Trippe's Big Bid

Since the early 1940s, Juan Terry Trippe, 63, go-getting president of Pan American World Airways, has preached the gospel of the "chosen instrument"--the idea that U.S. airlines can profitably compete against subsidized foreign airlines only if Washington designates a single U.S. airline to operate overseas. Naturally he assumed that the chosen instrument would be built upon Pan Am. And since administrations in Washington have never followed his advice, Juan Trippe last week set out on his own to realize this ambition.

After much private negotiating, Pan Am and Trans World Airlines announced their agreement to merge into a single Pan American-dominated line.

The proposed merger would create the free world's largest single line--a transportation goliath with 298 planes, 80,000 miles of routes touching six continents, and nearly $1 billion in annual revenues. Since TWA is Pan Am's only U.S. rival on European and Middle Eastern routes,* the merger would also, in effect, make Pan Am the U.S.'s chosen instrument on many of the world's most heavily traveled airlanes.

Locking Up Hughes. Trippe's opportunity to snatch off TWA opened up two years ago when Millionaire Industrialist Howard Hughes was forced by a consortium of banks and insurance companies to put his 78.2% of TWA's stock into a voting trust in return for $165 million in loans to the airline. Under Charles Tillinghast, 51, the new president appointed by the trustees, TWA lost $38.7 million last year. In desperation, Tillinghast began seeking a merger partner.

For Trippe, the only objection to a merger with TWA was that a straight share-for-share exchange of stock would make Howard Hughes the biggest single shareholder in the merged company. Under the terms announced last week, that problem is solved by a complex device: if the merger goes through, Pan American will become a holding company with a 63% interest in the merged airline--which will be called Pan Am World Airlines. TWA shareholders will receive stock (on a share-for-share swap) in the new airline, but none in the holding company. This will permit Trippe, who will be chief executive of both the holding company and the airline, to vote the holding company stock in a block--and thereby consistently outvote the Hughes share.

Endangered Dream. Trippe's proposal seems sure to be approved both by Pan Am stockholders and TWA trustees. It also seems to be agreeable to New York Congressman Emanuel Celler, whose Judiciary Committee deals with such matters. It is less certain that it will be approved by President Kennedy, who has final voice in the matter, since the merger involves overseas routes. And even if the White House agrees, Trippe's dream may still be smashed by Howard Hughes, who has no love for the Pan Am boss. Already suing to get his TWA shares back, Hughes is now likely to go to court again to protest the merger.

* Beyond Hawaii, the only other major U.S. carrier in the Far East is Northwest Airlines.

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