It started as a tiny aerial crop-dusting company formed to wipe out the dreaded boll weevil. But last week Atlanta-based Delta Air Lines was well on its way to becoming the largest air carrier in the nation. After weeks of negotiation and tussles with competitors, the airline won bankruptcy-court approval to buy the assets of troubled Pan American World Airways for $1.39 billion. When the deal is completed, Delta is expected to leap past industry leaders American and United both in seating capacity and in profits.
Delta money had been on the table since July when the carrier offered a paltry $260 million for Pan Am's prized remains. But just as that agreement was nearing completion, a flurry of competing offers emerged from Trans World Airlines and United. Not known for its aggressiveness, Delta responded with uncharacteristic tenacity. Company officials scrambled to revise their offer at least five times before clinching the agreement. It calls for the airline to pay $621 million in cash, assume $668 million in debt and provide an $80 million loan to help Pan Am stay aloft until the deal is finalized. In return, Delta will inherit a high-profile Northeast shuttle, about two dozen transatlantic routes, a hub in Frankfurt, Germany, and some 45 jets. "We knew the price of poker would go up," says president Whitley Hawkins. But "it was a once-in-a-lifetime opportunity."
Despite a reputation as a plodding marketer, Delta has managed to grow over the years by making shrewd acquisitions. In 1953, after having earned its wings at crop-dusting, the airline pulled off what was then considered one of the most important deals since the beginning of airline transportation: it acquired Chicago and Southern Air Lines, adding routes to the Midwest and Caribbean. In 1972, Delta merged with Northeast, further expanding its territory. Yet it was the 1986 purchase of Western Airlines that gained Delta hubs in the West and distinguished it as an industry force.
While its latest deal propels Delta into the airline stratosphere, the flight path may be bumpy. As with other carriers, increases in fuel prices, threats of terrorism and an uncertain economy have hurt Delta. The airline has little expertise with shuttle operations or the European market, and it will need a deft marketing touch to make its expanded operations fly smoothly. "They are going to have a little [difficulty] at first, trying to digest everything they ate," says Shearson Lehman Hutton consultant Robert Joedicke.
Delta's longstanding reputation for satisfied customers-and employees-may go a long way toward easing its indigestion. Delta's workers are among the best paid in the industry, and the company has never resorted to layoffs. Moreover, its traditional Southern hospitality has made it a leader in customer satisfaction; according to the U.S. Department of Transportation, Delta has chalked up fewer complaints during the past 17 years than any other airline. Company officials are confident Delta can retain its down-home charms as it ventures into untested markets. But they are realistic about what lies ahead. "Now, we go to work," Delta chairman Ronald Allen told reporters at Pan Am's hearing last week. Given the turbulence in the industry, warding off a field of boll weevils might be easier.