Pan American World Airways, Inc Essays - Pan American World Airways

Pan American World Airways, Inc Pan American World Airways, Inc ("Pan Am") is a New York corporation organized in 1927 which is engaged in commercial air transportation which it pioneered between the United States and most areas of the world. Pan Am Corporation ("the Corporation"), a Delaware corporation, is and since September 14, 1984 has been the parent of Pan Am, it's principal subsidiary. For the past few years Pan Am's financial condition has been very poor. The company reported a consolidated net loss for 1986 of $469.3 million. The 1988 net loss included a gain of $89.1 million resulting from the sale of Pan Am's Airbus A320 aircraft and delivery positions. This gain was partially offsetted by a reserve of $25.7 million related to the loss on sale of Pan Am's subsidiary, which is responsible for the marketing of excess inventory, and 18 million of year-end adjustments. Pan Am's passenger traffic was strong in 1988. An increase of 12.2 percent on capacity of 11.2 percent. This was due to the result of strengthening of various European currencies against the U.S. dollar, fare increases in the market, enhanced management systems and procedures, as well as programs to reduce the dependence on wholesale ticket distributions throughout the Atlantic, Latin America, Domestic, and systemwide. Eventhough revenue was strong in 1988, labor and other costs increased at a higher rate as a consequence of efforts to improve service and effectiveness of the operation. Labor costs were higher in 1988 due to the result of an increase in the number of employees during the year. Also the addition of increased fuel prices, commissions, purchased services, aircraft rentals, and a $24.0 million foreign exchange loss had a negative impact on the corporation. 1987 expenses were effected by increases in expenses for fuel, commissions, maintenance materials and other operating costs which exceeded expectations. Labor cost reductions were not achieved in 1987. Other losses which occurred was the settlement of an $18 million provision for the proposed settlement of an age discrimination suit, and as well as $42.0 million for increased allowances for inventory obsolescence, uncollected receivables and costs associated with the WorldPass frequent flyer program. COMPANY BACKGROUND Pan Am lead by it's founder Juan Trippe, virtually single- handedly opened up the world to commercial flight. Teeming with adventure, international intrigue, and financial manipulations, this sky-struck young man with immense ambition and vision took a seaplane carrying mail 90 miles from Key West to Havana and expanded the operation into the vast world-wide airline that at one time considered itself the "chosen instrument" of the State Department abroad. The airline was considered so official by Washington that Trippe had power to make deals with foreign governments abroad . In 1934 people thought it was virtually impossible to cross the Pacific by air, but Trippe saw a way to do it. Through the use of the famous Clipper Flying Boats, Trippe achieved the impossible, and started the worlds first trans-atlantic flights to europe, asia, and south america. Pan Am achieved great heights with the help of pilots like Charles Lindbergh, who opened many early routes, and hero pilot Eddie Musick, who pioneered routes across the Pacific, and not to mention Andre Priester, the engineering marvel behind the early flying boats. Currently Pam Am provides non-stop service from the states to 36 locations in europe, asia, and south america. The company strives to provide the best service to all it's destinations than all the other carriers in general. Presently the airline is trying to achieve a "Corporate Image" to attract more business people thus increasing passenger revenues. ASSESSMENT OF COMPANY'S PERFORMANCE AND FINANCIAL CONDITION Overall, the short term liquidity of Pan Am seems to have a stable trend but is very poor compared to the average industry's ratios. Through the past two years very little changes can be seen in the short-term liquidity ratios. The firm acid test ratio puts it in the lower quartile. As for capital structure and long-term solvency we can only say that the firm is experiencing heavy losses and is relying on long term loans and secured notes in order to finance themselves. A stockholder deficit and net losses gave all index ratios negative values. So again we can see that the capital structure and long-term solvency of the firm is quite poor. Return on investments where quite poor since no change occurred on the return of investment and return on equity due to the stockholder deficit. As for operating performance ratios, these figures where quite poor also due to heavy losses in operating