Pan Am clipper, Vol. 15, No. 4, May 1989

              Pan Am Considers Bid For
Northwest
Pan Am Corporation announced on May 9 that it was considering making a possible offer to acquire NWA, Inc., parent company of Northwest Airlines. The announcement was made during the Corporation’s annual shareholders’ meeting in Washington, D. C. by Chairman Tom Plaskett. Plaskett said the bid was being made in response to NWA’s announcement in April that it was putting itself up for sale in the wake of a hostile takeover bid. Pan Am’s interest in Northwest is in the form of a friendly acquisition.
Pan Am has retained Prudential-Bache, the investment and merchant banking subsidiary of Prudential Insurance Company of North America, as its financial advisor. Several days after the original announcement, Pan Am announced that an investor group led by Prudential-Bache and Airlie Group, L. P., had confirmed its willingness to invest at least $400 million in equity if the company decided to proceed with a formal offer for NWA. As CLIPPER was going to press, Prudential-Bache anticipated it would also arrange the remaining requisite financing if a formal offer was pursued.
“There seems to be general agreement among the investing public that a combination of Pan Am Corporation and NWA makes good business sense; therefore, this commitment by our equity partners, which forms the cornerstone of our financial plan, clearly demonstrates our ability to fund such a transaction, ” said Chairman Tom Plaskett.
Prudential-Bache is an investment and merchant banking subsidiary of The Prudential Life Insurance Company of America. Airlie Group, L. P. is an investment partnership whose general partners are Mort Meyerson and Dort Cameron. In a special Newswire to Pan Am employees issued as the Chairman was making his announcement in Washington, the lead sentence is one employees had been waiting to hear:
Pan Am is considering a unique opportunity to become, once again, a global airline.
“The unsettled situation at Northwest presented us with a window of opportunity, ” said Plaskett. “The linkage of two airlines with virtually no overlapping routes into a single global carrier would create a formidable U.S. challenger to the rapidly expanding foreign mega-carriers. The combination is especially significant given the international heritage and inherent employee strengths of both carriers, ” Plaskett said.
Plaskett said a combined Pan Am-Northwest operation would create a company with $9 Billion in annual sales—about the size of American or United. It would have about 1,700 departures per day throughout the USA, Europe, the Middle East, the sub-continent, Latin America, the Caribbean and the Pacific Rim. As an example, Plaskett pointed out that in 1988, if the two carriers had a combined operation, the route network would have included 255 cities in 62 countries. Together, they would have carried 51.2 million passengers.
Plaskett said in the two or three weeks following the May 9th announcement, Pan Am would review detailed financial information and develop a business plan to operate the two carriers. “If we decide to proceed with a formal offer, and if we are the successful bidder,” said Plaskett, “both airlines would continue to continued on page 6
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Cargo Joint Venture Formed
CHAIRMAN TOM PLASKETT passes the pen to Aeroflot General Director Vladimir Samoroukov as they sign a new joint venture agreement for a transatlantic cargo operation. It is similar to the joint venture for passenger traffic, except the cargo will be flown aboard Aeroflot cargo aircraft with Aeroflot crews. Pending government approvals, service is expected to begin in mid-summer. Witnessing the signatures are Thor Johnson, Pan Am’s Vice President Cargo Sales and Service and Victor Shumsky, Europe and America Division Director of the Ministry of Civil Aviation.
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VOL 15 NO 4
CLIPPER
MAY 1989
Sweepstakes Celebrates Transatlantic Golden Anniversary
Pan Am is celebrating the 50th
anniversary of transatlantic service with a sweepstakes game that offers a grand prize of fifty years of unlimited free travel for two on Pan Am. The legendary “Dixie Clipper” made its first crossing from Port Washington, New York to Lisbon and Marseille on June 28,1939. The sweepstakes, which recalls that aviation milestone, is appropriately called the 50 Years to Europe game.
In addition to the Grand Prize of fifty years of economy class travel for the winner and a companion on Pan Am, fifty “second” prizes will be awarded—with each winner receiving one year of unlimited economy class travel. Thousands of other Pan Am passengers will also be “instant winners. ”
“In this promotion everyone is a winner,” said Peter McHugh, Senior Vice President— Marketing at Pan Am. “We are offering a commemorative gift of WorldPass mileage and automatic enrollment in WorldPass for anyone who participates, ” he said.
The “Fifty Years to Europe” game works like this: all passengers traveling to Europe on Pan Am will receive “rub-off’ game cards on the transatlantic portion of their journey on flights departing from U.S. gateways between May 17 and August 15, 1989. To participate, passengers rub off all boxes on the game card to reveal prizes. If three of the squares on the game card match, the passenger becomes an “instant winner.” Instant winner prizes include First Class Clipper and Economy Class tickets on Pan Am; ticket discounts on future Pan Am flights; WorldPass mileage; free drinks and headsets; car rental upgrades from Alamo and Dollar Rent-A-Car; one class service upgrades on future Pan Am flights and Clipper Club memberships. Free drink or movie headset prizes may be redeemed on any Pan Am flight until May 15, 1990, including the flight the passenger is on when he receives an instant winner game card. All other prizes must be claimed by mail.
All instant winners will automatically be entered in the Grand Prize Drawing if the Entry Stub on back of the Game Card is completed. In addition, all cards, even those that are not continued on page 7
SAMPLE GAME CARD, similar to the ones that will be distributed during the Sweepstakes, reveals an instant winner prize of a one class upgrade on a future Pan Am flight or 500 WorldPass miles.
World Services Sold To Johnson Controls
A definitive agreement has been reached to sell Pan Am World Services to Johnson Controls, Inc., a Milwaukee-based corporation founded in 1885. Johnson Controls is a leader in automated building controls, automotive seating, batteries and plastics with 75 manufacturing facilities and 200 sales and services offices around the world. About one-third of the Company’s Controls Group’s sales involve the provision of services, including on-site operations management of complexes such as airports, sports arenas and offices. Johnson Controls says it will operate World Services as a wholly-owned subsidiary.
The Boards of Directors of Pan Am Corporation and Johnson Controls agreed to withhold details of the purchase price until the transaction has been finalized.
The sale of Pan Am World Services was authorized by the Board of Directors of Pan Am
Corporation in January of this year.
“The decision by the board to offer World Services for sale reflected a renewed confidence in Pan American World Airways, ” Chairman Tom Plaskett said at the time. “While World Services has been a consistent profit-maker for the Corporation, it is our view that World Services would have a far greater value to the Corporation as an asset that could be sold with the capital generated from the sale being applied to strengthen the financial base of the airline. ” Plaskett said. “The sale allows us to reorganize our finances internally without reverting to additional higher-cost bank loans which would result in additional debt. ”
Plaskett reminded employees that the Board of Directors agreed to the sale only if a buyer were willing to agree to the Corporation’s terms and that it was not an asset sale precipitated by a liquidity crisis.