Famous U.S. Airlines: Then and Now

Pan Am

Pan American World Airways was probably the most famous carrier in the world from when it was founded in 1927 until well into the 1970s. The carrier's success was undermined by high fuel prices in the early 1970s and a bidding war to buy National Airlines in 1980 which put tremendous debt onto the Pan Am balance sheet. In 1989, Pan Am tried to merge with Northwest to cut costs. The airline was outbid, and its debt put it out of business in 1991.

Next: TWA

TWA

TWA was Pan Am's most formidable competitor for several decades. It was started in 1930. By 1938, TWA was running commercial flights around the US using DC-3 aircraft. It was aggressive in adding to its fleet, and in 1969 it moved ahead of Pan Am in total trans-Atlantic traffic. Its dominance did not last long. Carl Icahn took over the company in 1985 and hoped to make money selling off the firm's assets. The plan did not work and TWA filed for Chapter 11 in 1992. It operated under court protection and made a run at the domestic market which failed in 2001 when American bought its remaining assets.
Next: Eastern

Eastern

Another of the great American airlines to disappear in the 1990s was Eastern. The company started in the 1920s as a mail carrier and grew to become one of the largest in the U.S. by the 1970s. But, with the 1978 Air Transportation Deregulation Act, Eastern began to face brutal price competition on some of its most popular routes. A mechanic's strike forced Eastern into Chapter 11 in 1989. The recession that year and rising fuel prices put Eastern completely out of business in 1991.
Next: ValuJet

ValuJet

ValuJet was a discount carrier, founded in 1993, which had some success. Using Atlanta as its hub, it quickly spread service across the southeast and raised capital with a 1994 IPO. But, the company may have run the airline too inexpensively. The government started to charge the airline with safety violations as early as 1995. The trouble came to a head on May 11, 1996 when ValuJet flight 592 crashed killing 110 people. After the incident, the airline was grounded for three months and started to lose money. In 1997, ValuJet was taken over by AirTran and its run as a discount carrier was over.

Next: People Express

People Express

The concept of the "no frills" airline did not exist until People Express invented it in 1981. It flew out of the equivalent of a huge garage at Newark Airport and early round-trip fares were $149 to places like Florida, which was a bargain at the time. The company was doing so well that it committed the cardinal sin in the airline industry -- it bought another airline and took on a huge debt load. The new company tried to raise fares to improve revenue, but its customers were used to flying cheaply. People Express folded in 1987.

Next: America West

America West

America West began operations in 1983 as a service primarily for people who wanted to fly to Las Vegas and Phoenix for leisure. A combination of too many obligations and the increase in fuel costs during the Gulf War put America West into Chapter 11 in 1991. It stayed under court protection for almost four years. By 2003, the airline had shut its major hub in the eastern U.S. As part of the wave of consolidations in the airline industry in 2003 and 2004, America West "bought" US Air. Since the US Air brand survived, it is open to question as to who acquired whom.

Next: Republic Airlines

Republic Airlines

Republic Airlines was the king of the Midwest market from the late 1970s to the late 1980s. It kept two large hubs in Detroit and Minneapolis. Operating small aircraft including 727s it served more locations that any carrier in the US. In the hopes of picking up more domestic traffic to support its international routes, Northwest bought Republic in 1986. Of course, Northwest is currently in the process of disappearing into Delta.

Next: Piedmont

Piedmont

Piedmont was a major carrier in the American southeast from its founding in 1948. Piedmont was one of the few carriers that kept reasonable profit margins and responsible debt loads. It expanded into markets in the Northeast but stayed away from major cities, preferring Syracuse and Baltimore. Piedmont was rewarded for its profitability and was bought by US Air in 1989.

Next: Delta

Delta

Delta was heading into bankruptcy for almost two years in 2005 with a remarkably high $28 billion of debt on its balance sheet. The airline had lost $10 billion over the four years before it sought court protection. It used the move to cut out large numbers of union workers and cut down benefit costs. By the time it exited Chapter 11, it had cut over 6,000 people. By some estimates, attorneys made over $120 million helping the carrier though the process.

Next: Northwest

Northwest

Northwest went into bankruptcy at the same time Delta did. The carrier was facing employee unrest and a work stoppage by its mechanics. The airline was able to stiff its unsecured creditors, paying them as little as 66% of their claims. The company raised $2 billion in new capital from institutions. Northwest also picked up leverage in cutting pay for large pools of employees including flight attendants. It then went back to normal operations in 2007.

Next: US Air

US Air

US Air went into Chapter 11 a little ahead of some of its competition. It had faced prolonged negotiations with its unions and had not entirely recovered from the traffic drop after 9-11. US Air filed for protection in 2004. It had also gone into Chapter 11 in 2002. Rather than spend the second period of court protection trying to raise capital while it worked thought bitter labor negotiations, it merged with American West in 2005.

Next: Continental

Continental

Continental went into Chapter 11 in 1990 (it went bankrupt in 1983 as well) as a result of high oil prices due to the Gulf War and several years of rapid expansion and acquisition of new aircraft. The company had $2.2 billion in debt and only a little over $100 million in cash. If the company had not bought Eastern Air, it might have had the balance sheet to cover a protracted period of loses, but with the costs of integrating a new carrier there was no chance for Continental to generate enough cash to handle its debt service.

Next: United

United Airlines

Another victim of 9-11 was United Airlines which went into Chapter 11 in 2002. United had received loans from the Air Transportation Stabilization Board after the disaster, but labor costs and slow traffic put it in a position where it was unlikely to be able to pay that money back. As usual, the labor unions paid a big price in the bankruptcy. The airline did not become independent until early 2006. Aside from negotiating debt loads down, it has blistered suppliers and employees, lowered salaries and benefits.

Also: Check out the Top 25 Most Memorable Companies That Have Disappeared

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Everyone mired in debt wishes for some type of magic spell that can make it disappear. Unfortunately there are no magic words to get rid of debt. You can only pay off debt with a disciplined plan of paying more on your accounts than the interest due.

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