Pan Am clipper, Vol. 8, No. 2, February 1982

              February ’82
Volume 8 Number 2
Record operating loss: $348 million
Pan Am posted a net loss of $18.8 million for 1981, including a $364.2 million pre-tax gain on the sale of Intercontinental Hotels and a gain of $82.2 million from the sale of tax benefits.
Operating losses totaled $348.4 million, the largest ever incurred by an airline, and nearly three times the 1980 operating loss of $120 million, In 1980, the company’s reported net earnings of $80.3 million, including a $294.4 million gain on the sale of the stock of Grand Central Building, Inc.
The operating loss for the fourth quarter alone was $125 million.
With the release of the financial results, Chairman Acker announced major cost-cutting moves,
including reductions in force, an extended work day, a 50 percent reduction in management vacation time, and a reduction in the number of vice presidential positions. Acker also said that he would seek significant productivity concessions from the labor unions representing Pan Am employees. (See accompanying story.)
The airline’s salaries and benefits expense increased 4.5 percent and accounted for 32.6 percent of the airline’s total operating expenses in 1981. The company noted that during the fourth quarter, a 10 percent wage reduction program was in effect for all management personnel and employees of four of five of Pan Am’s unions.
Fuel and oil expense, which accounted for 32.1 percent of the airline’s total operating expense in 1981, was up 5.8 percent, despite a 7.9 percent reduction in the amount of fuel consumed during the year. The average price per gallon of fuel in 1981 was $1.15, up 14.8 percent from the 1980 price.
Intercontinental Hotels was sold in September, 1981. The gain on the sale and all earnings prior to the sale are reported as earnings from discontinued operations.
During the fourth quarter, Pan Am sold tax benefits of $82.2 million related to six L1011-500 and one DC 10-30 aircraft, under terms of the Economic Recovery Tax Act of 1981.
Pan Am World Services, which provides contract services to governments and private industry, reported pre-tax earnings of $12 million, compared with $9.4 million in 1980._____________
FOURTH QUARTER
Pan Am reported a net loss in the fourth quarter of 1981 of $82.7 million, including an $82.2 million gain on the sale of tax benefits.
In the fourth quarter of 1980, the company reported $196.9 million net earnings, including the $294.4 million gain on the sale of the stock of Grand Central Building, Inc.
Consolidated operating revenues in the fourth quarter were up 0.1 percent to $913.1 million. Con-
solidated operating expenses were up 7.0 percent to $1038.3 million. The operating loss for the 1981 fourth quarter was $125.2 million, compared with an operating loss of $58.2 million in 1980.
Net adjustments of $18.2 million for state taxes and federal income taxes were provided in the fourth quarter, reducing the gain on the sale of IHC. The federal tax provision, however, was offset by tax credits on losses from continuing operations.
World Services’ pre-tax earnings in the fourth quarter of 1981 were $2.9 million, compared with $2.3 million in the 1980 fourth quarter. □
50 millionth passenger gets Berlin welcome
It was a big day for Berlin, as Pan Am’s internal German Service gave a four-star welcome to its 50 millionth passenger.
Edith Wehner, owner of a Munich beauty shop was greeted by former Special Services Supervisor Willi Hoeppner at the Munich Airport where Ernst Voitl, director Southern Germany, presented her
with a Bavarian dirndl dress and a bottle of champagne. The ecstatic passenger then boarded her flight to Berlin with the help of Hoeppner, Public Relations Director Harold Kosel and Aware’s Marga Krombac.
But that wasn’t all. Waiting at Berlin’s Tegel Airport were a 30-continued on page 7
IGS HITS 50 MILLION MARK—Pan Am’s Internal German Service welcomed its 50 millionth passenger on Jan. 15, as Edith Wehner, owner of a Munich beauty salon, boarded Flight 761682 from Munich to Berlin. Special Services Supervisor Willi Hoeppner escorted the delighted passenger aboard her specially decorated 727 flight.
IUFA talks stall, strike deadline set
Officers, staff cut in latest cost-saving move
Faced with 1981 operating losses of $348.4 million, Pan Am has announced further staff reductions in force as well as extended work days and reduced vacation time for management employees.
“Our continuing losses make it essential that we immediately take further steps to reduce our cost structure,” Chairman Acker said. “We will reduce non-revenue producing staff functions and authorized officer positions by 25 percent and, effective immediately, will ask management employees to extend their work day and reduce vacation time. ”
The reductions include management jobs and 10 vice presidential positions. Management work days will be extended to 10 hours, and all management vacation time in excess of two weeks will be cut in half.
Acker also announced plans to expand the airline’s capacity by 15 percent over 1981 levels, increasing utilization of aircraft, facilities and labor force. To successfully implement this plan, the company will meet with representatives of all Pan Am’s unionized work force to seek productivity improvements.
In a joint letter sent to all Pan Am employees, Acker and President Bill Waltrip said “We feel confident that all our employees will rally to this need to produce more product with no increased labor cost. We are not asking for additional pay cuts or changes in rates of pay, but rather, for work rule changes that will make each of you more productive. ”
In the face of greatly increased competition, Pan Am can no longer operate at the highest cost of any U.S. airline. Our competitors range from major international carriers to small, “upstart” airlines like Air Florida and People Express. Acker
Pan Am is faced with a strike deadline by the Independent Union of Flight Attendants (IUFA) at one/ minute past midnight on Sunday morning, Feb. 28. The company had offered the union a substantial contract package over a three-year period. In return, Pan Am asked for concessions in the area of productivity which the union has been unwilling to make.
The company and the union met in September 1980 to negotiate existing labor agreements into a single, integrated contract for former Pan Am and former National flight attendants. After months of unsuccessful talks, these negotiations were, last July, combined with negotiations for the reopenable Pan Am/IUFA contract, which had begun in May 1981.
In September, the National Mediation Board assigned a federal mediator to the talks. In November, the NMB offered to resolve the dispute through a neutral third party. Pan Am accepted this proffer of binding arbitration, which the IUFA neither accepted nor rejected. Talks
said that Pan Am could meet that competition only by becoming cost effective and by expanding to become a major domestic airline with a strong international presence.
The Chairman found reason for optimism but stressed that significant cost reduction was crucial to the survival of the airline. “While I
continued between the parties, but the IUFA was unwilling to rapidly conclude settlement within the parameters determined by the company’s financial situation and unwilling to agree to work rule modifications which Pan Am considered essential to its future stability. The company then was forced to consider the union’s failure to respond to the Board’s proffer as a refusal of arbitration. On Jan. 27 Pan Am withdrew its acceptance of arbitration and rejected the proffer.
On Jan. 28, the National Mediation Board advised that “all practical methods provided in the Railway Labor Act . . . have been exhausted, without effecting a settlement” and that the Board’s services were terminated. The 30-day “cooling off period” required by Federal Law began. The IUFA is free to strike at the end of that period.
Company representatives have informed the IUFA that Pan Am remains prepared to continue talks in an all-out effort to settle these differences quickly and amicably. □
am pleased with the improvements we’ve seen in our traffic results and service product in the fourth quarter, it’s clear that if we are to return this company to profitability, our costs must be reduced, ” Acker said. “I feel strongly that management should take the lead. ” □
SPECIAL CLIPPER EDITION
On Feb. 9, Pan Am management met with the Labor Council which included representatives of the Air Line Pilots Association, the Flight Engineers Independent Association, the International Brotherhood of Teamsters, the Independent Union of Flight Attendants and the Transport Workers Union.
The company presented specific proposals to meet the urgent need, emphasized by Chairman Acker and President Waltrip, to provide necessary increases in productivity.
Details of this program and of the meeting will be the subject of a special edition of Clipper to be published later this month. □

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