The Big Deal

It was a well-kept secret. For several months, Pan American Airways' canny President Juan Terry Trippe had been dickering with American Airlines' Chairman C. R. Smith. But not till last week did any hint of the dickering leak out. This week, as Wall Street began to buzz with rumors, Juan Trippe sprang the news. American had agreed to sell Pan Am its transatlantic subsidiary, American Overseas Airlines.

The deal, in effect, indicated that Trippe might have been right in his campaign for a "chosen instrument" on the North Atlantic. Smith, who had fought Trippe's chosen instrument and demanded competition, now says: "The foreseeable volume of business does not justify the continuation of three competing U.S. carriers on the North Atlantic routes."

That was not the whole reason. American Overseas, with retroactive mail pay, would show a 1948 profit of about $1,750,000. But American Overseas needed $15 million to pay for its eight new Boeing Stratocruisers; American Airlines, which lost $3,900,000 in nine months this year, might have trouble raising cash for the planes in addition to financing its own domestic operations. Under the deal, American Airlines would probably get about $7,780,000 worth of Pan Am stock (at the present market value of American Overseas stock).

On its part, Pan Am would get American Overseas' 14,345 miles of heavily traveled routes, including those to Holland, Scandinavia, Berlin. By combining operating staffs, and some ground crews along the way, Trippe looked for operating economies in the merged lines. Best of all, it would leave T.W.A. the only other competing U.S. flag line on the North Atlantic run.

CAB, which is on record as favoring a good deal of competition among U.S. flag lines on the transocean airlanes, must approve the deal. So must President Truman. The merger is likely to be fought, not only by T.W.A., but by the American Export (steamship) Lines, Inc. American Export started American Overseas in 1937 to buck Pan Am, which was cutting into the line's Mediterranean tourist traffic. As American Export still has a 20% interest in American Overseas, it can wage a strong fight against the merger. American Export's Vice President John Slater has already resigned as chairman of American Overseas to clear his decks for action.

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