Marriage Failure

One of the biggest postwar marriages in the airline world ended last week in galling divorce. The Flying Tiger Line and Slick Airways, the nation's two strongest air-freight lines, which began a trial merger 18 months ago (TIME, April 6, 1953), told the Civil Aeronautics Board that they could not make a go of it and were splitting up for good. But the bigger news of the announcement was what it told of the sick state of the independent air-freight business. Said Flying Tiger President Robert W. Prescott, who started his line in 1945: "We are through as far as this deal is concerned, and we're through as far as air freight is concerned. You can't fight the economic facts of life."

Costs & Korea. The facts are that air freight has been a sick business for a long time, and even the two biggest lines were affected. The Flying Tigers and Slick both started up right after the war and had done well flying nonscheduled air-freight routes. All they needed, the freighters thought, was steady, scheduled runs to expand and cast a web of freight routes over the U.S. They got their scheduled routes in 1949, but then the dreams began to dissolve.

As it turned out, their best period was during the Korean war, and even then the gloomy handwriting was in the company books. From 1949 to 1953 the cost of their nonmilitary business zoomed by 40%, while rate boosts amounted to only 26%. Unlike passenger airlines, which get express (39-c- per ton mile) and airmail (45-c- ) contracts to make up any passenger deficit, the air freighters could only make money by increasing volume. When the Korean war ended, the Tigers and Slick prepared for serious trouble.

By merging, they hoped to eliminate costly duplication, pool their resources for a heavier peacetime volume, and show a profit. The big danger spot in the deal was the termination contracts the unions (Slick's independent pilots' and mechanics' unions, the Tiger locals of the pilots' A.F.L. union and independent mechanics' union) demanded for men lopped off the payroll as a result of the merger. The deal ordered by CAB: a year's salary, or 60% of it for four years. Says Prescott: "We believed that if the volume of business held up there would be relatively few terminations, and those could be paid out of earnings."

What happened was just the opposite. With Korea's end, the Tigers lost 49% of their business, Slick 33%, and they never made it up in the civilian market. Where Slick had previously broken even and the Tigers were more than $1,000,000 (before taxes) in the black annually, the two started losing money. The combined loss was almost $2,000,000 for the first six months of 1954. Trying to cut costs, they had to trim 900 men off their 3,200-man payroll, and promptly ran head-on into termination claims adding up to as much as $6,000,000. When both the unions and the CAB refused to nullify the contracts, the two lines decided to call off the merger, thus get out from under the union's costly claims.

What Next? Slick's President Earl Slick insists that his line will stay in business, though it plans to sell some of its planes to Flying Tiger. But Tiger President Prescott will shut down completely as an independent scheduled carrier of air freight. He wants to trim his 1,400-man payroll to 15 key men, go into the aircraft-leasing business with his 39 planes (seven four-engined DC-6As, seven C-54s, 25 pot-bellied Curtiss Commandos), renting them out to foreign and domestic carriers at fees ranging up to $30,000 a month. Eventually, he may set up a series of small subsidiaries to pick up what freight and passenger business is left from the rest of the nation's airlines.

This file is automatically generated by a robot program, so reader's discretion is required.