Pan Am Changes Pilots

None of us can have real job security unless we are part of a successful and growing business. Security, real security, can only come from convincing our customers of our ability and our dedication to first-rate service.

THAT tape-recorded inspiration from Najeeb Halaby, their chairman and chief executive, could still be heard until late last week by Pan American World Airways employees who dialed 937-3200 in New York City. Even as they pondered those words, Halaby's own job security ran out. After Pan Am had suffered more than $100 million in losses during his 27-month stewardship, the directors pulled out an all-purpose letter of resignation that he had written two years ago and accepted it. He was replaced by William T. Seawell, whom Halaby had brought aboard four months earlier as president.

Halaby looks and talks like a movie model of a modern corporate chief. He is a Yale-trained lawyer, a former Navy test pilot, an articulate, athletic, craggily handsome man of 56 whom President Kennedy had picked in 1961 to head the Federal Aviation Administration. At Pan Am Halaby earned both intense loyalty and intense dislike. Because he was unable to prevent growing losses--$26 million in 1969, $48 million in 1970, $46 million in 1971 and $23 million in the first two months of 1972--he also inspired repeated rumors of his impending departure.

When the Pam Am board met in

November to approve Seawell as president, a faction led by PepsiCo Chairman Donald M. Kendall and Pan Am Founder Juan Trippe considered replacing Halaby with Seawell in one quick move, but Halaby survived. In February, however, the line lost a staggering $11 million, and officers of the group of 38 banks that has extended Pan Am a $270 million credit line became increasingly impatient. They indicated that the financing might have to be renegotiated under terms less favorable to Pan Am. That would have jeopardized the company's credit rating and knocked its stock for a loop. The board's regular April meeting was hastily moved forward two weeks. A board faction--including Kendall, Trippe and CBS Vice Chairman Frank Stanton--was prepared to dump Halaby. They dispatched Director Cyrus Vance, former Army Secretary and close friend of Halaby's, to try to persuade Halaby to leave gracefully. Said Halaby after his resignation: "I did the best I could in the time available to me, but I truly believe it will be a miracle if the new team does any better."

Crowded Skies. Founder Trippe had originally spirited Halaby away from the FAA in 1965, named him a senior vice president and made it clear he was grooming the new executive to move in as chairman. Trippe figured that Halaby's charm and once considerable influence in Washington would help persuade the Government to award Pan Am some domestic routes and permit it to merge with a domestic airline. Pan Am sorely lacks continental U.S. routes that would feed passengers into its international network. After Halaby took over as chief executive in 1969, he became a frequent supplicant to Nixon officials, but he met with little success. Pan Am lost out to National Airlines for the potentially lucrative Miami-London run, and other lines won route awards in the South Pacific, where Pan Am had had a monopoly. As for domestic routes, Civil Aeronautics Board officials decided that they were already too crowded. Merger talks with TWA (twice) and Eastern fell through.

Halaby can hardly be blamed for all of Pan Am's problems. Almost as soon as he took over, the industry was caught in a recession that reduced travel. Trippe had ordered 25 Boeing 747 jumbo jets that Halaby found he could neither fill nor sell. Though he fired or retired some three dozen senior executives in his first year as chief, Halaby was saddled with many more nonproductive middle-and upper-level man agers left over from the Trippe era. The company's unionized workers grew ever bolder in their demands, and Pan Am's average wages rose 8% last year, to $13,500.

Trying to reduce costs, Halaby laid off 5,200 of the company's 35,700 employees. Last year he cut almost $20 million in maintenance, food and advertising expenses. Deeper cuts might have seriously impaired passenger service. Halaby also unsuccessfully tried to eliminate a number of unprofitable routes to Latin America and the Caribbean that Juan Trippe had taken on partly at the behest of the State Department.

On the other hand, Halaby created many of his problems. Morale at the top suffered when he began clearing out senior executives, and it grew worse when he went outside the company to find replacements for many of them.

For a year and a half, Halaby struggled to carry on both his lobbying activities and the day-to-day operation of the airline. When he could not find a No. 2 man to suit him, he picked four "group vice presidents" to share the second spot and gave every indication that one of them would eventually become president. That unusual arrangement led to endless confusion over responsibility and frenetic efforts by each of the "groupies" to promote himself. Infighting was compounded by Halaby's aversion to making firm decisions.

Seawell, the new chairman and chief, is expected to fire more people. He takes charge at a time when many airlines are in a steep climb; as a group they lost $125 million last year but expect to be well in the black this year. Pan Am, still saddled with too many jumbo jets and no domestic routes, may be left behind. Its archrival, TWA, turned around from a $63 million loss in 1970 to a profit last year. Seawell, formerly president of Rolls-Royce's U.S. subsidiary and senior vice president of American Airlines, is known as a good problem solver, a tough fighter and a highly ambitious man. Now Seawell faces his greatest challenge: to revitalize a great but seriously demoralized airline.

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