Lehman Brothers Collection - Contemporary Business Archives

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Lehman Brothers Collection

Twentieth-Century Business Archives

Pan American World Airways Inc. - Lehman Brothers Collection

Pan American World Airways Inc.

List of Deals

Pan American World Airways dates back to an airline started in the 1920s by Juan Terry Trippe. He established Long Island Airways and bought nine Navy "Jennys" with inheritance money. The company failed; however, Trippe and two friends opened a second airline after the passage of the Kelly Air Mail Act. Their company, Colonial Air Transport, won the first airmail contract establishing a route between New York and Boston. They bought two three-engine Fokker airplanes, which enabled them to carry passengers as well as mail. A dispute among stockholders resulted in the sale of the company to what later became known as American Airlines. Trippe and his partners were excluded from the decision and the airline.

Trippe's group bought Aviation Corporation of the Americas soon thereafter with the intention of bidding on the Key West-Havana mail route. In 1928 the company merged with Pan American Airways and Atlantic, Gulf, and Caribbean Airways. The new company retained the Pan American name and flew the Havana route, which was the first scheduled international commercial destination.

Pan Am had difficulty reserving the eight seats on each flight because people were afraid of flying over the ninety miles of water. Pilots were known to enter Cuban bars and dare American tourists to fly back to Florida. In Miami the company tried a different advertising campaign: "Fly with us to Havana, and you can bathe in Bacardi rum four hours from now." Pan Am lost one of its three Fokker airplanes in the ocean in 1928. In spite of this, however, air travel grew in popularity. Pan Am bought twenty-five Sikorsky S-38 "flying boats," which could travel 100 miles an hour and had a range of 300 miles. Shortly after this, the company secured routes to Puerto Rico, Panama, and other points throughout the Caribbean.

In 1930 Postmaster General Walter Brown forced Pan Am's biggest airmail contract competitor, the New York, Rio, and Buenos Aires airlines, to merge with Pan Am. The company doubled its fleet and was awarded the extremely lucrative South American East Coast airmail contract. Pan Am emerged as the world's largest airline and the "chosen instrument" for flying the U.S. flag abroad. The company turned its attention to traversing the oceans. The airline used the newly developed China Clipper (a Martin M-130), with a range of 2500 miles, to transport passengers and mail from California to Asia. Overcoming huge obstacles of diplomacy, financing, and engineering, Pan Am established service to Europe in 1939 using the larger and faster "Dixie Clipper" aircraft.

Pan Am, the only established American international airline at the time, played a major role in the war effort during the early 1940s when it placed itself at the disposal of the U.S. government. In November 1940 Pan Am signed a contract with the War Department providing for the construction of airbases and remote supply, radio, and weather stations. In October that same year, the airline established a war transport service from the United States across the South Atlantic to West Africa and from there to points in the Middle East. Trippe thought the interests of the United States would be served best by the creation of one official airline to compete with foreign carriers. He proposed that Pan Am be made a regulated monopoly, not unlike utility companies. Congress rejected his proposal.

The company capitalized on the development of the Boeing 707 and ordered fifteen new jets, ushering in the jet age and forcing its competitors to follow suit. Pan Am acquired American Overseas Airlines in the early 1950s. Trippe also diversified Pan Am's operations and selected related businesses such as hotels, corporate jet aircraft, and NASA support services, all of which were profitable.

By 1969, however, the company was on the verge of bankruptcy. Pan Am's 81,430-mile route system could no longer be maintained without the award of a government subsidy or a compensatory monopoly, neither of which was likely to be granted. They became overextended. From 1969 through 1976, the company's losses amounted to $364 million, with debt estimated in excess of $1 billion.

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