an American World Airways' aggressive new pricing policy, with some domestic fares reduced as much as 67 percent, has begun to pay off already with increased ridership and revenues, C. Edward Acker, the airline's new chairman, said today.
In an interview in in the Pan Am Building--a property the airline sold last year to raise cash--Acker said that next week Pan Am will report that its scheduled passenger traffic systemwide in October was up more than 2 1/2 percent from the same month a year ago, the first significant gain since March 1980.
The airline, which currently is operating at reduced capacity, has been filling an increasing number of its seats, Acker said. Last month it filled 65 percent on domestic flights, up from 51.9 percent in the same month a year ago. He added that advance bookings on new December Florida services have been "tremendous."
Acker instituted the simplified fare structure, with its unrestricted reductions, shortly after arriving on Sept. 1. He dismissed the contentions of some that a "high-cost" airline such as Pan Am couldn't bring enough new traffic with the fare cuts to make the strategy pay off. "We were not selling . . . the fares we are reducing," he said. "We were selling something completely different."
As an example, he said that only 14 percent of Pan Am's passengers between New York and London were paying the coach fares that were reduced; the balance of the seats were sold at discounts. "So by getting rid of the other discounts and by lowering the coach fare, we're actually increasing our yield, rather than decreasing it," he commented.
In September and October, the yield to the airline from its customers increased by half a cent on a cent-per-mile basis, Acker said. "On a year-round basis, that would mean $200 million," he noted.
Pan Am still is losing money, but it is losing less. Daily losses of $1 million have been cut to "below $800,000," Acker said. "For the first time this year, the trend has changed; the thing is improving . . . revenues are better than the previous month and expenses are lower . . ."
Acker said a number of changes designed to reduce expenses were already in the works when he joined Pan Am from Air Florida.These include a 10 percent pay cut taken by management and labor groups, and reductions in overhead costs and personnel--15 percent of management and 10 percent of contract labor costs. Many of the tasks of departed vice presidents have been taken on by remaining staff. Next week Acker will announce more executive changes and a streamlined organization structure.
He also is looking to save money other ways, including moving Pan Am's offices out of the Pan Am Building and possibly out of New York altogether, although no decision has been made. Pan Am is considering subleasing the floors it occupies--it easily could charge twice what it's paying--or selling its long-term leases outright. The airline also is considering selling two Boeing 747 freighters and other aircraft.
Acker said the company now has a "strong balance sheet" and there is "no danger of a Pan Am bankruptcy at all" given a normal environment with stable, and not gushing, fuel price increases.
"Now obviously, we have to stop losing money," he said.