What do you think of the bankruptcy of Pan American Airlines?

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droxonian eNotes educator| Certified Educator

This seems to be an opinion-based question. I cannot tell you what you should think about Pan American Airlines' bankruptcy, but I can explain the circumstances under which it occurred and how it was received at the time.

Pan American Airlines was a globally recognized American brand, a symbol of the US abroad. In 1991, it filed for bankruptcy with court filings stating its combined liabilities as $2.8 billion, outstripping its $2.1 billion assets. At the time of its bankruptcy, Pan Am was still the biggest transatlantic airline in the US. In its statement, the airline said it had been pushed into bankruptcy by the rising cost of fuel.

What caused fuel to become so expensive in the early 1990s was the 1990 "oil price shock" which followed the invasion of Kuwait by the Iraqis in August of 1990. In October of that year, oil prices literally doubled, which naturally caused significant difficulties for airlines, including Continental, which also went bankrupt slightly before Pan Am. This was also a period of general recession, and the economy in the West declined. The US federal reserve was attempting to temper the inflation of the previous decade by raising interest rates, which also meant that Pan Am's debts became increasingly difficult for it to keep up with.

Delta Air purchased Pan Am's routes to Europe in October '91, allowing it to pay off some of its debts, and restructuring meant that it was able to relaunch as a far smaller airline. However, heavy losses continued, and Pan Am finally ceased operations again in December. Continued attempts to sell off Pan Am's brand and remaining profitable assets resulted in the founding of a new Pan American World Airways, a separate corporation which flew under the brand it had purchased from 1996–1998. Many complained at the time that the US government had not done enough to protect its primary international carrier, suggesting that they should have bailed out the company. Others suggested that mismanagement of the sales of assets meant that the situation for Pan Am went from bad to worse and that it would never have been able to recover after first declaring bankruptcy.