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UNITED STATES v. PAN AM

March 8, 1961

UNITED STATES of America,
v.
PAN AMERICAN WORLD AIRWAYS, INC., W. R. Grace and Company, and Pan American-Grace Airways, Inc., Defendants



The opinion of the court was delivered by: MURPHY

Nominally this is a government anti-trust action brought pursuant to § 4 of the Sherman Act, 15 U.S.C.A. § 4, in which the defendants, Pan American World Airways, Inc., W. R. Grace and Company and Pan American-Grace Airways, Inc., *fn1" are charged with violations of Sections 1, 2, and 3 of that act (15 U.S.C.A. §§ 1, 2 and 3.) Actually it is a continuation of a bitter family quarrel rampant since 1941 arising out of the unhappy and quondam unholy union of Pan American and Grace, each of whom owns 50% Of the stock of Panagra, that the Civil Aeronautics Board (C.A.B.) could not resolve. *fn2"

Briefly, the complaint charges defendants with unlawful combination and conspiracy to restrain and monopolize trade and commerce between the United States and South America, particularly the west coast of South America. The relief sought is a decree requiring Pan American and Grace to divest themselves of their ownership of Panagra and enjoining all defendants from any and all challenged activities that are found to be violative of the antitrust laws. The ultimate objective of the government is to facilitate the merger of defendant Panagra with Braniff International Airways (Braniff), the only other American flag carrier operating between the United States and South America aside from Pan American and Panagra. *fn3" This is in accordance with the recommendation of the C.A.B. in 1954 in order to make possible thereby 'effective' competition between American carriers in that area and to reduce substantially the heavy burden of subsidy presently borne by this government. New York-Balboa Through Service, Reopened, 18 C.A.B. 501, 505.

 The principal defenses urged are condonation by the government of the acts complained of, estoppel and laches; immunity because many of the agreements and mergers and acts complained of were approved by the Civil Aeronautics Board under a grant from Congress that absolved the defendants from antitrust violations and, as far as Pan American is concerned, that this court has no jurisdiction at this time because of the primary jurisdiction conferred by Congress in the Civil Aeronautics Board.

 The Parties

 Pan American is a corporation organized in 1927 under the laws of the State of New York as Pan American Airways, Inc. In 1950 its corporate name was changed to Pan American World Airways Inc. Pan American directly operates routes in air transportation of persons, property and mail between the United States and various points in Europe, Asia, Africa, Australia and Central and South America. It is today the largest international air carrier in the world. It also has a number of subsidiaries, including foreign corporations engaged in the transportation by air of persons, property and mail.

 Grace is a corporation organized in 1899 under the laws of the State of Connecticut with its principal office in New York City. Grace has subsidiaries which engage in various aspects of industry, trade and commerce including Grace Line, Inc., which operates a steamship route, among others, for the transportation of persons, property and mail between the United States and the west coast of South America.

 Panagra is a corporation organized in 1929 under the laws of the State of Delaware. Panagra is engaged in air transportation of persons, property and mail over routes between the Canal Zone and Buenos Airs, Argentina, via the countries on the west coast of South America. It is wholly owned by defendants Pan American and Grace, each of whom owns 50% Of the stock thereof. The principal offices of Pan American and Panagra are located in New York City.

 Civil Aeronautics Board

 Commercial aviation in this country is a highly regulated industry, but became such only after Congress passed the Civil Aeronautics Act of 1938 (C.A.A.). *fn4" That act authorized the creation of the Civil Aeronautics Board and established for the first time a comprehensive system of economic regulation of air transportation and removed, or attempted to remove, the threat of uneconomic and destructive competition in that field by providing that no air carrier may engage in air transportation without first receiving a certificate of public convenience and necessity. It gave to the President of the United States approval and veto power for such certificates as related to 'overseas' and 'foreign' air transportation (49 U.S.C.A. § 601). Since, however, a number of air carriers were in operation prior to the act it provided that as to those they could receive certificates of public convenience and necessity, under the so-called 'grandfather' clause (49 U.S.C.A. § 481(e)). Accordingly, Pan American and Panagra received certificates of convenience and necessity for the operations which had been conducted by them under the various foreign mail contracts.

 Congress also provided what policy the C.A.B. should follow as being in the public interest and in accordance with the public convenience and necessity, and defined that policy as follows:

 '(a) The encouragement and development of an air-transportation system properly adapted to the present and future needs of the foreign and domestic commerce of the United States, of the Postal Service, and of the national defense;

 '(b) The regulation of air transportation in such manner as to recognize and preserve the inherent advantages of, assure the highest degree of safety in, and foster sound economic conditions in, such transportation, and to improve the relations between, and coordinate transportation by, air carriers;

 '(c) The promotion of adequate, economical, and efficient service by air carriers at reasonable charges, without unjust discriminations, undue preferences or advantages, or unfair or destructive competitive practices;

 '(d) Competition to the extent necessary to assure the sound development of an air-transportation system properly adapted to the needs of the foreign and domestic commerce of the United States, of the Postal Service, and of the national defense; * * *' (49 U.S.C.A. § 402).

 Congress also gave to the C.A.B. the power to approve or disapprove rates and tariffs, all types of mergers, consolidations, acquisitions, pooling and other agreements (49 U.S.C.A. § 481 et seq.) and with reference to certain of its orders antitrust immunity (49 U.S.C.A. § 494).

 The Complaint

 The government's case was fashioned along three major lines which, however, are interdependent both theoretically and evidencewise.

 The first line deals with alleged restraints of trade relating to a division of markets in the transportation of passengers, cargo and mail in commerce between the United States and South America asserted to be illegal both from the standpoint of reasonableness and as a per se violation of law. It is the government's claim that Pan American and Grace entered into an agreement prior to the formation of Panagra whereunder the proposed jointly owned company was to have the exclusive right to traffic along the west coast of South America from the Canal Zone south free from Pan American competition, and Pan American was to be free from competition from the proposed jointly owned company elsewhere throughout South America and between the Canal Zone and the United States.

 The second line of attack relates to alleged restraints imposed upon Panagra by its two parent companies, Pan American and Grace. To a large extent the evidence of restraints on Panagra in the categories of joint offices, communications, equipment, publicity and sales are matters of agreement that must be initially approved by the C.A.B. and to a large degree have been approved and others are awaiting approval or extension of approval previously granted.

 These agreements are, however, interrelated to the third line of attack wherein the government alleges that Pan American and Grace conspired to monopolize transportation between the eastern coastal areas of the United States and South America, particularly the western coastal areas of South America and Buenos Aires, Argentina. It is alleged that Pan American and Grace agreed to combine in the formation of Panagra, equally controlled by them to engage in a limited operation from the Canal Zone south along the west coast of South America with the intent and purpose of preventing competition between Pan American and Grace with respect to transportation by air and preventing the establishment of an air transportation service independent of the control of themselves which would be competitive with the projected air services of Pan American and the surface operation of Grace Line, Inc.

 It is claimed that these defendants, pursuant to such alleged conspiracy, organized Panagra in such a fashion that they each have a negative control of the latter's competition with their independent operations, and have prevented Panagra's extension of its routes in South America and to the United States, and from developing its own facilities in the United States independent of the control of Pan American, and in South America independent of the control of Grace. In addition, they are said to have acquired the stock or assets of, or have entered into agreements with competing airlines in pursuance of their design to restrain and monopolize, and have retarded, restrained or eliminated competition from local airlines in South America, as well as having attempted and committed illegal restraints with respect to the operations of Braniff.

 Grace, in addition, is charged with monopolizing or attempting to monopolize transportation by air and surface carriers between the United States and the western coastal areas of Sough America. The government also argues that the ownership and control of a competing air carrier by the dominant surface carrier in the same market necessarily violates the antitrust laws.

 As to Panagra the government claims that it, together with Pan American, after 1946 engaged in restrictive practices to restrain and impede other airlines on the west coast of South America.

 Conclusions

 On the facts hereinafter found we have concluded (1) that the joinder of Grace and Pan American was not the result of conspiracy, but was a lawful combination with legitimate ends; (2) the division of territories understanding under which the operations of the two airlines were conducted was not unreasonable under the circumstances and not a per se violation; (3) that Pan American's restraints against Panagra and its continued determination to suppress the extension of that airline to the United States, in itself, and in combination with other conduct on the part of Pan American constitutes a monopolization of commerce that contravenes the provisions of the Sherman Act, and would seem to require divestiture by that defendant; (4) that Grace's stock ownership in Panagra does not per se violate the Sherman Act; (5) Grace and Panagra have not been found guilty of any antitrust violations; (6) price fixing for the most part is a mooted issue and in view of our decision with regard to Pan American need not be considered at length; (7) we will defer to the primary jurisdiction of the C.A.B. the legality of the joint advertising, sales and offices, etc. agreements between the two airlines; (8) we will defer to the primary jurisdiction of the C.A.B. the question of Grace's control in the management of Panagra.

 The Facts

 In 1927 substantially all transportation between this country and Latin America was by steamship. International commercial aviation was in the experimental stage and as yet no American air transportation company had entered upon operations from the United States to South America.

 In October, 1927, Pan American began operations under the first United States Post Office contract for the carriage of the mails by air to a foreign country, by inaugurating such a service between key West, Florida, and Havana, Cuba. Pan American also had a contract with the Cuban government for the carriage of Cuban mail to this country.

 Between 1920 and 1927 several German and French companies had established commercial air transportation services in South America, in Colombia, Bolivia, Brazil, Argentina and Chile, and were receiving financial and diplomatic assistance from their governments necessary to the establishment and maintenance of such services. These foreign companies had envisioned routes throughout South America and had sought also to extend into the Canal Zone and to the United States.

 Our government was greatly concerned for political, military and business reasons with the successful establishment of an American system of air transportation to Latin America, and recognized the need for legislation under which financial aid could be rendered to American companies to engage in international air transportation. The result was the enactment by Congress in March, 1928, of the first Foreign Air Mail Act (45 Stat. 248, amended, March 2, 1929, 45 Stat. 1449) which authorized the Postmaster General to let contracts for not more than ten years for the transportation of mail by airplane to foreign countries or insular possessions of the United States. The method of payment established by the Postmaster General was based on the mileage flown without relation to the amount of mail carried. It was in essence, subsidy.

 On May 8, 1928, Pan American was awarded a contract under that act which superseded its 1927 contract for service between Florida and Cuba.

 Pan American had started some time in late 1927 to formulate plans looking to the establishment of a complete system of air transportation serving all parts of the Caribbean, and Central and South America. It was aware of the potentialities of the Latin American market, as yet untapped by American international companies, and equally aware of the impending legislation to subsidize American air lines. With knowledge of the projected routes of the Post Office Department (see House Report 481, 70th Cong., 1st Sess., 1928) or better, the active sponsor of them, it began studies in early 1928 of proposed routes from Miami, Florida, to the Canal Zone, and the Canal Zone to Valparaiso, Chile.

 Pan American's ambitions, however, were not equalled by its assets *fn5" or financial resources, and ultimately, in June 1928, all of its stock was acquired by a holding company formed for the purpose of raising capital to enable Pan American to bid on the mail contracts advertised or about to be advertised by the Postmaster General, and to conduct operations under contracts it was awarded. This company was called the Aviation Corporation of the Americas (ACA) and included among its assets acquired at the time of the acquisition of Pan American, was an option to operate a concession by the government of Peru for the establishment of an air transportation service between the United States and Peru. In June 1928 ACA acquired a contract for the carriage of Peruvian air mail to the United States. The concession and mail contract were intended ultimately to be assigned to Pan American if and when it began a west coast service contemplated in its plans.

 On July 13, 1928, Pan American was awarded the United States mail contract for the route from Miami to the Canal Zone, for ten years, with an option in the Postmaster General to extend the route along the north coast of South America via Trinidad, as far as Paramaribo, Dutch Guiana. On the same day Pan American was awarded a 10-year contract for a route from Miami to Puerto Rico, with a similar option for the extension of this route to Trinidad.

 In order to engage in air transportation operations into or within any of the countries of South America at this time, as well as today, such operating rights must be granted by the government of each such country whether by permit or concession. Without such rights Pan American or any foreign company could not even fly over these countries. *fn6" By the end of July 1928, Pan American had instituted negotiations for operating rights in Panama, Colombia and Ecuador. By reason of the option in Peru it was assured of rights in that country (or it could subcontract that portion of its proposed west coast operations to a Peruvian subsidiary). If it could secure rights in the first mentioned countries and in Chile the way would then be clear for the proposed operations under a contract to be advertised by the Postmaster General from the Canal Zone to Valparaiso, Chile. In Colombia, however, Pan American's efforts to acquire operating rights were opposed by German interests who controlled SCADTA, a Colombian air line organized in 1920 and operating in that country and between Colombia and Ecuador. The owners of SCADTA were influential with the Colombian government. They had sought to extend their line to the Canal Zone and thence to this country since 1925 or 1926 but without success. Being thus situated, they had successfully opposed Pan American's applications for Colombian rights and thereby blocked the extension of American flag operations south of the Canal Zone.

 As early as 1927, Pan American sought to purchase all of the stock of SCADTA, and these negotiations continued until January 1929, at which time the principal stockholder and managing director of the company orally agreed with Pan American to sell sufficient stock to enable Pan American to gain control of the company. The agreement to purchase SCADTA stock immediately opened the way for the establishment of an American flag west coast airline, for as part of the agreement, SCADTA withdraw all opposition to Pan American's application to the Colombian government, and entered into an agreement granting to Pan American exclusive use of its landing facilities along the north and west coasts of Colombia and in Ecuador, subject to its receiving permits from the Colombian government. In February, 1929, a treaty was signed between the United States and Colombia providing for reciprocal rights to aircraft of the two countries for landing rights in the Canal Zone and Colombia. The oral agreement for the purchase and sale of SCADTA stock was reduced to a formal writing in February, 1930, and finally executed in April of 1931.

 In early 1928 Grace had independently begun to inquire into the possibilities of a west coast airline and had caused a study to be made with respect thereto. It began inquiries with governmental officials and in time became apprised of the activities of the Pan American interests and their plans for a west coast route. Pan American at this time was seeking to interest the principal shipping companies along the various proposed routes in financial participation as well as to secure the benefits of association with steamship lines, including air-sea rescue arrangements, and use of communication and agency facilities of these lines which would considerably decrease the amount of capital investment for such facilities immediately necessary in the operation of air transportation companies.

 In May 1928, officials of Grace and Pan American conferred with a view to joint participation, and again in the following months. Grace's approach was a conservative one at the outset. It was naturally interested in the new form of transportation and fully appreciated the commercial possibilities of the airplane. It also appreciated the potentially competitive aspects of air transportation, but felt that it was quite risky at that early stage and no immediate threat as a competitor of its steamship lines.

 At this time Grace was aware of the impending contracts to be offered by the Post Office, including the Miami-Canal Zone route which eventually went to Pan American, but its interest was limited to the proposed Canal Zone-Valparaiso route.

 In the fall of 1928 Pan American entered into an agreement with Grace, evidenced by two letters dated respectively August 31st and September 7th, *fn7" whereunder each agreed to subscribe equal amounts to the capital stock of a corporation to be formed under the laws of Delaware to operate an airplane service in Peru with the view to ultimately inaugurating a through mail service from the Panama Canal to Valparaiso, Chile. The agreement provided that the two companies would cooperate in studying the costs of operations on such route and that if Pan American determined that it was advisable to bid on a contract for carrying the mails between the Pan ama Canal and Valparaiso, the amount contributed by Grace to the stock of the company which was to operate in Peru should be treated as a contribution to the stock of the company making the bid and Grace was to have an option to take an additional interest in such a company not to exceed 50% Of the total capitalization. Pan American was to 'have charge of the operations of the service from the Canal to Valparaiso' and the Grace houses on the west coast of South America were to act as agents for the company.

 Pan American's study of this route indicated that even with the revenue of a United States mail contract, conditions did not then justify its undertaking to install an air transportation service in that area. By combining with Grace, however, they mutually concluded that they could operate a west coast service more economically than could any other air transportation company, including the French and German companies.

 The Delaware company referred to in the letters was formed under the name 'Peruvian Airways Corporation' and it began operations in Peru in September, 1928, under the Peruvian concession and contract referred to above. In January, 1929, Grace and Pan American secured operating rights in Chile and, as stated earlier, Pan American's negotiations with SCADTA had set the stage for a concession from Colombia. On January 31, 1929, the Post Office Department issued an advertisement for a contract for Foreign Air Mail Route No. 9, from the Canal Zone down the west coast of South America to Santiago, Chile, with an option in the Postmaster General to extend the service from Santiago across the Andes to Buenos Aires, Argentina, and Montevideo, Uruguay.

 Panagra was formed on January 25, 1929, as South American Airways Corporation and changed to Pan American-Grace Airways, Inc., on February 21, 1929. Grace exercised its option to acquire 50% Of the stock, and Panagra submitted a bid for the mail contract. Pan American and Grace each subscribed $ 500,000 to the capital stock of Panagra, including the amounts previously subscribed by them to the stock of Peruvian Airways Corporation.

 On March 2, 1929, the Postmaster General awarded to Panagra the contract for Foreign Air Mail Route No. 9. Panagra was not the lowest bidder for this contract *fn8" but was found by the Postmaster to be the lowest responsible bidder that could satisfactorily perform the service to the best advantage of the government. In making the award, the Postmaster stated, inter alia:

 'This is the most important air mail contract that has as yet been awarded. Its importance goes not alone to the financial ability of the bidders but more directly and to a far greater degree to their proven and recognized capacity for performing the service contemplated.

 'The Pan American company has filed evidence of extensive preparation for the operation of an air mail route through the countries with which arrangements are necessary. It has had this particular service in view for the last two years and has for that length of time been conducting negotiations and perfecting arrangements for the carrying on of the service if in the fulness of time it should be awarded the contract for it. It has the required franchises under which to operate in the countries to be served and over which the line passes. It is indeed operating through subsidiary companies already in existence over a considerable portion of the route under consideration. In addition to this it will have the benefit of all the facilities of the Grace Line of steamers now operating a firmly established service by sea along the whole line of the proposed air mail route.

 'I would repeat that the contract in question is for a route most difficult to serve but at the same time of very great and far-reaching importance not only to the public but to the whole future of transportation by air. Failure would be a serious blow to the prestige of American aeronautical enterprise.'

 Panagra commenced operations under this contract on July 12, 1929, and later, On October 12, 1929, inaugurated operations from Santiago to Buenos Aires after the route was ordered extended by the Postmaster General in August, 1929.

 Until November of 1929 operations on Panagra's routes as far south as Guayaquil, Ecuador, were conducted by aircraft and personnel of Pan American because Panagra had not until that time secured operating rights in Colombia in its own name. By the end of 1929, Pan American's routes having been extended by the Postmaster General, it was operating regular service along the north coast of South America to Paramaribo, Dutch Guiana.

 The joinder of Pan American and Grace, with their complementary resources, in the formation of Panagra to establish American air transportation on the west coast of South America was of decisive importance to the Postmaster General in awarding to Panagra the United States Mail contract for the west coast route. Such a contract was the umbilical cord of any proposed American flag international air operations in South America, without which they could not long survive. It is beyond peradventure that the successful inauguration of an international air transportation system in South America, with the flying equipment then available, with no airfields or ground facilities but what defendants supplied or arranged themselves, with the air to fly in and the ground to land on, was in the truest sense a pioneering endeavor. *fn9" The technical and physical resources possessed by each of the defendants, together with the financial and diplomatic assistance rendered by this government, were pooled to facilitate the success of Panagra, the American entry on the west coast of South America.

 In September, 1930, Pan American acquired the assets of New York, Rio & Buenos Aires Line, Inc. (NYRBA), an American company which had been formed in March, 1929, by persons independent of Pan American and Grace with the purpose of operating an airline service under mail contracts obtained in South America, from Miami through the Caribbean, and down the north and east coasts of South America to Buenos Aires, and across the Andes to Santiago, Chile.

 The key to the successful maintenance of an American airline in Latin America was a United States Post Office mail contract, without which a company could operate only at a heavy loss. The joint company (Peruvian Airways) which preceded Panagra operated at a loss on the west coast prior to the awarding of the contract to Panagra for that route. Pan American had instituted competitive services on the east coast with NYRBA prior to September, 1930, without the benefit of a United States mail contract for that route and it too, as well as NYRBA, sustained heavy losses amounting to about $ 40,000 a month. It nevertheless so operated in order to put itself in position to compete with NYRBA in bidding for a proposed United States mail contract for the east coast route. NYRBA had two wholly owned subsidiaries, Trimotor Safety Airways, Inc. and NYRBA do Brasil, and together they had secured contracts from the governments of Argentina, Brazil, Uruguay, Chile and Venezuela, for the carriage of mail from those countries north to the United States. These contracts were at considerably lower rates of pay than those awarded by our Post Office Department, and because of the scheme of its contracts, it created a problem for the Post Office Department with possible embarrassment with countries on the west coast of South America who contracted with Panagra. The situation also created a problem with respect to the award of a satisfactory mail contract if there was to be competitive bidding between NYRBA and Pan American. The Postmaster General determined not to advertise for an airmail route down the east coast of South America from Paramaribo unless some satisfactory arrangement could be made between Pan American and NYRBA, and apparently suggested that the two companies merge. Pan American was concerned about possible antitrust implications in the proposed merger and sought advice and 'clearance' from the Department of Justice.

 In a memorandum to that department dated July 18, 1930, Pan American set forth the details of the proposed acquisition of all of the assets of NYRBA, the competitive situation between the two companies, as well as with respect to foreign airlines in the area, ad also as regards competition from steamships along the proposed route. Pan American demonstrated the economic impossibility of continued competition between itself and NYRBA on the same route without an air mail contract from the United States Post Office, and that it was the policy of the Post Office Department not to subsidize two contractors in South America for the same route. Pan American pointed to the diplomatic and financial assistance given to its foreign competitors by the French, English and German governments, and that effective similar assistance from the State Department could be rendered to only one American operator in the same area. In this memorandum Pan American disclosed its interest in Panagra, indicating that Panagra was part of the Pan American system, and also that the assets of NYRBA included NYRBA's wholly owned subsidiaries.

 Pan American made a persuasive argument to indicate that the acquisition would be of substantial benefit to the public, and was of particular interest to the Post Office Department, the Department of Commerce, and to the State, War and Navy Departments as well. On August 1, 1930, the Department of Justice responded, inter alia, as follows: 'Upon the basis of the information thus furnished the Department does not at the present time deem that any action by it would be warranted if the proposed acquisition should be effected. This, however, cannot under the law limit the full freedom of the Department to take such later action as future developments, further information or a subsequent consideration of the questions involved may in its judgment warrant.'

 Pan American made no mention of its earlier agreements, first oral and then written, with regard to its purchase of control of SCADTA, the acquisition of 84% Of whose stock was thereafter completed in April, 1931. It claims that both the oral and written agreements were required by the seller to be kept strictly confidential until the sale was completed, and that Pan American adhered to that condition, disclosing it, one of its officers testified many years later, only to the .secretary of State on a personal and confidential basis. What effect disclosure of its impending acquisition of SCADTA may have had on Pan American's application for 'clearance' from the Department of Justice we can only speculate.

 As we said above, Pan American did acquire the assets of NYRBA in September, 1930, together with the stock of NYRBA do Brasil as contemplated in its memorandum to the Department of Justice, and in October, 1930, the name of that subsidiary was changed to Panair do Brasil. (In 1935, Pan American secured its own operating concession from Brazil and then reduced its stock in Panair do Brasil to 58%, and again in 1947 to 48%. In 1940 SCADTA merged with another Colombian airline and the name was changed to AVIANCA. Pan American received 64% Of the stock of AVIANCA, which was reduced in 1945 to 48% And as of 1954 it owned 38% Of AVIANCA. The 1940 merger was precipitated by the Colombian government which passed a law in that year requiring the majority of SCADTA stock to be owned by Colombian Nationals. How it disposed of its stock and to whom, and what the relationship was or is, was not disclosed by the evidence.)

 On September 24, 1930, the Postmaster General awarded to Pan American a contract for a route from Paramaribo down the east coast of Santos, Brazil, with an option to extend the route to Buenos Aires. Pan American inaugurated service to Buenos Aires under this contract in 1931.

 The last extension of Pan American's east coast route rounded out the United States air mail service throughout South America. The entire northern and eastern part, and the northern portion of the western part from Miami to the Canal Zone were operated by Pan American, and the southern portion of the western part from the Canal down the west coast and across the Andes operated by Panagra.

 In August, 1931, Pan American organized UMCA, a Delaware corporation, to which was assigned a concession theretofore granted by the Colombian government to one of its nationals for a route between Medellin, Colombia, and Panama. The concession required as a condition that the proposed airline become associated with an American company to be approved by the Colombian government. The assignment to UMCA, in which Pan American acquired a 75% Voting interest, was approved by the Colombian government and UMCA commenced operations in July, 1932. (In 1947 Pan American acquired all of the stock, which it retains to this day. In 1948 Pan American sought approval from the C.A.B. of its proposal to acquire all of the assets of UMCA and, though the hearing examiner recommended it, the C.A.B. has never acted on the recommendation. In 1959 UMCA applied for leave of the C.A.B. to abandon its certificated operations.)

 Pan American and Panagra merely had landing rights in Colombia along their international routes at this time. The acquisition of UMCA enabled Pan American to carry traffic into Colombia, which was one of the reasons for its acquisition and, additionally, Pan American considered this route as a link in a possible short-cut route across South America to Buenos Aires and Rio de Janeiro. SCADTA had a monopoly in the carriage of Colombian mail and a virtual monopoly for all intra-Colombian traffic, partly because of the air policy of the Colombian government and partly because of a tripartite agreement among Pan American, Panagra and SCADTA, whereunder SCADTA withdrew from operations into Ecuador in competition with Panagra and withdrew its opposition to the efforts of Pan American and Panagra to acquire landing rights in Colombia. In return Pan American and Panagra agreed not to press for rights to operate within Colombia.

 In 1934 Panagra formed a Peruvian company, Aerovias Peruanas, in order to protect its position in that country. @ At the same time the original joint company, Peruvian Airways, was dissolved. After about four years of very strong competition between Panagra, and its Peruvian subsidiary on the one hand, and Faucett Aviation Company, the leading Peruvian company, on the other hand, with both sides sustaining heavy losses, Panagra and Faucett reached an agreement whereby Panagra's subsidiary withdrew from all operations in Peru, and Panagra acquired 20% Of the stock of Faucett. Panagra's local service in Peru was to be limited to that incident to its international itinerary and its tariffs for such local service was to be based upon its international rates, which would effectively maintain a differential between its fares and those ...


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