Business & Finance: Mid-Air Collision

When CAB Examiner Thomas L. Wrenn recommended that Pan American World Airways be allowed to buy American Overseas Airlines and fly A.O.A.’s transatlantic routes (TIME, Jan. 2), he expected trouble. But neither he nor anyone else expected the rip-roaring row that raged in Washington last week.

Two of CAB’s own lawyers, James L. Highsaw and William F. Kennedy, who had been assigned to represent the public interest at the hearings, lambasted Wrenn’s report, chiefly on the ground that the merger would make Pan Am too powerful a competitor of T.W.A., the third U.S. North Atlantic carrier. Three Justice Department lawyers, who had an observer sitting in at the hearings, also jumped on Wrenn. They accused him of “bias and prejudice,” presumably because he had been CAB’s examiner in the original North Atlantic route proceedings in 1945. At that time Wrenn had recommended that only two U.S. carriers, Pan Am and A.O.A., get routes, because there was not enough traffic to support three. (CAB overruled him and gave a route to T.W.A. also.)

The Justice Department lawyers also questioned Wrenn’s “acceptance” of an estimate by Pan Am President Juan Trippe that the merger would save the U.S. Government about $9,000,000 a year in mail pay subsidies, and they felt certain that the merger would spawn a monopoly.

All this was just what T.W.A., which had objected to the deal from the start, had been hoping for. It got in a few licks of its own, charging that Pan Am “is attempting to accomplish piecemeal what it could not do wholesale—eliminate its competitors.”

One calm voice in the uproar was that of American Airlines’ President C. R. Smith. He had considered the sale of A.O.A., American’s subsidiary, as a simple business deal, he said, and “would have sold to T.W.A., but it didn’t have the money.” Some of the Justice Department’s objections, Smith said, “have evidently been made without full knowledge of the background and details of the transaction, for many of [its statements] are inaccurate and misleading when compared with the facts.”

The cry of monopoly, said Smith, was nonsense. “With two capable U.S. carriers competing with each other, how can you have a monopoly? The situation of having three U.S. carriers competing with each other and the seven foreign operators is illogical, wasteful and unnecessary.” All that competition, added Smith, was the reason why American wanted to sell A.O.A. in the first place.