Pan Am Corp., one of the nation's oldest airlines, filed for federal bankruptcy protection Tuesday because of what it called huge losses and the recent sharp runup in jet fuel prices.
The troubled airline, which has been involved in merger talks with Trans World Airlines, said in a one-paragraph statement that it would "maintain full flight schedules and customer services worldwide" while it reorganizes under Chapter 11 of the bankruptcy laws.The filing in Manhattan federal bankruptcy court protects Pan Am from its creditors while allowing it to continue operations.
Pan Am becomes the second airline in as many months to file for Chapter 11 protection partly because of higher fuel prices since Iraq invaded Kuwait in August. Houston-based Continental Airlines sought bankruptcy protection Dec. 3.
Pan Am spokeswoman Pamela Hanlon said further details of the filing were to be discussed later Tuesday.
In a telephone interview, she said the carrier turned to bankruptcy court because of its continuous losses and the sharp rise in oil prices stemming from the 5-month-old Middle East crisis.
The filing "provides us an opportunity to restructure at a time when recent years of losses, including recent fuel price hikes as a result of the Persian Gulf crisis, have had a devastating effect on the company," Hanlon said.
The company has refused to comment on how much cash it has been losing each day. But in its latest quarterly earnings report, Pan Am said it lost $29.1 million, or 19 cents a share, in the three months ended Sept. 30. The airline lost $18 million, or 12 cents a share, in the same period a year ago.
Pan Am, founded in the 1920s by the famed Juan Trippe, has struggled for years but survived by selling off assets, including its skyscraper in New York City and, most recently, prized London routes that it agreed to sell to healthier rival United Airlines.
The company was a pioneer in international air travel. In 1935, it captured world attention when it inaugurated its China Clipper service, the first air service across the Pacific. But in the 1980s, Pan Am was forced to sell off its valued Pacific routes.
Airline analysts have said that the root of Pan Am's troubles is in its lack of a strong domestic route system. That has also caused problems for TWA, which also was formerly a strong international carrier that has since hit hard times.
Hanlon said she had no comment on how Tuesday's filing might affect merger talks with TWA, based in Mount Kisco, N.Y.
TWA Chairman Carl Icahn said he would be willing to acquire Pan Am for $125 million in cash and $150 million in debt securities.
But negotiations between the two airlines have been stalled by a number of issues. Icahn was understood to want Pan Am to file for Chapter 11 protection in order to receive a loan that would tide the airline over while a merger with TWA was consummated.
However, Pan Am stated last month that it would not agree to a bankruptcy court filing as a condition to an agreement with Icahn.
Icahn was not in his office when a reporter called for comment this morning.