Becoming: Pan American

Early Pan-American flights

“It may be hard for today's all-too-frequent fliers to remember that once, air travel was an adventure; that airlines once had a soul. Pan Am certainly did. It ushered in cross-Pacific air travel in the mid-'30s with its China Clipper and commercial-jet travel with its Boeing 707--the first jet was christened in grand manner by First Lady Mamie Eisenhower. The carrier came to stand for a questing American spirit--and sound business sense.”

Text from 1991 Newsweek article[i]

Pan American World Airways – more commonly known as ‘Pan Am’ – can be credited with inventing modern commercial air travel. From its foundation in 1927, it became the unofficial flag carrier of the United States at the dawn of the commercial aviation industry. At its peak, it held up to 90% of flights to the Caribbean and over 50% of those to Latin America.[ii]

Pan Am ultimately fell victim to the changing competitive dynamics which arose as a result of deregulation in the aviation industry at the end of the 1970s.[iii] It filed for Chapter 11 bankruptcy and was forced to liquidate its remaining assets in 1991. Despite its ignominious end, many of the airline’s practices provide a template for how modern airlines operate:

Pan Am transformed aviation into a consumer industry

Pan Am founder, Juan Trippe, once said: “air transport does have the choice... of becoming a luxury service to carry the well-to-do at high prices or to carry the average man at what he can afford to pay. Pan American has chosen the latter course.”[iv] This is essentially the thinking which underpins the modern aviation industry.

In a 1998 Time magazine article[v], Richard Branson wrote: “Before anyone else, he believed in airline travel as something to be enjoyed by ordinary mortals, not just a globe-trotting elite. In 1945 other airlines didn't think or act that way. Trippe decided to introduce a "tourist class" fare from New York to London. He cut the round-trip fare more than half, to $275.”

Branson continued: “This went over like a lead balloon in the industry, where air fares were fixed by a cartel, the International Air Transport Association; it didn't want to hear about the tourist class. Incredibly, Britain closed its airports to Pan Am flights that had tourist seats. Pan Am was forced to switch to remote Shannon, Ireland.”

Trippe’s concept of aviation becoming a ‘glorified bus operation’ (to quote the CEO of Ryanair, Europe’s largest airline by passenger numbers)[vi], has subsequently been refined to the extent that air travel is accessible to all but a few: Nearly 4 billion people flew in 2018[vii] – a statistic that owes much to the vision of Juan Trippe.

Pan Am was the first to demand custom-built planes

In order to fulfill its goal of universal passenger air travel, Pan Am needed Boeing to provide it with specially designed passenger aircraft. With each new aircraft built, marginal costs fell, lowering Pan Am’s capital costs, which eventually fed through to the customer. The first of these aircraft was the Sikorsky S-38 in 1938.[viii]

By the 1950s, airplane manufacturers were already making airplanes with mass market appeal. The DC-6 “Super Six,” ordered in 1952, was the first plane ever designed for low-cost passenger service.[ix] Not only did Pan Am turn travel a customer-focused industry, by extension it made airplane manufacturers more customer-focused.

Pan Am integrated the travel industry

In order to effectively deliver on its mandate to provide cheap international travel, Pan Am had to bring together a number of stakeholders for the first time. An example of this came in 1932, when it was the first airline to sell all-expense international air tours, bringing together airports, hotels and other tourist providers under one offering.[x]

[i] See: https://www.newsweek.com/pan-american-world-airways-1927-1991-204910

[ii] See: Gale, B (2017). “Corporate Disasters: Management and Leadership Failures.” Cengage Learning.

[iii] See: Fischbacher-Smith, D., Sipika, C., (1993). “From Disaster to Crisis: The Failed Turnaround of Pan American Airlines,” Journal of Contingencies and Crisis Management Vol. 1 (3), pp. 138-151.

[iv] https://www.panam.org/golden-age/541-air-travel-for-all

[v] Branson, R. (1998). “Juan Trippe: Pilot of the Jet Age.” Time, Dec 7, 1998.

[vi] Howe Verhovek, S. (2010). “Jet Age: The Comet, the 707, and the race to shrink the world.” Penguin Group.

[vii] https://edition.cnn.com/travel/article/2018-year-in-aviation/index.html

[viii] https://www.panam.org/images/HistoryResourcesMuseumLinks/Pan-Am-Firsts.pdf

[ix] https://www.panam.org/golden-age/541-air-travel-for-all

[x] https://www.panam.org/images/HistoryResourcesMuseumLinks/Pan-Am-Firsts.pdf