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Delta Air Lines' purchase of Pan American World Airways represents a dramatic departure from the Atlanta-based carrier's traditionally deliberate path to expansion, especially in the international arena.
Until the Pan Am deal, Delta took pride in its careful, conservative ways (ATW, 6/91). But the airline's financial program always stressed "flexibility," a Delta word for keeping enough financial strength to be able to make dramatic moves when the time was right.
Apparently, Delta's management felt that the chance to acquire the Pan Am North Atlantic operation along with the Shuttle and a major stake in the Latin America operation of a restructured Pan Am was one of those times. Delta's president and chief operating officer, W. Whitley Hawkins, says the Pan Am deal was "a once-in-a-corporate-lifetime opportunity" for Delta. He says it represented a "chance to grow in one big bite, especially internationally."
Major factors in the decision to purchase the Pan Am assets, according to Hawkins, were the uncertainties about Delta's position vis-a-vis its major competitors, American Airlines and United Airlines in the U.S. and North Allantic markets. Both had made major moves to strengthen themselves there, United acquiring Pan Am's London Heathrow routes, American TWA's (ATW, 6/91). Hawkins says Delta did not want to be "blocked out" of key European markets when EC '93 rolls around.
In acquiring Pan Am's North Atlantic network, Delta is jumping from fourth place among U.S. airlines plying the sector to a position from which it can dominate the world's biggest international market. The related table (page 29) shows how the top seven U.S. North Atlantic carriers did in 1990, along with a forecast for 1992.
Despite Pan Am's prior sale of its Heathrow rights and other North Atlantic assets, Delta is receiving a considerable amount of new authority. Most of it is through New York, where Delta will take over the Pan Am's Worldport terminal at JFK, an airport where until now, Delta had been a small player. Delta also receives Pan Am's slots at LaGuardia and Washington National. From JFK, there are nonstop rights to 24 European cities, many of which are in what used to be called Eastern Europe. Included is the authority through the Frankfurt hub.
In addition, Delta is getting beyond rights--mostly through Frankfurt...