Pan American World Airways, which pioneered air travel to the Pacific before World War II with its storied "China Clipper" service, has agreed to sell its Pacific routes to United Airlines for $750 million, in the biggest such deal in civil aviation history.
The transaction, which requires the approval of the Transportation Department and President Reagan, will transfer Pan Am's Pacific division, including 17 jumbo-sized airplanes and the routes they fly, to United, the western world's largest airline. Pan Am's only destination in the Pacific will be Hawaii, also served by United and others.
Additionally, in their joint announcement yesterday, Pan Am and United said that 2,700 Pan Am employes will be offered jobs by United, which will operate the division separately before integrating it. C. Edward Acker, Pan Am's chairman and chief executive officer, said no Pan Am employe would lose a job.
In return, financially troubled Pan Am will obtain the cash to strengthen its domestic and trans-Atlantic markets and help buy the new airplanes needed to serve them.
United, which battled for 16 years to gain access to the Orient before it finally won a route to Tokyo in 1983, will pick up Pan Am's schedule between the United States and China, Australia, New Zealand, Hong Kong, Singapore, Taiwan, Korea, Thailand and the Philippines.
United will be able to keep thousands of passengers that its extensive domestic network already feeds into Los Angeles, San Francisco and Seattle. United now has to hand off many of them to another airline. One of the major goals of U.S. airlines since deregulation began in 1978 has been to find ways to keep, not share, passengers.
United was the first major carrier to support the deregulatory movement, and deregulation has made it possible for airlines to fly anywhere they want within the United States.
International routes, however, are determined through bilateral treaties, then assigned to specific airlines by the federal government. Thus, United is attempting to bypass a complex route-award process for each of the points Pan Am serves by acquiring Pan Am's Pacific division.
Richard J. Ferris, United's chairman and chief executive officer, insisted yesterday that the transaction should be treated as a normal acquisition or a merger of one company by another, not as a series of route-award cases.
The proposal could become part of the U.S.-Japanese trade picture, according to some U.S. specialists, because Pan Am's routes all go through Tokyo and the Japanese conceivably could delay entry by United. Technically, President Reagan certifies the U.S. carrier that will serve an international route.
"Over the years United has always wanted to be a major force in the Pacific, so we're very excited about it," Ferris said.
He said he first discussed with Acker the possibility of a Pacific division sale about three years ago, but that the discussions did not get serious until recently. "I never asked Mr. Acker why he did or did not want to discuss it. I just kept asking," he said.
The deal was finally struck about 3 a.m. Sunday, Acker and Ferris said in a joint press conference.
Asked why he chose to sell now, Acker said "the price changed." When asked if his company's financial situation had anything to do with it, he said "not at all."
As part of the deal, Pan Am is withdrawing from a lawsuit in which several U.S. airlines charged that computer reservation systems owned by United and American were biased against other carriers. Additionally, Pan Am and United will honor each other's frequent-flyer programs.
Pan Am lost $206.8 million last year, when the U.S. industry as a whole posted record profits. United made $258.9 million. Representatives of both United and Pan Am touted the proposed deal as good for the United States because it would place a strong force in the tough Pacific market.
The Pacific Rim is seen as the major growth area for international aviation, but it is highly competitive, with U.S. carriers Pan Am, Northwest and Continental vying against airlines from Korea, Japan, Singapore and the Philippines.
Pan Am has seen its share of Pacific travel drop from 23 percent in 1975 to 14 percent for the first nine months of last year. Nonetheless, in the past two years it made $132 million from its Pacific routes.
Acker said the proposal does not represent "retrenchment" on the part of his airline. He said "we are expanding our Atlantic division some 50 percent in capacity during 1985. . . . Pan American believes its strategy should be to consolidate its operations" where it is strong. In addition to a strong hub at Kennedy airport, Pan Am is expanding at Miami and Washington Dulles.
Acker was asked if he had any "twinges of sadness" in abandoning the routes Pan Am first flew with its "China Clippers," seaplanes that flew between San Francisco and the Orient. "Yes, of course," he said. "Nostalgia is a very important thing to individuals in the airline industry particularly, . . . but we have the responsibility of representing our employes' and our shareholders' best interests. Sometimes you have to sacrifice sentiment and nostalgia. . . . "
Acker and Ferris said they hope their case will be expedited, and they personally called on Transportation Secretary Elizabeth Hanford Dole at 8 a.m. yesterday to explain what they had in mind.
Acker and Ferris were accompanied by, among others, former Transportation secretary William T. Coleman Jr., a Pan Am board member and Pan Am's counsel for this transaction. Coleman said in an interview that "I hope the whole thing can be heard and disposed of within three months" at the department, then sent to the president.
In years past, the decision about such a deal would have been made by the Civil Aeronautics Board, but it went out of existence Jan. 1.
Other airlines were generally noncommittal yesterday. "This is too big for us to comment on until we figure it all out," an executive at one competing carrier said.
The Air Line Pilots Association, which has reached an impasse in labor negotiations with United and many of whose members recently supported a strike by the Transport Workers Union at Pan Am, also declined comment.
On the stock market yesterday, UAL Inc., United's parent, was up 3/4 at the close and Pan Am was up 1/4.