Delta bid for Pan Am assets wins Judge allows deal for $1.39 billion


NEW YORK -- Delta Air Lines won Pan American World Airways' prized European assets and its East Coast shuttle yesterday, setting the stage for an increasingly global air war among the three remaining U.S. giants: Delta, United and American.

Under a $1.4 billion transaction approved by U.S. Bankruptcy Court Judge Cornelius Blackshear, Delta also promised to keep a smaller Pan Am alive by helping the nation's oldest commercial airline maintain its original Latin American routes.

By helping Pan Am stay on those routes, Delta will effectively slow the efforts of archrival United Airlines to become a major carrier to South American markets.

The deal between Delta and Pan Am's major creditors was hammered out in the wee hours Sunday night after Delta sweetened its offer to top a combined bid of $1.3 billion from rivals United, Trans World Airlines and American Airlines for various pieces of the carrier.

"We're pleased," Pan Am Chairman Thomas G. Plaskett said. "Pan Am lives on."

Without approval of this plan and its immediate cash infusion, Pan Am faced shutdown as early as later this week, executives said yesterday. The carrier, for decades the symbol of American air supremacy around the world, filed for Chapter 11 bankruptcy protection from creditors in January.

By agreeing to pay more, Delta succeeds not only in achieving its main goal of expanding its international presence, but also keeps the Latin American prize from United.

Elk Grove Township, Ill.-based United, which had hoped to acquire Pan Am's Latin American and Caribbean routes, accepted the judge's ruling gracefully. "This clearly benefits Pan Am, its employees and creditors. United wishes all involved well," a United spokesman said. In court, United withdrew its objection to the Delta deal and thanked the creditors' committee "for being so cooperative and for their candor."

United has already begun putting together a network of South American flights, though acquisition of those routes from Pan Am would have greatly speeded the process.

Under the new plan, Delta will pay $416 million for Pan Am's Atlantic routes, its hub in Frankfurt, Germany, and its Boston-New York-Washington shuttle. The Atlanta-based airline will invest $305 million in the Pan Am that will emerge from bankruptcy court protection and assume $669 million in Pan Am liabilities. Delta will emerge with a 45 percent equity stake in the reorganized Pan Am, with Pan Am's creditors holding the remaining 55 percent.

About 13,500 of Pan Am's 17,000 existing jobs will be kept under the plan: 6,600 going to Delta in the assets sale and 6,900 remaining at the reorganized Pan Am.

"Delta is paying dearly for these assets, but they came to the conclusion they just had to acquire these routes or remain a distant third [behind United and American] in an oligopolistic industry," said Stephen Dexter, airline analyst with Kemper Financial Services in Chicago.

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