Monday, Mar. 16, 1942

Dogfight

Out in the open this week came the strangest internal fight in U.S. airline history. The battlers: nimble, Washington-wise, $60,000,000 Pan American Airways v. cagev, 90-year-old, multi-million-dollar W. R. Grace & Co., shippers, bankers and international traders. Pan Am boasts many a foe's scalp; Grace has a reputation for never losing a battle. The prize is domination of a great airline they started together, Pan American-Grace Airways (Panagra). The only important airline on the whole west coast of South America, Panagra flies over 8,000 route-miles from the Canal Zone to Santiago to Buenos Aires.

Panagra started about 1928, when Pan Am was first nosing into South America. On the east coast Pan Am had no U.S. competition. But in the west Pan Am ran smack into Grace, which has toted Chilean nitrates, Colombian coffee, Peruvian copper and Panama hats in its green, white & black funneled ships for decades, considers that part of South America a state of Grace. Grace was thinking about an airline to complement its shipping business. So Pan Am and Grace made a deal-each anted up $500,000, agreed to own and operate Panagra, 50-50. Panagra started flying in May 1929 with a wide-winged, many-strutted Sikorsky amphibian.

For both companies Panagra proved a smart investment. It throve despite jungles and mountains, and (until the Good Neighbor policy began hitting in high) a surplus of foreign competition. Business doubled in 1940, doubled again in 1941. Today Panagra owns 14 sleek Douglas transports, has over $7,500,000 in assets.

But Panagra had two big troubles: 1) of eight directors, four are elected by Pan Am, four by Grace. (Until three years ago they could not even agree on election of a president or chairman.) 2) It is a dead-end airline, and Pan Am would like to keep it that way. It begins & ends in South America (see map p. 50), connects with the lush U.S. market only through Pan Am. Today, ten weekly Panagra flights in & out of Cristobal bottleneck into six Pan Am flights direct to or from Miami. But if a Panagra passenger has plenty of time and likes to fly, he can --leave Cristobal via Pan Am's frequent Central American or Venezuelan flights. From an operating standpoint, Panagra's toughest problem is that it must base equipment, materials and personnel in South America (mainly Lima), has lost many a crackerjack pilot and mechanic because he would not stay away from the States.

Last December W. R. Grace & Co. got good & mad. The four Panagra directors named by Pan Am refused to let Panagra petition for a route north from Panama. So Grace went ahead on its own hook, filed an application-complaint with CAB. The application: a terminal for Panagra in New Orleans, Tampa or Miami. The complaint: "connecting service [by Pan Am] has become increasingly inadequate. . . . [The new route] would forever free the Panagra service from dependence on a connecting carrier . .. whose interests can never be expected to be exclusively service to the Panagra route." Pan Am says it has fulfilled its part of the service contract, boasts that on two of the three Miami-Cristobal flights it gets no mail pay, thus flies them at a loss.

Meanwhile, ever-increasing U.S. Latin-American trade relations are booming air travel. To fly this business, both Pan Am and Panagra last year boosted operations on most of their lines. In some places service is de luxe. Northwest out of Panama, for example, Pan Am runs fast DC-3s 14 times weekly (see map p. 80, where line thickness indicates flight frequency.)

This week dopesters could see a big ace hiding in Grace's terminal application: Panagra's extension to the U.S., it says, would better serve passengers from the French, German and Italian airlines Panagra has taken over in the last year. Since better service means Better Neighbors, the application apparently has the State Department's blessing.

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