Air Transport World

Playing for time. (Pan Am's bankruptcy)

If creditors and lenders could write the U.S. bankruptcy laws, there is little doubt that Eastern Airlines would have been shut down at least a year ago and that Pan American World Airways would be in or nearing the final stages of a court-ordered liquidation, its assets auctioned to repay those selfsame creditors. But lenders do not make bankruptcy law and the amount of influence they wield varies according to the whim of the bankruptcy court. in effect, bankruptcy suspends the normal rules, which dictate that only the strong survive.

That's why few people are prepared to close the casket on Pan Am just yet. The carrier, which sought protection under Chapter 11 of the U.S. Bankruptcy Code on Jan. 8, may have been shut down for good by the time this article appears. But don't bet your life on it. Sure, the carrier is flat broke, liabilities exceed assets by a whopping $1 billion and over two decades, it has demonstrated a talent for losing money as if it were going out of style. But the fact that Eastern Airlines was able to operate for 22 months after it filed for bankruptcy in March, 1989, against its creditors' wishes suggests that Pan Am may be allowed to spend hundreds of millions of dollars of creditors' money in an effort to keep flying.

That is not to say that the Chapter 11 filing means that Pan Am can survive in its present form. "You'd have to be an unbridled optimist to believe that," observes Avmark, Inc.'s Paul Turk. Still, as long as it can present a viable business plan, the court probably will give it wide latitude to work out its problems, says Rose Ann Tortora of County NatWest Securities.

Pan Am also has a singular advantage in arguing for time to conduct a reorganization instead of a liquidation: its heritage as a leader in world aviation. Pan Am repeatedly drew on this legacy in its bankruptcy filing, noting that, "Pan Am has preserved its solid reputation and tradition as an integral part of American aviation history," and serves "as an ambassador of goodwill by its performance of missions of mercy to remote regions of the globe. …

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