Pan Am Seeks Way Out of Woods

THEN there were six. The number of major United States airlines that have avoided bankruptcy slipped to six this week as Pan American Corporation filed for protection from its creditors.

The move, announced Tuesday, means that the New York-based airline - once the flagship US carrier - will join Continental and Eastern airlines in bankruptcy court. It plans to maintain a full schedule of flights. But, analysts expect pressure to mount on weak carriers as long as high jet-fuel prices and the recession continue.

In the long run, the airline industry will be dominated by mega-carriers.

``I think the consolidation will continue,'' says David Pizzimenti, airline analyst for Nomura Research Institute America Inc.

Under this scenario, a handful of huge carriers will dominate the market. Three of the top spots are already taken by United, American, and Delta airlines, analysts say. The other carriers will have to vie for the remaining one to three top spots. Pan Am almost certainly will not be one of the contenders, they add.

``It's always chancy when a carrier reduces its size and sells off its valuable assets,'' says Lee Howard, chief executive officer of Airline Economics Inc., a Washington, D.C., consulting firm. In Pan Am's case, it will be especially difficult, he adds.

The carrier's troubles date back to the 1960s, when it made costly acquisitions of new airplanes. When the industry was deregulated in the 1970s, Pan Am was unprepared for the heated competition, and didn't build a network of domestic flights to feed its overseas operations.

During the 1980s, it stayed airborne only by selling off big chunks of its business.

Pan Am may be able to emerge successfully from bankruptcy down the line, especially if the court approves a planned infusion of $150 million in financing from Bankers Trust New York Corporation and United Airlines.

Paul Karos, airline analyst for First Boston Corporation, is optimistic Pan Am can survive as a smaller carrier, serving all of Europe except Britain, Latin America, and to a very limited extent, the US. It will still lack the domestic network to ensure its long-term survival, he adds.

United may be the biggest winner, however, because it wants to buy Pan Am's choice transatlantic routes to London, Mr. Howard says. On Tuesday, the US Department of Transportation approved that sale, although the British government still must decide whether Pan Am's London gates can be transferred to United.

By providing Pan Am with a bridge loan during bankruptcy, United may be able to complete its deal without having to line up with the rest of Pan Am's creditors, Howard adds.

The deal puts an end to on-again, off-again merger talks with Trans World Airlines, another financially ailing carrier.

Pan Am's stock slipped to a record low during trading at the New York Stock Exchange Tuesday - under $1 - after trading as high as $4 a share last year.