the September 11th, attacks, that the larger airlines can't still profit from cross-county and international flights while smaller airlines deal with regional flights. It seems no one is coming up with solutions for the airline industry's problems. If legacy airlines keep heading down their current path of getting into trouble and looking for government bailouts, they will all end up like Pan Am by 2020.