Managing Editor, Korn Ferry Briefings
This Week in Leadership (Sept 20 - Sept 26)
Why job switchers aren't getting that much more money. Plus, leadership lessons from Angela Merkel and her very long tenure.
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The flying public would become terrified. On the evening of December 21, 1988, Pan Am flight 103—a Boeing 747 jumbo jet named Clipper Maid of the Seas—took off from London’s Heathrow Airport bound for New York. As the plane full of holiday travelers ascended to its cruising altitude of 31,000 feet and crossed over the Scottish border, an explosion blew the giant aircraft out of the sky over a rural village named Lockerbie. All 259 passengers and crew, along with 11 civilians on the ground, were killed.
After initial speculation citing structural failure, Scottish authorities announced that an exploding terrorist bomb had, in fact, caused the disaster. Within three years, the most iconic of airlines was out of business; and while many other factors were behind its demise, few doubt that the Lockerbie crash was a mortal wound. “It was the day the heart of Pan Am died,” said one pilot.
Credited with almost single-handedly creating the commercial airline industry, Pan American World Airways dominated it in the mid-20th century. It was the first airline to fly across both the Atlantic and Pacific Oceans, and, in 1947, the first to offer round-the-world service. Pan Am brought the Beatles to America in 1964, and its famous blue globe logo emblazoned the Pan Am skyscraper in Midtown Manhattan. Charles Lindbergh sat on its board.
The airline was founded by Juan Trippe, a former naval aviator who started out with an air taxi service in Long Island. A pioneer whose reign lasted half a century, Trippe landed on the cover of Time magazine in 1933. Decades later, he scored a marketing coup when Stanley Kubrick depicted a Pan Am lunar shuttle in his sci-fi masterpiece 2001: A Space Odyssey. That prompted Pan Am to sell $20 deposits for such future flights, attracting 93,000 customers.
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But for all his high-flying success, critics say Trippe could be an abrasive and hubristic leader, unable to win friends in high places, such as the White House, which would prove critical. After alienating presidents, starting with FDR, both Presidents Johnson and Nixon refused to help when Pan Am desperately needed influence in acquiring government permission to fly domestic routes.
Trippe insisted on spending lavishly, building a skyscraper near Park Avenue in New York to house Pan Am’s headquarters. A visionary with bad timing, Trippe in 1970 invested millions to acquire a fleet of the first Boeing 747 jumbo jets, just as the worldwide recession of ’69 to ’71 dried up international air travel. The financial burden of the 747 investment crippled the airline for years to come. The 1974 crisis in the Middle East, which led to an oil embargo and skyrocketing jet-fuel prices, added to the financial woes. “I compared Trippe to modern-day entrepreneurs like Bill Gates and Jeff Bezos,” says Robert Gandt, a former Pan Am pilot and the author of Sky Gods: The Fall of Pan Am. “Pan Am was Trippe.”
Trippe resisted grooming a successor, so when he stepped down as chief executive in 1968, the company endured two decades of ill-equipped leaders who alienated employees, unions, and regulatory agencies. Trippe remained on the board and kept an office in the Pan Am building, so his presence was palpable until his death in 1981. Pan Am found itself in a constant financial crisis. It was being extorted for outlandish landing fees in foreign airports—a Pan Am 747 paid $4,200 to land in Sydney while a similar Qantas flight paid $178 to land in Los Angeles—and the US government refused to intervene. In 1978, when deregulation rocked the airline industry, Pan Am was left reeling.
“The biggest factor in Pan Am’s demise was deregulation,” says Madhu Unnikrishnan, editor of Aviation Weekly. “They had this beautiful international network back when the Civil Aeronautics Board told airlines where they could fly and what they could charge.”
The Airline Deregulation Act of 1978 opened the skies to a wave of new competitors with a spider’s web of domestic routes. Pan Am had long been barred from entering domestic routes—now, all of a sudden, “they couldn’t feed traffic from domestic locations to their international flights, and domestic carriers were suddenly competing on international routes. Pan Am scrambled to create a domestic network through acquisition, but they never caught up,” says Unnikrishnan. “They had crushing financial problems, and then Lockerbie happened and they could never recover from that.”
For his part, Gandt compares the carrier to a great prehistoric dinosaur, the pterodactyl. “It ruled the sky for a long time and then the climate changed and it couldn’t adapt,” he says. “So it perished.”