Pan Am: The Wings of Imperialism

September 25, 2007

Pan Am is the most politically oriented airline in the country. It is still widely considered a private instrument of U.S. foreign policy. When brush fire wars loom, it is usually Pan Am that is called upon first to divert jets from regular runs to evacuate American nationals in danger. And when demonstrators, angry at some U.S. policy or action, burn down the U.S. Information Agency Library, the Pan Am ticket office is usually next in line. - Business Week, Feb. 17, 1968 No study of tourism in Latin America would be complete without a look at Pan American World Airways-- the first airline to fly to Latin America--and its subsidiary, Intercontinental Hotels (IHC), the first major hotel chain to build in the region. Pan Am was founded in 1927 as an airline serving Latin America. Its first route was the 110-mile government subsidized mail route between Miami and Cuba. Today the revenues from its Latin American operations account for only a small portion of the airline's earnings. In fact, the company claims it has been losing money on its Latin American routes over the last three years and has petitioned the Civil Aeronautics Board (CAB) for permission to drop some of its less profitable runs in the region and open more lucrative routes--especially in the Caribbean. Pan Am, however is still a major power in air travel to Latin America carrying 14 percent of all U.S. air traffic in South America (down from 50 percent just after World War II) and 38 percent of the traffic in the Caribbean down from 90 percent). 1 Reflecting the ambitions of its founder, Juan Trippe, who wanted to make the airline the U.S. international flag carrier, Pan Am is currently the largest exclusively international carrier in the world (it has no domestic routes). Its fleet of 177 aircraft serve 119 cities in 81 countries. In addition the airline operates over 50 hotels around the world through IHC, operates missile facilities at Cape Kennedy, and acts as the exclusive Western Hemisphere sales agent for Falcon business jets. PAN AM'S PATRIOTISM In the course of reaching and maintaining its preeminent position in international commercial aviation, Pan Am has developed an extremely close liaison with the government bodies which affect its destiny-- especially the White House, Congress and the CAB. Ever since Pan Am's original government mail contract, the airline has nurtured and has been heavily dependent on a close working relationship with the government. At one point, in 1945, Trippe went so far as to conceive a bill that would have created an official U.S. flag carrier with Pan Am stockholders having a 30 percent interest. The bill was introduced to Congress by one of the airline's key supporters, Patrick McCarren, Republican Senator from Nevada--it failed, however. Another Senate, friend was Owen Brewster, Republican Senator from Maine, who, because of his frequent proselytizing for the airline, was sometimes referred to as "the Senator from Pan Am". 2 Still another influential government official to whom the airline had easy access was Secretary of State (1944- 45) Edward Stettinius, Jr., Juan Trippe's brother-in- law. It was during Stettinius' term as Secretary of State that President Franklin Roosevelt approached Trippe about the shortage of first class hotel accomodations in Latin America. Roosevelt believed the shortage of hotels was one reason potential investors and tourists avoided Latin America--a draw-back to the "Good Neighbor Policy" he was promoting. Roosevelt urged Trippe to initiate a hotel renovation and construction program in Latin America. 3 Trippe agreed, particulary since the airline had long felt that better accomodations at its terminal cities in Latin America would help boost its passenger and cargo bookings and certainly any increase in investor interest in Latin America would boost the airline's passenger, cargo and mail business (at the time Pan Am was the only scheduled U.S. airline abroad). Two years after his meeting with Roosevelt, Trippe founded IHC which today is still one of the major international hotel chains in Latin America. Pan Am's board of directors (see box) and its chief executive officer lineups reflect the close ties the airline maintains with government agencies that decide its routes, subsidies and mail and military contracts. For example, executive positions at Pan Am were recently filled by the former head of the Federal Aviation Administration (Najeeb Halaby, who became president in 1968), the former commander-in- chief of the North American Air Defense Command (Gen. Laurence Kuter, named executive vice-president in 1968) and the former State Department deputy assistant secretary for transportation and telecommunica- tions (Frank Loy, named senior vice-president for international affairs in August 1970). Pan Am is proud of its "service in the national interest!'--service for which it is repaid not only in cash but also in exclusive route awards and prestige. As the box below indicates, part of its service in the national interest has made it a major factor in providing air services for the Southeast Asian war. The airline's military contracts include a variety of other activities. During World War II Pan Am constructed air force bases in 16 foreign countries and designed air routes for Allied forces in North Africa. 4 For more than 16 years it has operated the Air Force facilities at Cape Kennedy and the Eastern *Test Range tracking stations in the Caribbean and Atlantic which are connected with the Cape. 5 In 1963 it landed another government contract to manage the Nuclear Rocket Development Station at Jackass Flats, Nevada. 6- 14 - PAN AM's INTER-CONTINENTAL HOTELS (IHC) Inter-Continental Hotels is currently engaged in the most far-reaching expansion in its 24-year history. The new drive plans to build 14 new hotels in 12 countries, bolstering IHC's world total to 67 hotels -- a big jump from its 11 hotels in Latin America in 1961. IHC prefers to take a minority ownership position in the hotels it manages, leaving the bulk of the financing to local governments and private interests. For example, two of IHC's new Latin American hotels -- in Buenos Aires and Managua -- are being jointly financed with Aerolineas Argentinas and Air Managua respectively. IHC HOTELS IN LATIN AIEr J CA * NAME OF HOTEL WITH NUMBER OF ROOMS CITY Argentina ..... Buenos Aires Colombia ...... Barranquilla Colombia ...... Bogota Dominican Republic... Santo Domingo Ecuador ....... Quito El Salvador...San Salvador Mexico ........ Mexico City Netherlands Antilles... Curacao Nicaragua ..... Managua Peru .......... Lima Puerto Rico... Ponce Uruguay ....... Montevideo Venezuela ..... Caracas Venezuela .... Maracaibo Plaza Hotel (400) El Prado IHC (200) Tequendama (400) Embajador (310) IHC Quito (243) IHC El Salvador (210) Reforma (300) IHC Curacao (125) IHC Managua (208) Gran Hotel Bolivar (350) IHC Ponce (310) Victoria Plaza (359) Tamanaco (400) Hotel del Lago (250) Pan Am is also a special contractor with the State Department's Agency for International Development (AID) providing management and technical training to Third World airlines. In times of crisis it has diverted planes from regular routes for special evacuations of U.S. nationals, such as Cyprus in 1964 and Lebanon in 1967. 7 Pan Am assigns more aircraft to the Pentagon's Civil Air Transport Division than any other airline. It was the first airline chosen to run the U.S. government-financed Cuban airlift in 1965 and is the only U.S. airline the government has approved for flying to Eastern Europe and the Soviet Union (considered one of the great potential markets of the future). 8 NO COMPETITION WANTED IN LATIN AMERICA Up until 1945 Pan Am was the only scheduled U.S. airline abroad. However. new airlines came into existence and wanted a piece of the pie. Pan Am's resistence to new competition in its Latin American domain are legendary in the airline industry. During CAB hearings in 1949 Thomas Braniff, then president of the Texas-based airline bearing his name, accused Pan American of interfering with a scheduled Braniff stopover in Veracruz, Mexico. He accused Pan Am of locking airport gates to prevent fuel trucks from reaching his plane and claimed that Mexican troops had to be called to open the gates so the trucks could refuel the Braniff plane, which was on its way to Florida. This particular flight was an inaugural and Pan Am had no intention of permitting a new competitor into its territory without a struggle. Seven years later, during the 1956 Senate anti- trust hearings Trippe refuted the charges claiming the airline responsible for operating the Veracruz facilities was a Mexican airline, not Pan Am. Trippe, however, failed to mention the Mexican airline was a Pan Am subsidiary. * According to the 1969 Pan Am annual report, IHC plans to construct or is in the process of building additional hotels in Buenos Aires, Rio, Medellin (Colombia), Ciudad Guyana (Venezuela), and Kingston, Montego Bay and Ocho Rios (Jamaica). NOTE: IHC's Hotel Nacional in Cuba was expropriated in 1960. The company filled a claim with the State Department for $5.4 million but has collected nothing to date. (The New York Times, November 1, 1970.) WHO STAYS AT IHC HOTELS? Henry Ford II being welcomed to the IHC's Hotel Tamanaco by Eduardo Olasolo, the hotel's Resident tlanager, and Manuel Arriandiaga, General Manager. (Revista Tamanaco, July/August 1969) . ~ ~ ~ ~ ~ ~ l Other incidents of Pan Am power-plays have been reported throughout Latin America. During the 1940's Pan Am operated the airport facilities in Camaguey, Cuba. Chicago & Southern Airlines, now a part of Delta Airlines, asked Pan Am for permission to use Camaguey as an alternate landing field on its Jamaican route. Pan Am agreed but only if C & S paid a $36,000 fee, forcing C & S to utilize another field near Havana and necessitating an extra 1,800 pound fuel load. Another incident during the forties was reported in the Dominican Republic. A Union and Southern flight (a nonscheduled airline) attempted to land at the main Dominican airport which was controlled by Pan An. Airline officials turned off all runway lights and refused to answer U.S. radio call. 9 As revealed in Braniff's testimony Pan Am's preeminent position in Latin American commercial aviation rested not only on its extensive route network but also on its ownership and control of major airports, terminals and communications facilities and its ownership of several airlines. Among the Latin American airlines in which it has had an ownership position are: -- Aerovias Guatemala; -- Panair do Brasil (Pan Am sold its remaining 30 percent interest in 1961] -- Lineas Aereas Costarricenses (Pan Am sold its remaining 22 percent interest in September 1970); -- Avianca (as of 1967 Pan Am held 38 percent of the capital stock): COUNTRY I - I- 15 - -- Panagra (Pan Am and W.R. Grace sold their 50-50 interests to Braniff); -- Compania Mexicana de Aviacion (Pan Am sold its 35 percent interest in 1968); -- Compania Cubana de Aviacion (Pan Am began sel- ling its ownership to the Batista dictatorship in 1955--it also owned the Havana airport). 10 Not all the airline's holdings are easily trace- able. For example, in October 1943 CAB hearings Juan Trippe revealed Pan Am in 1929 had secretly purchased an interest in the German-owned pioneer Colombian air- line SCADTA. 11 In another case, in 1956, when a con- gressional anti-trust subcommittee asked the Pentagon to declassify some documents relating to reports Pan Am had received exclusive title to some airport facilities built in Latin America with government funds during World War II, the documents were never made available. 12 PUSH FOR DOMESTIC ROUTES Though Pan Am was the first airline to fly across the Pacific (1935) first to cross the Atlantic (1939) and first to fly around the world, it neglected one of the largest and most lucrative markets of all--the United States. As the airline comes under increasing international competition from such giants as KLM, Japan Air Lines, BOAC and Air France, it is beginning to pay the price for developing exclusively as an international airline. The solution, it figures, is two-fold: acquire domestic "feeder routes" for its international runs and at the same time find a merger partner among one of the major domestic carriers--Eastern, United,American or TWA. Lately, Halaby has been busy preparing the proper government authorities and the media for such a merger: Over the Congressional recess he saw Senator Warren Magnuson (D-Wash.), the well-entrenched chairman of the powerful Senate Commerce Committee on the West Coast. In Nevada he visited Senator Howard Cannon (D Nev.), head of the Sub- committee on Aviation. A week in mid-January was spent traversing official Washington, calling upon congressional staff members, other congressmen, Secretary of Transportation John A. Volpe, and at least two members of the Civil Aeronautics Board--chairman Secor D. Browne and vice chairman Whitney Gillilland. Nor was Halaby ignoring the media; during that week he lunched with the top editors of the Washington Post. 13 Given the airline's political and economic clout and its importance to the "national interest" it appears to be almost certain the desired merger will take place. * * The above is just a brief sketch of Pan Am's operations. By the time this newsletter reaches readers a recently compiled corporate biography of the company should be available to the public. The history was prepared by John Leslie, retiring senior vice president for international affairs, a 40 year Pan Am veteran with over 20 years of service on the board of directors. Call or write the airline-for your copy; Pan Am Public Relations Department Pan American Building New York, New York World's Largest Air Cargo Carrier Worlds Most Experienced Airline FOOTNOTES 1. The Wall Street Journal, March 19, 1971. Pan Am's share of the Pacific and the Transatlantic markets during the same period fell from 100 percent to 30 percent and from 32 percent to 18 percent, respectively. 2. The Wall Street Journal, March 19, 1970. 3. The Wall Street Journal, April 14, 1964. 4. The Wall Street Journal, March 19, 1970. 5. For more on Pan Am's Cape Kennedy contract and the tracking stations see The Christian Sci- ence Monitor, May 24, 1969. 6. For more on Pan Am's contract with the AEC and NASA in Nevada see Business Week, June 8, 1963. 7. Endangered U.S. nationals not only fly out of crisis spots on Pan Am, they also seek refuge in- side Pan Am IHC hotels. For example, during the Dominican Republic rebellion in April 1965 Americans gathered in the IHC Embajador on the outskirts of Santa Domingo and during the Jordanian civil war in September 1970 nationals of many countries sought refuge inside the IHC Amman. 8. For a recent summary of Pan Am's Eastern Euro- pean routes see The New York Times, March 26, 1971. Though Pan Am may take losses on these routes for the first few years, it is quite clear that the airline's executives and directors see great future potential. Pan Am president Najeeb Halaby has been a leading exponent of opening Eastern Europe to U.S. investments and trade. For example, he was head of the Second National Convocation on the Challenge of Building Peace which sponsered "the first mass meeting on U.S.-Soviet cooperation" in April 1970. His co-chairman was George Ball, former Under- secretary of State and a partner in Lehman Brothers, Pan Am's leading investment banker. 9. For the three incidents mentioned above (in Mexico, Cuba and the Dominican Republic) see The Wall Street Journal, March 19, 1970. 10. Information on Pan Am's ownership of airlines and airports was taken from many sources, including: The Wall Street Journal, September 8, 1970 (Costa Rica); The New York Times, April 22, 1942 (Guatemala); and Panorama Economico Latinoamericano, No. 42, (March 1962), Prensa Latina, Havana (Cuba). 11. For more on SCADTA and Pan Am see The New York Times, October 6, 1943. 12. The Wall Street Journal, March 19, 1970. 13. The Washington Post, February 7, 1971. For CAB Chairman Secor Browne's "cozy relationship" with Pan Am and how he cast a key vote for the airline in a recent award of Micronesia routes see Jack Anderson's column in The Washington Post, January 28, 1971. Note: Two other articles used in writing the above on Pan Am can be found in Forbes, December l, 1968 and Business Week,February 17, 1968.- 16 - WHO RULES PAN AM ? Of necessity, the men who shape the guiding policies of the giant milti-national corporations such as Pan Am must be well connected with the levers of power in the world's of high finance, gov- ernment, communications, international diplomacy, and big business. A quick look below at the sket- ches of ten of Pan Am's twenty-one directors reveals it is well endowed with men who have the right connections: former secretaries of the U.S. Treasury, Army, and Navy; directors and partners of the countries most prestigious banks, insurance companies, and invesment houses; executives of the nation's leading mass media empires; friends of President Nixon and advisors of past presidents; and men who have served as special ambassadors and high-level troubleshooters in numerous crisies around the globe. For these men who travel in and out of the highest levels of government and bus- iness, the distinctions between the two are barely discernable. The dates in parentheses following each name indicate when they joined Pan Am's board of dir- ectors. Among those not included in this list are Charles F. Adams, board chairman of Raytheon, Otis Chandler, publisher of the Los Angeles Times; Donald K. David, past chairman of the executive committee of the Ford Foundation; Alfred Gruenther, former Supreme Allied Commander in Europe (1953- 56); and Charles Lindbergh, who made the first solo transatlantic flight in 1927, the year Pan Am was founded. ROBERT B. ANDERSON (1966)- As Treasury Secretary (1957-61) was the most powerful figure for domestic affairs in Eisenhower's second administration; previously had been Secretary of the Navy (1953-54) and Assistant Secretary of Defense (1954-55); began career as an attorney for the estate of Texas millionaire oilman W.T. Waggoner; from 1955-57 was president of Ventures, Ltd.(now Falcon- bridge Nickel) a $250-million Canadian based mining complex with extensive interests in Latin Amer- ica, Africa, and Europe; since leaving the Treasury he has been a limited partner in the prestigious Wall Street banking house of Loeb, Rhoades & Co.; served as President Johnson's chief negotiator for a new Panama Canal treaty and as his unofficial envoy to Arab governments; currently works out of a large suite at One Rockefeller Plaza where he acts as a broker of large Middle East oil conces- sions. (For the story of Anderson's oil interests and his role in oil price fixing while Treasury Secretary see The Washington Post, July 16, 1970). NAJEEB E. HALABY (1965)- From 1961-65 was Administrator of the Federal Aviation Administra- tion (FAA), one of the two principal government regulators of the airline industry; the same year he left the FAA (1965) he became a director of Pan Am and was elected president in May 1968; a dir- ector of the Bank of America (the nation's largest commercial bank), Chrysler Corp., Whirlpool Corp., New York Urban Coalition, the Council on Foreign Relations (CFR, the elite foreign policy lobby) and the United Fund of Greater New York: also, a trustee of the Aerospace Corp. which advises the Air Force on space programs. DONALD M. KENDALL (1971)- One of Nixon's closest associates (apparently added to the board with this in mind); President of Pepsico and a director of Pepsi-Co!a, Sinclair Oil, Alaska Air- lines, Frito-Lay (the food company), and the Dayton International Speedway. JAMES A. LINEN, III (1971)- Publisher of Time Magazine (1945-60) and currently president of Time, Inc.; also board chairman of Athens College (Greece), chairman of the U.S. Council of the International Chamber of Commerce (whose president is Arthur K. Watson, brother of Pan Am board member Thomas Watson) and a trustee of the National Urban League. JAMES S. ROCKEFELLER (1953)- Chairman of the Center for Inter-American Relations, the elite Latin American policy lobby group (See NACLA pamphlet, The Rockefeller Empire/Latin America, avail- able for 50C); also a director of Kimberly-Clark (makers of Kleenex) and the National Cash Regis- ter Co., and Monsanto Corp.; past chairman of the First National City Bank of New York, the U.S. bank with the largest overseas branch network and one of Pan Am's leading creditors, (his cousin, David Rockefeller, is chairman of Chase Manhattan Bank, First National City's chief "rival"). WILLIAM W. SCRANTON (1970)- Member of a long-established Eastern family; past governor of Pennsylvania (1963-67) and past candidate for the Republican presidential nomination. Represented President Nixon on special missions to the Middle East and Europe in 1968; a director of Scott Paper Co., IBM World Trade Corp. (whose chairman, Thomas Watson, sits on Pan Am's board); currently chairman of the National Liberty Co., an insurance firm, and a member of the Carnegie Commission on Higher Education. FRANK STANTON (1967)- President and director of Columbia Broadcasting System (CBS); director of Holt, Rinehart & Winston, a major publishing house, and the New York Life Insurance Co., trustee of the counter-insurgency think tank, the Rand Corporation. Also a trustee of the Rockefeller Foundation and the Carnegie Institution. JUAN TRIPPE (1927)- Organized and become president of Pan Am in 1927, became board chairman in 1964 (now Honorary Chairman); director of Chrysler Corp., Metropolitan L fe Insurance Co., Bermuda Properties, Ltd., and the Liberian Development Corp.; a past director of .h-e 1rsrican Institute for I 0- 17 - Free Labor Development (AIFLD), a U.S. government-business-labor funded program designed to combat communist trade union organizing in Latin America; a member of the Institute of International Educa- tion (for more on IIE, see NACLA Newsletter, Vol. 1, No. 9, December, 1967), the Business Council, and a trustee of the Carnegie Institution. CYRUS VANCE (1969)- Past General Counsel of the Defense Department, (1961-62), Secretary of the Army (1962-64) and Deputy Secretary of Defense (1964-67); the Johnson administration's chief troubleshooter on special missions to Korea, Cyprus, Greece, the Dominican Republic and ten-months as a negotiator at the Paris "peace" talks; a director of IBM and Aetna Life and Casualty Co., and a partner in the prestigious Wall Street law firm of Simpson,Thacher, and Bartlett. THOMIAS WATSON, JR. (1971)- Chairman of IBM, which has a near monopoly on the computer market throughout the world; a trustee of Brown University and the California Institute of Technology; added to Pan Am' s board of directors in 1971 to replace his brother Arthur K. Watson who was ap- pointed by President Nixon to be the U.S. Ambassador to France in 1970. Robert B. Anderson Najeeb E. Halaby William W. Scranton Franlk Stanton Juan T. Trippe Cyrus R. Vance Whywe fly where others don't. Wealwayshave. Becauseof men likeCharles A. Lindbergh. the one in the cockpit. He joined Pan Am in 1928, one year after flying whereothers hadn't. Hes been with Pan Am ever since, working with men equally dedicated to opening the world to air travel. In 1929 it was the Caribbean. It was also the year we developed instrunent flying and organized aviation's first complete weather service. By 1930 we were designing our own radio equip- ment. We were also hacking airports our of the jungles of South America to open an entire continent to air travel. And people began to take flying seriously. In 1935 we flew west over the Pacific and opened half the sorld. Todo it we developed the worlds first long range weather forecasting system, built our own landing and refueling bases along the way, and became the first airline to serve warm meals aloft. In l939 we fle east over theAtlantic to open Europe and give travelers access to the Near East and Africa. And 1947 we put it all together and made the first scheduled passenger flight ever to circle theglobe. So what hav weone tor you lately? A couple of things. Our experience with planes. navigation and weather is so vast that virtually every airliner of the last 40 years (including the 747 ) was built to standards set by us and introduced to world service by us. And y our planes have grown bigger and faster and more efficient, weve been able to ( I make world travel a reality for anyone with a two veek vacation and (Z) lower fares to the point where you can afford to take that vacation. Afluergiving you the world. u ask whaAt to eat. Which is only natural because airlines tend togo at it pretty good when it comes to advertising their service. And service s important. Its the naon we were offering menu selection, serving hot meals, showing movies and providing other creature comforts long before the others caught on. But still, the nmt important thing we ffer you is our experience, our knowledge, our techology. And our ability tomake your travel easy, as yoa want it to be. We're still the only ULS. airline to fly to such unampected places as Mcow, Helsinki, Johansburg, Bali and Maracaibo. And we still fly to such expected places as Iondon, Rome, Paris Rio, Honolulu, Sydne/, andlT

Tags: Pan Am, tourism, monopoly, development

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