Pan American World Airways, Inc


Pan American World Airways, Inc ("Pan Am") is a New York corporation
organized in 1927 which is engaged in commercial air transportation which
it pioneered between the United States and most areas of the world. Pan Am
Corporation ("the Corporation"), a Delaware corporation, is and since
September 14, 1984 has been the parent of Pan Am, it's principal
subsidiary.

For the past few years Pan Am's financial condition has been very
poor. The company reported a consolidated net loss for 1986 of $469.3
million. The 1988 net loss included a gain of $89.1 million resulting from
the sale of Pan Am's Airbus A320 aircraft and delivery positions. This gain
was partially offsetted by a reserve of $25.7 million related to the loss
on sale of Pan Am's subsidiary, which is responsible for the marketing of
excess inventory, and 18 million of year-end adjustments.

Pan Am's passenger traffic was strong in 1988. An increase of 12.2
percent on capacity of 11.2 percent. This was due to the result of
strengthening of various European currencies against the U.S. dollar, fare
increases in the market, enhanced management systems and procedures, as
well as programs to reduce the dependence on wholesale ticket distributions
throughout the Atlantic, Latin America, Domestic, and systemwide.

Eventhough revenue was strong in 1988, labor and other costs increased
at a higher rate as a consequence of efforts to improve service and
effectiveness of the operation. Labor costs were higher in 1988 due to the
result of an increase in the number of employees during the year. Also the
addition of increased fuel prices, commissions, purchased services,
aircraft rentals, and a $24.0 million foreign exchange loss had a negative
impact on the corporation.

1987 expenses were effected by increases in expenses for fuel,
commissions, maintenance materials and other operating costs which exceeded
expectations. Labor cost reductions were not achieved in 1987. Other losses
which occurred was the settlement of an $18 million provision for the
proposed settlement of an age discrimination suit, and as well as $42.0
million for increased allowances for inventory obsolescence, uncollected
receivables and costs associated with the WorldPass frequent flyer program.

COMPANY BACKGROUND

Pan Am lead by it's founder Juan Trippe, virtually single- handedly
opened up the world to commercial flight. Teeming with adventure,
international intrigue, and financial manipulations, this sky-struck young
man with immense ambition and vision took a seaplane carrying mail 90 miles
from Key West to Havana and expanded the operation into the vast world-wide
airline that at one time considered itself the "chosen instrument" of the
State Department abroad. The airline was considered so official by
Washington that Trippe had power to make deals with foreign governments
abroad .

In 1934 people thought it was virtually impossible to cross the
Pacific by air, but Trippe saw a way to do it. Through the use of the
famous Clipper Flying Boats, Trippe achieved the impossible, and started
the worlds first trans-atlantic flights to europe, asia, and south america.
Pan Am achieved great heights with the help of pilots like Charles
Lindbergh, who opened many early routes, and hero pilot Eddie Musick, who
pioneered routes across the Pacific, and not to mention Andre Priester, the
engineering marvel behind the early flying boats.

Currently Pam Am provides non-stop service from the states to 36
locations in europe, asia, and south america. The company strives to
provide the best service to all it's destinations than all the other
carriers in general. Presently the airline is trying to achieve a
"Corporate Image" to attract more business people thus increasing passenger
revenues.

ASSESSMENT OF COMPANY'S PERFORMANCE AND FINANCIAL CONDITION

Overall, the short term liquidity of Pan Am seems to have a stable
trend but is very poor compared to the average industry's ratios. Through
the past two years very little changes can be seen in the short-term
liquidity ratios. The firm acid test ratio puts it in the lower quartile.

As for capital structure and long-term solvency we can only say that
the firm is experiencing heavy losses and is relying on long term loans and
secured notes in order to finance themselves. A stockholder deficit and net
losses gave all index ratios negative values. So again we can see that the
capital structure and long-term solvency of the firm is quite poor.

Return on investments where quite poor since no change occurred on the
return of investment and return on equity due to the stockholder deficit.

As for operating performance ratios, these figures where quite poor
also due to heavy losses in operating expenses.

Asset Utilizations ratios where in general