AVIATION: Three into Two?

It looked like a simple business deal. Pan American World Airways wanted to pay $17.5 million cash for the assets of American Overseas Airlines and fly A.O.A.’s transatlantic routes. A.O.A.’s parent company, American Airlines, wanted to sell because it did not think transatlantic flying would continue to be profitable. Then things got complicated.

T.W.A., the third U.S. North Atlantic carrier, objected to the sale. Last week, in a 200-page report, Civil Aeronautics Board Examiner Thomas Wrenn brushed aside T.W.A.’s protests and recommended that CAB approve the merger. Cried T.W.A. President Ralph Damon: a “monopolistic grab.”

Wrenn’s recommendation has yet to be approved by CAB and the White House. But after listening to twelve months’ tedious argument, Examiner Wrenn had come to some carefully weighed conclusions. Said he: none of the evidence showed that “the reduction of from three to two U.S. [overseas] carriers would per se violate the established policy of regulated competition.”

What impressed Wrenn most was the claim by Pan Am President Juan Trippe that the merger would save the U.S. Government $9,000,000 a year in mail subsidies. “A saving of $9,000,000 . . . is a very important item of public interest. If the Board approves [this merger], it should make clear to Pan American that it will expect [it] to make good on Mr. Trippe’s representation.”

Though T.W.A. protested that it would lose 10% of its overseas traffic as a result of the merger, Examiner Wrenn could not follow that argument at all. He thought T.W.A. would benefit greatly, since “it will be the only airline selling single-carrier transatlantic transportation from such cities as Los Angeles and San Francisco, where at present it must sell in competition with American. These conditions do not indicate that the future traffic prospects of T.W.A. are as gloomy as pictured by its witnesses.”