Pan Iran on Stand-By

Pan American World Airways seemed, until a few days ago, to have found a most ironic way out of a financial nosedive caused largely by doubled fuel bills. The government of Iran, one of the nations most instrumental in forcing up petroleum prices, had been negotiating to provide the airline with $300 million so that it could pay off restless American creditors and rebuild working capital. Last week irony was followed by intense disappointment; the deal appeared to have fallen through, leaving Pan Am facing another money squeeze.

Though the Iranians refused to say whether the loan was on or off, the signs were not encouraging. Pan Am Chairman William Seawell went to Tehran last month with high hopes for progress, but returned without ever seeing the Shah. He was told by other Iranian officials that all proposed foreign loans are "under review." Despite high oil prices, slackened world demand cut Iran's petroleum revenue by $4 billion last year, to $16 billion, and Iranian Ministries are jostling to grab all available funds for domestic development projects. Privately, Iranians also express worry about Pan Am's first-quarter loss of $59 million. "There was never any commitment on the part of Iran," says Hushang Ansary, Minister of Economic Affairs and Finance, who had helped draw up the loan plan with Pan Am.

Skimpy Profit. Pan Am will not be grounded--at least not immediately. A small tax credit and changes in accounting methods enabled the airline to show a skimpy profit of $4 million for the second quarter. Through rigid cost-cutting measures that included reducing employment by 3,100, Pan Am has lowered its break-even point from a too-high 58% of seats filled to an acceptable under 50%. Still, the airline slipped back into the red by $4.7 million during June, and a huge loss for all 1975 appears inevitable. A new crunch will come in the fall, when Pan Am's $125 million line of short-term credit expires and a consortium of U.S. banks will have to decide whether to make more loan money available.

Before long, too, the Government will have to make up its mind what help, if any, it is prepared to extend to Pan Am and the other major U.S. international airline, TWA (which lost $86.8 million in the first half of 1975). One senior Pan Am executive has constructed what he calls a "prayer mat": a graph that contrasts the lavish government benefits received by foreign airlines with the absence of any special assistance to Pan Am and TWA.

Pan Am will soon be laying the prayer mat before Administration and congressional investigators. Secretary of Transportation William Coleman has ordered a study of Pan Am and TWA to consider all possible solutions. Among them: federal subsidy (which the two lines were denied last year), a forced TWA-Pan Am merger, or dismemberment of Pan Am and allocation of its foreign routes among domestic U.S. carriers.

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