Trippe and Pan Am, Part II
As we pick up our story on Juan Trippe
and Pan Am, around the time of World War II, Trippe
had been trying to crack the European market. While
FDR didn't care for Trippe, personally, he recognized
that Pan Am wasn't about to go away, and the U.S.
needed a trans-Atlantic presence, so Roosevelt assigned
Secretary of State Cordell Hull to work out a deal
with Britain's Imperial Airways to pool passenger
and cargo traffic.
took it one step further, though, gaining exclusive
rights to the Azores for 15 years (you'll recall that
the first trans- Atlantic flights using the southern
route weren't non-stop and needed the Azores for refueling).
But this violated U.S. antitrust laws, a constant
battle as we'll see, so Trippe had to back down.
war approached, Trippe was making flights to Europe
using Boeing Clipper pontoon ships, but still it was
mostly for mail, and a few passengers. The inaugural
flight was June 28 from Long Island and carried just
22, each paying $375 (one way).
the war hit. But this had little to do initially with
Pan Am's troubles that first winter which saw only
40 of 87 scheduled trans-Atlantic flights completed
due to the weather. Trippe was actually removed as
CEO briefly in '39, though he was back less than a
Pearl Harbor, FDR learned of Trippe's renewed attempts
at a monopoly on overseas business. Trippe wanted
to gain 'flag carrier' status and FDR was miffed.
At the same time, the President had little choice
but to work with him. "In government and in war, you
have to use scoundrels," he said. Presidential aide
Harry Hopkins chimed in, "I have never liked the idea
of Pan American having a world monopoly of our airlines."
was the War Department that came up with a solution,
however, in awarding contracts not just to Pan Am,
but the other carriers as well. While Trippe received
the bulk of the business, American and Trans World
were granted some routes to London, while United got
the Pacific, Eastern and Braniff Latin America.
George Marshall wasn't a Pan Am fan, either, noting
"the recurring resentments of the British to Pan Am's
expansion into the Middle East and the fact that Pan
American tends to regard a military effort as a commercial
Robert Sobel describes what happened next.
1943 the 19 airlines that had Air Transport Command
(ATC) contracts were called to Washington for a meeting
and were told the government had no intention of remaining
in the transport business after the war. It was up
to the airline executives to determine the shape of
this part of the industry. Trippe had little to fear
from them. From the vantage point of 1943, transcontinental
airline growth seemed a chimera. United had commissioned
a study, which concluded that few first-class steamship
passengers - believed the only possible customers
- would find the long, chancy passage appealing. After
the war, thought United's economists, 43 passenger
planes would be needed for the North Atlantic run.
Since eight countries had indicated interest, that
came to an average of little more than five per country.
Perhaps two American companies could make a profit
given such numbers, and Pan Am, the most experienced
and best known, would certainly be one of these. United
had a coast-to-coast route system, a natural feeder
for travelers from other parts of the country wanting
to fly to Europe, but declined to submit a bid. The
domestic business seemed more appealing than anything
trans-Atlantic passage could offer."
"When Giants Stumble"]
thought you'd enjoy what I imagine later became a
Harvard Business School case study.]
the war the European Airlines had formed an alliance
to set fares, including Pan Am as a "junior member,"
since under U.S. law Pan Am couldn't fix prices. But
Trippe established the International Air Transport
Association (IATA) for oceanic routes, and this organization
fixed prices and restricted entry. Well, it was now
a post-war world, and while Washington was against
Trippe's move, Britain accepted competition into London
so the U.S. said, O.K., do what you want, at least
that Trippe was interested in charging huge fares,
mind you; he actually wanted to lower prices to encourage
more travel. So it went something like this.
wanted the $375 fare to be lowered to $275, while
the European flag carriers sought to raise the trans-Atlantic
fare to $572. In the end, Trippe convinced them to
keep it at $375.
this time Howard Hughes entered the scene as the new
head at Trans World Airlines. Hughes had deeper pockets
than Trippe, and a strong route between New York and
Los Angeles, along with faster land planes, forcing
Trippe to scuttle his Clipper pontoon craft.
is the 1946 financial breakdown for the major carriers
in the U.S.
Am.revenues of $113 million, profit $3 mm
TWA.revenue $57 mm, loss $14 mm
United.revenue $65 mm, profit $1 mm
American.revenue $68 mm, loss $500,000
Eastern.$42 mm, profit $3 mm
thing about Juan Trippe, he was a visionary, and after
the war he began constructing hotels, Intercontinentals,
for Pan Am's travelers. He even got the government
to loan him 90% of the construction price. Trippe
sought to bring the enjoyment of travel to the average
person instead of just a privileged few.
person's holiday has, in the past, been the prisoner
of two grim keepers - money and time," he said. "Their
enjoyment of the world has been circumscribed by the
high walls of an economic jail. We can level these
prison walls only by bringing travel costs way down
and by shortening travel time."
course after World War II travel of all kinds boomed,
trans- Atlantic included. Ocean liners were also doing
a big business and Trippe urged Douglas, Boeing and
Lockheed to come up with planes that could make the
trip non-stop. Washington again supplied the aid,
this time to the manufacturers. [But it wasn't until
1957 that airline traffic exceeded ocean liners.]
earned $10 million on $238 million in revenue in 1955,
at the end of the year Juan Trippe put in a jet order
for $269 million; 21 Boeing 707s and 24 Douglas DC-8s,
a gigantic deal which officially launched the commercial
jet age. Boeing and Douglas raced each other to see
who would be first, with Boeing winning in 1958. Its
reconfigured 707s had a range of 3,000 miles and a
top speed of 600 mph, though they still only carried
60-120. Douglas launched its DC-8s two years later
and they had a longer range. Both models were in the
$5 million range. You can imagine that all of Pan
Am's competitors had to follow suit. Not a bad time
to work on either assembly line, I think you'd agree.
1966, Pan Am was operating 115 planes, with revenue
of $841 million and $72 million in profits. Juan Trippe,
now 67- years-old, moved the company headquarters
to a new building behind Grand Central Station in
New York, installing a heliport on the roof for his
top clients. It was called the Pan Am building, and
the big, bold letters at the top could be seen all
over New York.
for the stock, on a split-adjusted basis Pan Am traded
at $10 in late 1962, but by mid-1966 it was up to
$40. Then the roof caved in.
have the conclusion of our story next week, July 11.
Giants Stumble," Robert Sobel
"The New York Times Century of Business," Floyd Norris
and Christine Bockelmann
American Heritage / T.A. Heppenheimer
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