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United to Buy Pan Am's London Routes : Airlines: The deal is worth $400 million. The carrier will gain gateways from five U.S. cities, including Los Angeles.

October 24, 1990|ROBERT E. DALLOS | TIMES STAFF WRITER

NEW YORK — In another step in its emergence as a global carrier, United Airlines announced Tuesday that it has agreed to purchase the London routes of troubled Pan American World Airways.

The transaction, worth $400 million, will give United gateways to London from five U.S. cities: Los Angeles, New York, Washington, San Francisco and Seattle. From London, United will pick up Pan Am routes to a half-dozen European cities.

For Pan Am, the sale is part of a decadelong, worldwide retreat. Pan Am will still have extensive routes abroad, with service to Scandinavia, Eastern Europe, the Middle East, the Indian subcontinent and Latin America.

But like Pan Am's $715-million sale to United of its Pacific routes in 1986, the latest deal will help erase overseas an American brand name that once was as well-known as Coca-Cola or Kodak.

"I think it is a clear sign that Pan Am will continue to be in an asset-sale mode," said Paul Karos, an airline analyst with First Boston Corp. "It will continue to sell assets until it will be a very small operation. And at some point down the road, it will not exist anymore."

In making the announcement at a news conference in New York, Pan Am Chairman Thomas G. Plaskett and Stephen M. Wolf, chairman of United's parent company, UAL Inc., said United would also acquire two Boeing 747s and their crews.

United also will obtain Pan Am's routes from London to Amsterdam, Berlin, Brussels, Oslo, Helsinki, Finland, and the German cities of Hamburg and Munich. In addition, it will initiate service from Washington's Dulles International Airport to Paris.

The airlines' frequent-flyer programs will be meshed. And the two executives said their carriers will "develop long-term cooperative opportunities in a number of areas." Initially, United and Pan Am will coordinate their schedules at Miami International Airport and their flights to South America from the West Coast.

Plaskett and Wolf denied that the agreement was the first step toward a merger. Pan Am reportedly ended merger discussions last week with Trans World Airlines which, like Pan Am, is primarily an international carrier.

Wolf said the revenue on the routes being acquired by United is about $500 million annually.

The deal still faces a major hurdle.

Under an agreement with the British government, Pan Am and TWA are the only American carriers allowed to serve London's Heathrow Airport. Travelers generally favor it over the other London airport, Gatwick. Because of congestion at Heathrow, however, the two carriers had to agree that, if they sold a route, the purchaser would have to fly to smaller and less congested Gatwick.

Plaskett and Wolf said they were confident that the British government would allow United to use Heathrow. Pan Am will continue to operate the routes pending government approval.

United only recently initiated service to Europe, with flights from Chicago to both Frankfurt, Germany, and Paris and from Washington's Dulles to Frankfurt. It plans Dulles-Madrid flights beginning next spring. Just last week, the airline put behind it a 15-month-long takeover skirmish and announced a $22-billion jet purchase, largest in aviation history.

Pan Am's announcements for years have been about divestments, not acquisitions.

Since 1980, it has sold its headquarters building in New York City, its worldwide Intercontinental Hotel chain, its Pacific routes, a major maintenance operation and its rights to buy 16 Airbus Industrie A-320 airliners.

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