U.A. set for Pacific move

Press, 15 July 1985, Page 35

U.A. set for Pacific move

By

PHILIP BARBARA

of Reuters through NZPA United Airlines, America’s biggest carrier, is poised to move into the Pacific region in a big way next year — if it gains Government approval for its planned take over of Pan American routes there.

Mr Richard Ferris, chairman of the airline’s parent company, U.A.L., says the proposed purchase of Pan Am’s Pacific division would at least double the combined activity of the two airlines in the area by 1995. Pan American agreed in April to sell its Pacific division to United in a SUS7SO-million ($1582.5 million) deal on which the United States transportation Department will rule by the end of October. “The Pan American deal is a once-in-a-lifetime thing. It gets us into the Pacific in a big way in one fell swoop and allows us to play upon our feed capabilities from Seattle, San Francisco, Los Angeles and Honolulu,” Mr Ferris told Reuters in an interview. “We will double the size of the revenue passenger miles on the same route structure within 10 years, and I think that’s a very conservative estimate.”

Mr Ferris said it made more sense to buy Pan American’s Pacific fleet than to set up another United States operation in the area from scratch. “It was our most attractive opportunity, although I’m not excluding the possibility of another hub in the south-east or south-west, or going to Europe,” he said. President Reagan still has to approve the transfer and other countries involved must authorise U.A.L.’s right to fly Pan American’s routes, but Mr Ferris said he was confident United States and foreign governments would not block the deal. He predicted feeble opposition from United States airlines and unions. A four-week pilots’ strike at United over a new contract ended in June last month with agreement on lower salary structures for new recruits. Salaries, a big part of flying costs, are.

under pressure throughout the very competitive United States airline industry. Mr Ferris said he expected United to be ready to start flying Pan American’s routes in the first quarter of next year. If United is allowed to assume Pan American’s Pacific routes, it would take over 33 flights a week from the United States to Japan — from where Pan Am flies to South-East Asia and China — and direct routes from the United States to Australia and New Zealand. Some 2700 Pan American employees, including more than 410 pilots and 1200 flight attendants, would be offered jobs with United. Pacific operations accounted for 24 per cent of Pan American’s total revenue passenger miles last year.

Pan American plans to spend the money from the deal on cutting its debt, boosting its capacity to Europe and acquiring new aircraft from the European consortium, Airbus Industrie. Mr Ferris said a decision by U.A.L., Inc, United’s parent company, to buy Hertz, the world’s biggest car rental firm, from R.C.A. for SUSSB7 million ($1238.5 million) was prompted by a desire to step up investment in the travel industry.

Analysts say United’s deal with Pan American, combined with Hertz amd U.A.L.’s interests in Westin Hotels, could create the world’s most powerful travel organisation. “We bought Hertz because it is in a growing industry, and because we believe there is value added through operating efficiencies that Hertz can bring to us and we can bring to them,” Mr Ferris said, citing computers and communications, credit card agreements, and managing inventories. “There is the possibility of checking in at Hertz and getting a seat assignment on an airplane, and checking your luggage all the way through,” he said.

Mr Ferris said he would decide on new aircraft in September while continuing to search for suitable used airliners.