AVIATION: The Air Argument

The U.S. is still fumbling toward a postwar air policy.* A determined 17 of the 19 U.S. airlines are certain that the keystone of that U.S. policy should be wide-open competition on foreign routes. Quietly but persistently, Pan American’s famed president, Juan Terry Trippe, has opposed this stand, urging instead the “chosen instrument” policy (TIME, Nov. 8). This week, pinko Author Matthew Josephson (The Robber Barons, The Politicos) entered the controversy with a new book, Empire of the Air (Harcourt, Brace; $3). In trying to decide between the two views, Author Josephson has adopted a historical method: to determine whether competition or the “chosen instrument” is better, first study how the methods have worked in the past. Although it may surprise non-airminded citizens, Author Josephson says that the prewar U.S. backed the “chosen instrument” policy. The instrument: Pan American Airways. But how did the U.S. come to pick Pan Am?

Ground Floor. Back in 1928, the U.S. first decided to let contracts for carrying air mail outside the U.S. — in effect, subsidizing foreign expansion of the airlines. Newly organized Pan Am, according to Josephson, simply got in on the ground floor. Its board of directors, as one awed official reported, “had a combined wealth of $850,000,000.” Pan Am also had wide contacts in Washington, and the “seat-of-the-pants” flying knowledge of Juan Trippe. On this setup, Pan Am wangled its first contract to fly mail from Miami to Havana, for which it was paid $160,000 yearly. Overnight Juan Trippe became an adviser to the Post Office on expanding mail routes to South America.

Frequently, writes Mr. Josephson, before new routes were opened to bidders, “Trippe’s agents turned up in the Latin American Republics that lay along the future routes … to apply for exclusive flying franchises.” With and without the help of the State Department, Pan Am wangled scores of exclusive contracts, while postal authorities “passed over lower bids of other interests to favor Pan Am with its strong financial backing.” Summing up, Josephson holds: “Thus, rightly or wrongly … the Post Office Department and Congress by its appropriations, tolerated and indeed encouraged monopoly in the foreign mail service. . . .”

As a result, Pan Am collected most of the $123,000,000 which the Post Office paid out in foreign mail contracts from 1928 to 1941. And thus Pan Am spread-eagled its airways over most of South America, on to China and Lisbon. Did the U.S. get its money’s worth?

Credits and Debits. Josephson is sure it did. Pan Am pioneered oceanic flying for the U.S., helped design the “Clippers” to do it (although Martin, Boeing and Sikorsky wailed that they never made money selling them to Trippe) and gave the U.S. domination in South America over Germany’s Lufthansa, Air France and Italy’s Lati. More important, Pan Am charted the transoceanic routes which became invaluable in war. As Trippe recalled: “Why, sometimes nobody in the State Department, or even the Navy, had ever heard of some of the places we wanted to get to, places now part of our aerial lifeline.”

But Josephson chalks up much on the debit side also. Pan Am’s mail and passenger rates were high (in 1940 the U.S. paid domestic airlines ⅓ the rates paid Pan Am). Pan Am always argued that this was necessary because it had to build its own port facilities. Yet six months after American Airlines started service to Mexico in 1942, Pan Am cut its Latin American fares 10%, and slashed its Mexican fares still more. But Josephson cites as the biggest objection to Pan Am’s monopoly its failure to keep up technically with U.S. domestic airlines. Although Pan Am was young, he says, as monopolies go, obsolescence had already set in. Only after persistent pressure from U.S. authorities did Pan Am institute improvements such as night flying, which domestic lines had begun years earlier. As for Juan Trippe: he “desires all the advantages of the private-enterprise system and none of its disadvantages. … He would seek Government support and subsidy for his private air transport monopoly . . . permitting him to suppress commercial competitors in the field and yet hold the system under private commercial control.”

Long and Rough. For Pan Am’s “chosen instrument,” which Josephson contends is but “air imperialism” and the breeder of future international troubles, Josephson would substitute a modified freedom of the air, corresponding in a general way with freedom of the seas, i.e., a system giving all nations equal access to airports. He argues that the U.S., because of its need for overseas bases, would have much to gain by this system and little to lose. But he is not optimistic about the ease of establishing a workable freedom of the air. The U.S. has, willy-nilly, placed Pan Am in a powerful position, with landing rights, many of them exclusive, in 60-odd countries. Therefore Mr. Josephson feels that other U.S. airlines may find the job of getting rid of the “chosen instrument” a long one.

*This week Adolf A. Berle Jr., Assistant Secretary of State,arrived in London, for preliminary talks on international air parley (TIME, March 27).