Pan Am clipper, Vol. 7, No. 5, May 1981

              iRfWAIVl	William T. Seawell
Chairman of the Board
May 4, 1981
DEAR FELLOW EMPLOYEES:
Pan Am suffered a first-quarter loss of $114.5 million. This serious financial problem concerns all of us whose professional lives depend on the airline's prosperity.
Many U.S. airlines displayed deterioration during the first quarter, but Pan Am was most hard hit. We experienced a 94 a gallon higher fuel cost than other U.S. airlines flying primarily domestic routes. We saw a systemwide yield (amount of revenue per passenger flown) that was 16 percent below the industry average. Finally, we suffered a significant domestic traffic short-fall.
Our first quarter is traditionally a loss, but this year's loss was exceptional. Of particular concern: the airline in January was on plan; in February, slightly below plan; in March, substantially below plan. This trend is of serious concern. It must be reversed.
This airline is made up of dedicated and loyal employees who provide a superior airline product. We have done much recently to re-establish our passenger service and on-time performance. That gives us the basis for coping with our short-term problem: getting revenue.
In addition to our short-term problem, we have a long-term challenge. To afford the new equipment we will need over the next few years, we have to reach an operating profit level of at least 5 percent. If we do not, we will not be able to afford the more fuel-efficient aircraft we must have to be able to cope with ever higher fuel prices.
You'll be hearing more soon about plans for meeting both our short-term problem and long-range challenge.

Pan Am goes out to the ball game
city as a “good luck” charm for a winning season. Ball Three has been given to the team’s majority stockholder, while the fourth ball is now on display at Ohio’s Baseball Hall of Fame.
The fifth ball was donated to a local charity. Before it was, however, Pan Am’s Smith tossed the ball to Cleveland Mayor George Voinavoich who pitched a perfect strike to the mound to get the ’81 season underway.
Cleveland itself could have used some charity. Ball Six—the actual playing ball and not part of the Pan Am shipment—was mercilessly pounded by the Milwaukee Brewers in a 5-3 romp over the Indians. It could be “wait until next year” season all over again.
But Pan Am in Cleveland doesn’t have to wait for another year. It had its day last month.
Burford and Smith appeared on several widely heard local talk shows and participated in a festive motorcade through the heart of Cleveland. The scoreboard in Indian Stadium, moreover, flashed the team’s thanks to Pan Am throughout the game—in Italian, Polish, German, French, Spanish and English.
For Pan Am: a big hit, plenty of runs and not a single error! □
Cleveland-born and dedicated Indian fan, New York-based flight attendant Susan Smith was on hand to help Mayor George Voinavoich toss out the Opening Day ball. The ball was one of five flown around the world by Pan Am to mark the start of Cleveland’s 1981 season.
It’s always “wait until next year” for also-ran baseball clubs who don’t finish at the top of the league after a grueling and frustrating schedule. For Cleveland, next year never seems to come.
Whatever happens during the ’81 season, however, the Indians enjoy a unique distinction no one can ever bat away. They opened their current campaign last month with a baseball that had to be the envy of any cleanup slugger—one “belted” around the world courtesy of Pan Am.
Masterminded by Jim Burford, manager Cleveland, Pan Am pulled a Tinker to Evers to Chance. A week before Opening Day, in a dramatic quintuple play, five baseballs were lofted from Los Angeles to Tokyo to Hong Kong to New Delhi to Bahrain to Frankfurt to JFK on round-the-world Flight 002. On every leg of the hop, cockpit crews affixed their Babe Ruths to the balls, attesting to the fact they had, indeed, made the circuit.
On arrival at JFK, New York-based flight attendant Susan Smith—a native Clevelander and longtime Indians fan—personally carried the baseballs to Cleveland.
One ball has been retained as a trophy by the team’s management. A second has been donated to the
First quarter loss: $114.5 million
Poor airline traffic and continued difficulty in increasing international passenger revenue yield were reflected in Pan Am’s worst first quarter in history. The airline reported a net operating loss of $92.3 million for the first three months of 1981, up sharply from a $62.3 million loss in the 1980 first quarter.
Pan Am’s consolidated first quarter results showed a record $114.5 million net loss, compared to a $74.9 million loss for the same period in 1980.
Intercontinental Hotels Corporation posted a pre-tax profit of $10 million, compared with $10.3 million in the 1980 first quarter, and Pan Am World Services reported pre-tax earnings of $2.8 million, up
from $2.5 million a year ago.
For the quarter, airline revenues increased only 0.7 percent, or $5.9 million, over the 1980 first quarter, while operating expenses jumped 4.2 percent— from $862.9 million to $898.8 million. Other airline expenses, such as interest costs, increased to a total of $30.3 million from $21.2 million.
Scheduled revenue passenger miles were down 9.6 percent. The company noted that while passenger revenue yield increased 28.3 percent on domestic routes, the increase in international markets was only 11.7 percent. The international markets account for nearly three-fourths of Pan Am’s total traffic system.
Airline salaries and benefits ex-
pense was up 5.8 percent. Fuel costs increased 8.1 percent, despite a 12.3 percent drop in fuel consumption. The average price of jet fuel rose 23 percent during the first quarter, to an average of $1.13 per gallon. All other airline operating expenses decreased by 1 percent — evidence of Pan Am’s continuing efforts to achieve maximum cost efficiency.
Loss per share in the quarter was $1.61, compared with a loss of $1.05 in the first quarter of 1980. The first quarter generally shows some loss for Pan Am because of the seasonality of the airline industry.
One factor in the size of the loss for the 1981 first quarter was the
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CLIPPER CHRISTENED — Pan Am’s newest aircraft, a Lockheed L1011-500, was christened “Clipper George T. Baker,’’ honoring the founder of National Airlines, as Mrs. James F. Lyons, Baker’s widow poured champagne over the fuselage in ceremonies held In Miami. Looking on are her daughter Mrs. Robert Hutchens, their husbands, and Chairman and Mrs. Seawell.
L1011 brings us back to Paris
Ahh. . .April in Paris. . .C’est magnifique. And Pan Am was there, back on the New York/Paris route after a six-year absence.
On April 1, Flight 114, under the command of New York Chief Pilot John Harris, left New York with a lucky number of 114 passengers who enjoyed Pan Am’s Sleeperette and Clipper Class seating for the first time on the L1011-500.
Among the inaugural passengers were Chairman and Mrs. Seawell. On the flight’s arrival, the Deputy Mayor of Paris presented Seawell with the City of Paris Medal, the Parisian equivalent of the keys to the city.
Seawell noted that Pan Am had
served France since 1939 and Paris since 1950. And, in 1958, Pan Am made aviation history with the first scheduled jet flight by an American airline, when Jet Clipper America flew from New York to Paris in October.
“We always knew we’d be back.”
Said Seawell, “We continued to serve Paris during the 60s and into the 70s—and then we were forced to suspend service as part of a worldwide restructuring of our route system. But we always knew we’d be back, because, well, we could
hardly call ourselves an international airline if we didn’t fly to Paris.”
Pan Am now offers the only daily New York/Paris flights serving Orly Airport. The airport’s location—11 miles from central Paris—offers a definite marketing advantage. (Paris’ other principal airport, Charles de Gaulle, is approximately 20 miles from the heart of the city.) And, Pan Am is already settled at Orly, having served the airport from Miami since the Pan Am/National merger.
Flight 114 departs JFK at 8:45 p.m., arriving in Paris at 9:45 a.m. the following morning. Westbound Flight 115 leaves Orly at noon, arriving in New York at 2:05 p.m. □
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