NEW YORK -- Delta Air Lines yesterday backed out of its deal to bankroll Pan American World Airways, leaving the historic but battered airline hoping for a last-ditch miracle to keep it alive.
Pan Am will operate its routes today while its creditors hunt for a savior to provide $15 million to keep the airline flying the rest of this week. If no buyer steps forward today, the 64-year-old airline could shut down as early as tonight.
Trans World Airlines Chairman Carl C. Icahn is negotiating with the creditors. Mr. Icahn earlier this week bought Pan Am's commuter airline.
If Mr. Icahn or another financier surfaces today with $15 million, the airline can operate the rest of the week while negotiators try to hammer out a quick but lasting fix. By 11 a.m. Saturday, when another court hearing is scheduled, creditors hope to have found investors to take Delta's place and have a plan to emerge from bankruptcy.
George Weiss, a Pan Am attorney, said at a packed bankruptcy court hearing yesterday that the airline had enough money, $3 million to $4 million, to stay in business one more day.
"We just ask you to allow us to run until Saturday," Leon Marcus, lawyer for Pan Am's creditors, begged in the court hearing yesterday.
"I have a 20 to 25 percent chance of pulling the rabbit, whose ears are in my hands, out of a hat," he said.
Yesterday was supposed to be a glorious day for Pan Am.
Under its reorganization plan, the airline would move its headquarters from New York to Miami. It would operate as a much-smaller carrier, serving Latin America, the Caribbean, Paris and a few domestic routes.
Its new chairman, Russell Ray, had been hired away from airline manufacturer McDonnell Douglas at Delta's behest.
But Delta held the key to Pan Am's future.
In August, the Atlanta carrier made a $1.4 billion deal with Pan Am. It agreed to pay $416 million for Pan Am's European routes and its popular shuttle between New York, Boston and Washington. It also agreed to assume $669 million in Pan Am liabilities and to invest $305 million in the scaled-down but revitalized Pan Am. In return, Delta would receive 45 percent of Pan Am's stock.
In October, Delta agreed to provide an additional $140 million to shore up Pan Am, which was still losing a lot of money. Delta had paid $115 million as of yesterday but suddenly refused to turn over the remaining $25 million.
A Delta lawyer, Lawrence Handelsman, said Pan Am's new business plan wouldn't work. He said few travelers booked advance flights on Pan Am, a sure sign the public lacked confidence in the venerable airline. Sources said Pan Am lost $100 million in October.
"Delta has tried as hard as anyone to make this work," Mr. Handelsman said. "This is a terrible disappointment, a depressing thing to all involved."
Pan Am, which filed for bankruptcy court protection in January, has suffered from the same troubles that have plagued the airline industry: an inadequate route system, cyclical travel patterns and increased competition from mega-carriers.
Delta's change of heart brought cheer on Wall Street. Delta shares soared $3.375, to $60.75, on news of the reversal. Traders were pleased that the carrier was free of the burden of helping bail out Pan Am.