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Thursday, June 02, 2005

Airline mismanagement cost South Florida more jobs than Scripps will bring

(Part 2)

On June 1, 1980, the merged Pan Am, rebranded the "New Pan Am," was unveiled. Pan American World Airways had been a global ambassador for the United States going back to 1927, and had been a key magnet in the international growth of Miami, since the Latin American operation of Pan Am always centered around Miami. However, Eastern, a New York based carrier who moved its headquarters to Miami in 1974 and Miami based National were the two largest carriers at Miami International Airport in 1979. As I stated in the last blog, by 1980 Eastern had become the free world's largest air carrier and was the top carrier at just about every major Florida airport. Between the purchase of Mackey Airways in 1971 (an airline based in Fort Lauderdale that flew to the Bahamas) and 1980, Eastern had expanded into the Caribbean and Latin America. Florida's economy was highly dependent on Eastern as many of the tourists that flocked to Florida from all over the world flew Eastern into Florida airports. It was logical that Eastern should acquire National's abandoned routes from Miami to Europe, since Pan Am already flew the routes and the FAA would be given the authority to allocate a second carrier on the routes. Eastern employed 18,900 people in Miami and Fort Lauderdale in 1980. (as compared with American's 5,800 today- this is in response to the comment posted on the last blog that American is bigger in Miami today than Eastern or Pan Am ever was). After the PA/NA merger the "new" Pan Am employed close to 12,000 people in South Florida. (more than twice as many as American employees now.) The FAA, however decided to award the routes to Air Florida a discount, no frills Miami airline, whose Chairman Ed Acker was well connected in Washington political circles. Overnight, Air Florida became the 3rd largest American based air carrier to Europe. Eastern had again been shafted by Washington, and this time in favor of an airline whose staying power was questionable.


Eastern now geared up for the competition from the new Pan Am, which enjoyed 27% of Miami market (as compared with 35% for Eastern and 16% for Delta) by beefing up service to the Northeast. But Air Florida, with newly minted European routes was able to cut fares even further from Miami, Fort Lauderdale and West Palm Beach to points in the Northeast and they undercut Pan Am's fares to Europe as well.

Eastern routes in 1981:

By 1982, the nation was in recession and both Pan Am and Eastern were posting hug losses due to the increased competition. Eastern was able to acquire Braniff's South American Routes in 1982 because Braniff liquidated, but despite this profitable division the rest of the airline was being hurt by increased competition.

Pan Am began a massive pullback from Florida markets flown by National and by 1984, despite having inherited National's service to 11 Florida cities, service was limited to Miami, still Pan Am's largest hub, Tampa and Orlando. In 1989, service would resume to Jacksonville and Fort Lauderdale, but Pan Am would never again fly to the secondary markets that it had inherited from National. Service to major National cities such as Houston and New Orleans were ended outright as well until 1988.

Air Florida in 1983:

As competition and labor problems intensified for both Pan Am and Eastern, they both fell deeper and deeper into debt. Eastern finally began service to London and Madrid after Air Florida went belly up, but the flights were dropped as a mounting fear of terrorism hurt European travel after the bombing of Pan Am 103 and TWA 847. Pan Am continued to hold a strong presence at Miami but was crumbling elsewhere- the Pacific division was sold to United in 1986, and London was sold to United in 1990, and the Frankfurt and JFK based European routes were sold to Delta in 1991.

Sensing weakness, American Airlines a Dallas based carrier who had only begun service to Florida in 1979 opened a crew base and eventually a hub in Miami. Eastern facing a crippling strike bailed out of Miami in 1990, selling its hub almost lock stock and barrel to AA. Eastern maintained their headquarters and plane maintence facilities in Miami, however and thus remained a larger employer locally than American. Pan Am and Eastern both based their reservation call centers in South Florida and had maintance bases for their larger planes. To this date American does not maintain a single aircraft in Miami or have a single local call center open.
Pan Am's response to American was quite different. Rather than contract and bail out of the Miami hub, Pan Am decided to defend their base. Pan Am ran ads stating" We've been with Miami since the beginning," and " Fly the way South Florida has for over 50 years," a clear shot at American's relatively new entry into the Miami market. Pan Am increased service from Miami and in 1991 was Miami's largest carrier and employed 4 times as many people locally than did American. However, American eventually dropped fares and ran Pan Am, which by this time had 80% of its routes touching Miami, out of business. On December 4, 1991 after a last flight from Barbados to Miami, Pan Am the most famous name in aviation worldwide was dead. Eastern had gone out of business earlier in the year, when the Gulf War raised fuel costs.

Gone between Pan Am and Eastern were 25,000 local jobs. Local Government and the Feds did nothing to stop these legendary airlines from going under, but in 2001 decided to bail out equally poorly run airlines. Where is the fairness for South Florida? American Airlines is now the dominant carrier in Miami, but yet employees only 5,800 employees. Air fares out Miami are among the highest in the nation as American has achieved a monopoly on several routes. For example Miami-New York, an route served by 6 carriers in 1990 is currently served by just American. This is in direct contrast to the route from Fort-Lauderdale to New York which is served by 5 carriers nonstop. Miami to Los Angeles is also served by just American even though it was served by 4 carriers in 1990. No carrier flew nonstop from Fort Lauderdale to Los Angeles in 1990, but now 3 airlines fly the route nonstop. The failure of National and local Governments to prevent interference in Eastern's affairs and later the failure to help bail out Pan Am and Eastern created a situation where South Florida lost 25,000 jobs and air fares were out of control. Oh, and American Airlines made some Miami-Dade politicians very wealthy. But that is a subject for another time!

Pan Am at the end:


Mark said...

I disagree totally. Eastern was being held hostage by its unions even in 1979 and a merger with a low cost airline like National would have been a disaster. Moreover, today American flies to more destinations and offers more daily flights from Miami than Pan Am or Eastern ever did. I know where you are going with the second half of this article, that American has a monopoly over Miami, something you feel Eastern was blocked from having. Times are different now, and Miami isn't quite the key market it was then. In 1980 all flights from the US to Latin America went from either New York or Miami. Now, Chicago, Atlanta, Denver, Dallas, Houston, Orlando, Charlotte, Washington even fort Lauderdale handle flights to Latin America. Also, Eastern was allowed to purchase Braniff's Miami-South America flights in 1982 over Pan Am's loud objections, and thus PA and EA competeted head to head on Miami-South America routes from 1982 thru 1990. Pan Am was not allowed to have a monopoly on Latin traffic from MIA, just as EA was not allowed to have a monopoly on domestic traffic. The competetion served South Florida well. American also competeted beginning in 1988 and now has Miami's largest hub ever.

American's hub in Miami has allowed South Florida to be integrated in an airline system that spans the globe and has more than just a regional or international focus. Delta and United both have pulled back from Miami because American's fares were low enough for them not to compete. Now American is adding several cities with regional jets such as Richmond, Dayton and Greensboro never served from Miami before. AA for Miami is good for the traveler and for the economy. Several new cities have been opened in the last year where no other service from South Florida has ever existed. American has dropped fares also due to Jet Blue and Spirit's large Fort Lauderdale operations. Sure, job losses were heavy, but things such as Pan Am's reservation system and Eastern call center probably would have eventually been outsourced anyway.

Scotty said...

I believe that Delta actually serves all 3 of the cities Mark mentioned from Fort Lauderdale.

I agree with Kartik's analysis. Eastern was the world's largest airline and was South Florida's jewel. Not only was Eastern based in Miami, but they had a large operation at other Florida cities unlike American. Eastern was the largest airline in the country and also the most critical in several major business centers. I miss Eastern.

Kartik said...

You cannot make a case in any way that MIA is better off as an airport with American replacing Pan Am and Eastern. You mentioned that AA allows miami to be the hub of a global network, than what exactly was Pan Am? Moreover, how does 5,800 jobs replace 25,000? The state is so concerned about job incentive programs when at one time we had the jobs here. It's a shame Dade County never cooperated. United strongly considered placing a mx facility at MIA for widebody aircrafts but got no help from local government that was already in AAs pocket.

One airline that always had a large operation MIA that is still in business is Delta. However, Delta thanks to hostility from the county has pulled back from Miami and only serves four destinations now from Miami. (Atlanata, Orlando, Tallahassee, Cinn./Northern Kentucky.)

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I am the host of the Major League Soccer Talk and EPL Talk Podcasts and am frequent guest on other (world) football shows. I am also the publisher of various other websites including this one. I work in public/government relations in addition to my soccer work and have a keen interest in history, politics, aviation, travel,and the world around us.