Will the Sun Shine on Pan Am?

Remember the character in Li’l Abner, the one who was followed everywhere by a damp, dark cloud?

There must have been times recently when C. Edward Acker felt a little bit like that. He’s the chairman of Pan Am, to whom bad things seem to keep happening.

Acker, you may recall, was the man who negotiated the sale of Pan Am’s historic Pacific routes to United Airlines. The idea of Pan Am out of the Pacific, a region it pioneered decades ago, was difficult for some traditionalists--like me--to absorb.

But to Acker the logic seemed sound enough. Pan Am needed money; it was stretched pretty thin.

Its most salable asset was its Pacific route network. And United desperately wanted to plunge heavily into that market.

Atlantic Plans

Besides, Acker had a plan for Pan Am. With the $750 million earned from the transfer of Pacific service, he was going to make his company a major player in transatlantic transportation.

He could not have been expected to know just how badly traffic between this country and Europe would be affected by the terrorism/Libya situation. To say that the bottom dropped out is woefully to understate the case.

Estimates vary, but business to Europe could be off by anything from 15% to 50%, depending on whose figures you believe. Black cloud No. 1 for Acker.

This just isn’t any kind of year to try to get yourself more firmly entrenched in the market. Pan Am’s plans for expansion already have been partially sidetracked.

Some route start-ups have been delayed. So have frequency increases planned as part of the Europe strategy.

Acker will have to wait until next year or, more likely, 1988 before he can achieve his corporate goal of a position of dominance in Europe for Pan Am.

Russian Service

One part of the transatlantic master plan was the resumption of service by Pan Am from the United States to Russia. That route had been dropped several years ago for a combination of business and political reasons.

For a while it seemed as if the move might pay off. Americans, it seemed, perceived the Soviet Union as a safer, terrorism-immune destination. Pan Am’s bookings looked very healthy.

Service to Russia could not hope to totally offset weaknesses in the carrier’s other Europe destinations, of course. There simply isn’t enough of it for that. But it was just about the only up feature of a down year.

Then came Chernobyl.

To paraphrase a popular bumper sticker, “One nuclear power plant mishap can ruin your whole day.” Suddenly, the U.S.S.R. and its neighboring countries to the west and north didn’t seem quite as attractive to travelers from the United States.

Black cloud No. 2 for Acker and Pan Am.

But the man who runs the nation’s most recognizable international carrier isn’t giving up. His latest move is a big one, one that some people believe has implications far beyond what’s visible to the naked eye.

Sabre Network

Basically, Acker has decided to throw out Pan Am’s computer reservations system, Panamac, and all that goes with it and join American Airlines’ Sabre network. Sabre is one of the industry’s most sophisticated systems.

It was this sophistication, the level of ability to provide passengers with other than air reservations services, that got Acker’s attention. To bring Panamac up to what he considered an acceptable standard, it would have been necessary to spend tens of millions of dollars, with no guarantee it would ever be the equal of Sabre, and with a delay that Pan Am could ill afford.

And so Pan Am will soon be able to provide boarding passes in advance, which it cannot do now, and will have the ability to offer users a wider variety of travel-related services, such as hotels and car rentals.

Pan Am’s WorldPass frequent flyer program will be merged into American’s Advantage package, inevitably, it seems to me, providing bonuses for members of both.

The final terms of the agreement between the companies have not been negotiated. It won’t come cheap. Sabre is a high-rent district.

Room to Grow

But the involvement with the system will give Pan Am greater room to grow, and to do all of the things that airlines need to do to serve a growing customer base.

Does the deal mean more than appears on the surface? There are those in the industry who suggest that the Sabre tie-in is only the first step on the road to outright acquisition by American of Pan Am, or perhaps Pan Am’s Europe routes.

Some see a parallel between the United takeover of Pan Am’s Pacific route structure and the latest Pan Am/American developments. United had limited service in the Pacific and wanted more; it bought out Pan Am’s routes.

American has limited Europe service, is known to want more and doesn’t want its arch rival, United, to expand out of reach. Is it preparing to buy out Pan Am in Europe, to give it the base in the east that United now has in the west?

Acker has a one-word answer to the question: No. But the speculation persists.

Whether or not the Sabre deal is the last word or just the precursor of something more is relatively unimportant at this stage. What is important is that, in Sabre, Pan Am has found itself a strong partner whose services will make it a more efficient air carrier.

Automation to the nth degree is an absolute must in the airline industry these days. Pan Am wasn’t going to get it on its own so it’s doing the smart thing and buying it from somebody who has it.

This looks like one move by Pan Am, and Ed Acker, that won’t draw black clouds.