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Wednesday, December 4, 1991 - Page updated at 12:00 AM

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Pioneer Pan Am Shuts Down -- Restructuring Bid Ends With Delta- Deal Failure

Times Staff: Times News Services

Pan American World Airways, the historic pioneer of commercial aviation, stopped flying today. It was grounded by the troubles that have plagued the weak sisters of the airline industry - an inadequate route system, cyclical travel patterns and increased competition from mega-carriers.

Pan Am said it was killed off by a decision from Delta Air Lines, one of the emerging mega-carriers, to withdraw from a deal that would have helped Pan Am emerge from bankruptcy court.

It is the third airline this year to fold. Eastern Airlines went out of business earlier this year and Midway Airlines folded last month when a deal with Northwest Airlines fell through.

The shutdown marks the death of a 64-year-old carrier once regarded as the flagship airline of the United States. The airline began notifying its 9,000 employees, most of them in South Florida, of the shutdown at 9 a.m. today.

The airline was founded in 1927 by Juan T. Trippe and it inaugurated the first scheduled international flight - a mail run between Key West, Fla., and Havana, Cuba.

In 1935, it launched the first scheduled trans-Pacific service and four years later began the first scheduled trans-Atlantic service.

People phoning Pan Am's reservations office today heard a recorded message that the airline had closed. The message said flights already en route would go on to their destinations, but everything else had been canceled. Passengers with tickets were advised to contact other airlines.

The airline, a longtime Boeing customer, in some ways helped shape the future of the company. It was there at the dawn of the jet age as one of the first customers for the Boeing 707.

In the late 1960s, it took the bold step of ordering 25 747s, giving Boeing the boost it needed to begin making jumbo jets. The 747 now is the single-most-profitable aircraft Boeing makes and still has no competition from other aircraft manufacturers.

Pan Am had no aircraft currently on order with Boeing.

Pam Am flew out of Seattle-Tacoma International Airport for a number of years, pioneering the polar route to Europe. It sold some of those European routes to United Airlines late last year. United began flying Pan Am's Seattle-to-London route in April.

The rest of Pan Am's overseas operations was sold to Delta in October, with Pan Am hoping to emerge from bankruptcy as a smaller carrier focused on Latin American operations. Those hopes were dashed when Delta said it would not contribute more than the $115 million in financing it already had provided.

"Today, we will see the end of an airline whose name will be forever forged in American history," Russell Ray, president and chief executive officer of Pan Am, said in a statement.

The demise of Pan Am, while marking a chapter in aviation history, also removes another weak player from the staggering air-travel industry, hurt by struggling airlines that keep slashing ticket prices to bring in quick cash.

United Airlines, a strong airline, said today it expects to report record losses for the quarter and the year, in part because of discounted airline tickets with which it must compete.

Continental and America West are in bankruptcy now while Trans World Airlines is headed there, although that airline is trying to work out a prearranged bankruptcy, which would allow it to enter bankruptcy but emerge a few months later.

-- Associated Press and Knight-Ridder contributed to this report.

Copyright (c) 1991 Seattle Times Company, All Rights Reserved.

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