DALLAS — Today, in 1980, Pan Am completed the purchase of National Airlines (NA), a major U.S. airline that had operated since 1934. Pan Am had been attempting to build a domestic network across the US for many years, even exploring merger discussions with United Airlines (UA) and American Airlines (AA). However, these attempts were consistently rejected, leaving Pan Am without a feed for its long-haul network, which hurt its financial performance.
National Airlines positioned itself as a more glamorous alternative to its rival, Eastern Air Lines, with slogans like “Airline of the Stars” and “Fly Me.” They also painted their aircraft with orange and grapefruit-colored stripes to reflect their Florida roots. In 1970, National was chosen over Pan Am and TWA to operate nonstop service between Miami (MIA) and London (LGW), making it the third transatlantic airline in the United States.
The Airline Deregulation Act of 1978 allowed many US carriers, previously focused on domestic operations, to expand their networks by adding international routes. This change in the industry landscape prompted Pan Am to initiate discussions to acquire National Airlines in early 1979. Other airlines, such as Texas International Airlines (TI) and Eastern Airlines (EA), also expressed interest in acquiring National Airlines, but Pan Am ultimately emerged as the winner.
The US government approved the US$437 million takeover on December 22, 1979. The combined carriers employed 35,000 staff and became the country’s fourth-largest airline.
Pan Am’s acquisition of National Airlines allowed them to link their main gateways in New York City, Miami, Los Angeles, and San Francisco.
Pan Am’s Downward Spiral
Despite initial optimism that the acquisition of National Airlines would improve Pan Am’s financial situation, it had the opposite effect. Many believed that Pan Am paid an excessively high price for National Airlines, and the integration of the two airlines’ fleets and staff proved to be extremely challenging.
As part of the process of merging the workforces of both airlines, Pan Am agreed to increase the wages of National’s unionized employees to match the higher salaries earned by Pan Am staff. This resulted in previously profitable flights at National’s lower cost levels becoming unprofitable at Pan Am’s higher cost structure.
Furthermore, National Airlines did not have the extensive domestic network that Pan Am desperately needed. Unfortunately, in the late 1970s, the Middle East unrest caused oil prices to skyrocket, significantly increasing the operating costs of the merged airlines.
Within a year of the purchase, Pan Am incurred a loss of US$18.9 million. To stay afloat, the management began selling off assets, starting with their iconic Manhattan head office for US$400 million. They also sold their Pacific routes to United Airlines (UA).
Tragically, the bombing of Pan Am Flight 103 over Lockerbie, Scotland, on December 21, 1988, was a significant blow to the already struggling airline. Pan Am continued to operate until December 4, 1991, when it ultimately ceased operations.