NEW YORK -- Pan American World Airways Inc. said yesterday that it will eliminate 2,500 jobs, 8.6 percent of its work force, by next month. The layoffs, which include managers and other employees, are the most visible sign yet of the weakening condition of the nation's airline industry.
The cuts, which will save Pan Am about $55 million a year, are part of a cost-saving program aimed at softening the double blow of higher fuel costs and slackening demand for air travel. It is the most employees the troubled airline has let go since 1982.
"We think this is a prudent move, given the conditions today," said Thomas G. Plaskett, Pan Am's chairman. "We are by no means out of the woods yet."
He also said the airline will sell its profitable Pan Am Shuttle by the endof the year.
Pan Am's stock rose 12.5 cents a share, to $1.875, on the New York Stock Exchange.
Fuel prices have increased by more than 40 percent since the Iraqi invasion of Kuwait, and the airline industry has felt the impact. But Pan Am, which has lost nearly $2 billion in the last decade, is particularly vulnerable to any cost rises.
Most analysts called the layoffs and other cutbacks announced yesterday a needed but preliminary step in making Pan Am profitable.
"It's the last chance to restart the airline," Kevin Murphy of Morgan Stanley & Co. said. "It is the first step in a long series of things they need to do to be profitable."
Besides the layoffs, Pan Am will return five of its 35 Boeing 747 jets to its lessor and eliminate flights between New York and Philadelphia, Pittsburgh, Cincinnati and the Texas cities of San Antonio and Austin.