Delta, Pan Am officials discuss possible merger

April 19, 1991|By Brett Pulley | Brett Pulley,Dow Jones News Service

NEW YORK -- Delta Air Lines and Pan American World Airways officials are engaged in discussions concerning a possible merger, according to individuals familiar with the talks.

At Pan Am's headquarters in New York yesterday, Delta officials met with Pan Am Chairman Thomas Plaskett to discuss a move that could bolster Delta's position in the industry and save Pan Am from liquidation, it was learned.

Officials of both airlines declined to comment.

Delta is the nation's third-largest carrier and Pan Am, a unit of Pan Am Corp., is the sixth-largest. Yesterday's meeting was understood to provide Delta officials with a close look at Pan Am's financial picture. The troubled carrier has been operating under the protection of federal bankruptcy law since January.

Following a meeting last week between leaders of Pan Am's pilots union and Delta officials, Delta reportedly requested a meeting with Pan Am's top management to examine the financial data.

Pan Am's pilots have been making the rounds of healthy carriers recently to try to find a merger partner for the airline.

At last week's session, held at Delta's headquarters in Atlanta, the pilots presented a slide show detailing Pan Am's remaining assets, including its route system in Europe, the Middle East and South America and its vast unused international route authority.

Delta's initial contact with Pan Am was first reported in yesterday's Miami Herald.

Even if Delta's interest in Pan Am persists, several obstacles remain to an outright combination. One of the toughest issues to resolve likely would be Pan Am's underfunded pension plan, which is running a deficit of at least $420 million.

Additionally, Pan Am, which is heavily unionized, has high labor costs, and its fleet is almost entirely leased. Delta, on the other hand, is non-union, except for its pilots, and owns most of its jets.

Still, a merger could awaken Delta, which hasn't had a major acquisition since 1986.

In recent months, the carrier has watched fellow industry leaders UAL Corp.'s United Airlines and AMR Corp.'s American Airlines snatch valuable international route authorities from failing carriers.

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