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American Export Line -
Subject file
P.S.F. Box
amer.
PSF
Export
THE WHITE HOUSE
WASHINGTON
January 16, 1941
CONFIDENTIAL
MEMORANDUM FOR
THE SECRETARY OF STATE
While I do not know whether
it is true or not, I am told that
Mr. Burke of the State Department
told a Senate Committee (re appro-
priations) that it was the settled
policy of the State Department and
all other Government Departments
that this Administration seeks to
parallel all American airlines
flying into foreign countries with
other American airlines.
Would you let me know if
this story is true?
F. D. R./tmb
teal
THE
Carlton
WASHINGTON, D.C.
F.DR
Please Read -
Last week. Burle of the State Deps.
told a Secrete Committee considering
Export ans second request for an
approgration - that I was the settled
policy of the State. and all after 9m
Departments - and this adumestation
to parallell are foreign american
an lines. This was said in executive
session
of course itus usue true - but " has upsel
mekellan and hadlow un the Housel he 3
charman of sub. committee an P.O. approgrations)
Waula il be proper to Rend word to Mc Keller
Can June Byrus) and to Ludlow steal
this as not the administrations policy-
and that pending your femal determine
tion of that policy watters sloould
remain in states geo?
Effort an Lenes as Do active in every quarter
that this whole situation may blow are
weless you take same action
THE WHITE HOUSE
WASHINGTON
January 21, 1941
MEMORANDUM FOR
DOC O'CONNOR
For your information.
F. D. R./tab
Enclosure
Copy of attached.
PSF amer. Export
Lile
Kramy
3
DEPARTMENT OF STATE
WASHINGTON
January 17, 1941
My dear Mr. President:
In reply to the inquiry contained in your memoran-
dum of January 16, I am informed by Mr. Burke that he
appeared on Thursday, September 26, 1940 before a
Senate Subcommittee on Appropriations and placed in the
record a statement of the Department's policy regard-
ing international aviation. A copy of this statement
is enclosed herewith. Again on Friday, January 10, last
he made an identical statement before a House Subcommit-
tee on Appropriations. He states to me that on neither
occasion, either directly or indirectly, was any refer-
ence made by him to the question of paralleling exist-
ing services.
Believe me
Faithfully yours,
Enclosure:
Copy of statement.
Correethee
The President,
The White House.
ADVISABILITY OF AN ADDITIONAL
TRANS-ATLANTIC AIR CARRIER
The question of whether a trans-Atlantic service
by an additional air transport carrier should be estab-
lished involves a number of considerations of primary
interest to several departments and agencies of the
United States Government. Obviously, since it involves
the operation of air transport services between the
United States and foreign territory, it is of definite
interest to the Department of State from the standpoint
of international policy.
NEGOTIATIONS WITH PORTUGUESE GOVERNMENT
The desire of the American Export Airlines to enter
Portuguese territory necessarily involved consultation
between the other interested Departments and agencies
of the Federal establishment, chiefly the Civil Aero-
nautics Board and the Department of State, The Board
having reached the conclusion that such additional
service was economically justifiable, it became the
duty of the Department of State to take action from the
standpoint of foreign policy. The Department, there-
fore, has directed its efforts toward the reaching of
an agreement with the Portuguese Government which would
permit the entry of an additional American carrier into
Portuguese territory. There is every reason to believe
from the reports which we have received from the Ameri-
can Legation at Lisbon that, in the near future, the
legation
-2-
legation will succeed in reaching an agreement with the
Portuguese Government which will permit of the additional
service, while at the same time protecting any contrac-
tual rights, other than complete exclusivity, which may
have been accorded to Pan American Airways by the Por-
tuguese authorities under the operating contract en-
tered into between the Portuguese Government and the Pan
American Airways in 1937.
EXCLUSIVITY PROVISION OF CONTRACT
With regard to the reservation concerning exclu-
sivity, I should like to state that, although the con-
tract in question granted exclusive rights to the Pan
American Airways as against any other United States air
carriers, a provision known as clause 3 was inserted in
the contract at the instance of the Portuguese Govern-
ment. This clause specifically provided that the exclu-
sive feature of the contract could be removed by an
agreement between the Government of the United States
and the Government of Portugal whenever by mutual con-
sent such action was deemed to be necessary. The in-
stant case specifically falls within the scope of clause 3.
COMPETITION AMONG DOMESTIC AIR CARRIERS
It may be of interest to this committee to know
that, among other important considerations raised here-
in, the Department of State was and is cognizant of the
frequently
-3-
frequently expressed desire of the Congress to encourage
legitimate American enterprises to enter into domestic
and foreign trade. In the domestic air-tranportation
field such a principle has been specifically established,
as has the principle of competition among domestic air
carriers. The fact that the United States has developed
the greatest and most efficient air-transport industry in
the world seems substantially to justify such a policy.
RECOMMENDATIONS BY STATE DEPARTMENT
Therefore, after careful consideration of the prob-
lems peculiar to transoceanic operations, and particu-
larly in view of the fact that it seems reasonable to
anticipate intense international rivalry for the estab-
lishment of rapid air links between Europe and the West-
ern Hemisphere, it is the considered judgment of the
Department that the best interests of this Government
would be served through the establishment of a second
United States air transport service between this country
and Europe.
(Hearings before the Subcommittee of the Committee on
Appropriations, United States Senate, 76th Cong., 3d
Sess., on H.R. 10539, A B111 making supplemental appro-
priations for the support of the Government for the
fiscal year ending June 30, 1941, and for other pur-
poses, pp. 240,241)
s
from file For F.D.R.
PSF
amis. Speat
January 27, 1941.
AMERICAN EXPORT AIRLINES, INC.
If you want to read a story of high finance that
makes good old public utility financing sound like running
a conservative savings bank, read the attached memorandum
as to how American Export Steamship and Aviation Lines were
financed through the Government, for the benefit of some Wall
Street individuals!
As you know, the same individuals are now seeking
more Government money in foreign aviation to enhance their
present colossal profits.
This is not propaganda. It is factual information
with which you should be acquainted because, on the law of
averages, some day it is going to blow up in the public's
face.
AMERICAN EXPORT LINES
HISTORICAL NOTES
Prior to 1934 three American shipping companies operated
ships to Mediterranean and Black Sea ports, each drawing subsidies
from the United States Government for the same service on the same
route. In 1924, under the direction of the United States Shipping
Board, these companies were consolidated and resulted in "Export
Steamship Lines." Mr. Henry Herberman was President, and owned
substantially all of its stock.
This Export Steamship Line took over from the U. S. Ship-
ping Board a fleet of 25 cargo vessels. These vessels had been
built by the Government at a cost of something over $42,000,000.
As of 1924-25 their listed market value was $4,826,000. Export got
them for $1,351,000. In 1928 Export secured a mail contract for its
route. During 1930-31 it ordered 4 small cargo vessels which also
provided limited passenger accommodations. They succeeded in being
paid for the operation of these four vessels on the same basis the
law provided for ten-thousand-ton vessels, although their four ships
were much smaller than this.
As a result of Senator Black's disclosures, Mr. Herberman
was forced to dispose of the Export Company which, in the summer of
1934 was turned over to the New York Shipbuilding Company. In No-
vember 1934, because of a resolution of the Advisory Committee of
the Shipping Board that it was contrary to public interest for &
shipbuilding company to control a steamship line receiving financial
aid from the Government, the New York Shipbuilding Company had to
divest itself of its Export Line stock.
This brings the picture up to the point where American
Export Lines, Inc. actually starts.
New York Shipbuilding Company disposed of the Export Line
to a syndicate which was "formed to take the shipping company off
their hands." The control of the Export Steamship Line was then
acquired in this manner:
A holding company was formed by the syndicate, which
holding company issued one thousand shares of stock. It borrowed
$190,000 from banks, put up its own promissory notes for another
$580,000, and raised an additional $500,600 by additional notes,
distributed to syndicate members, in 100 units, composed of one
$5,000 note and 6 shares of stock, for a total of $5,006 per unit.
This thus disposed of 600 of the holding company's original
1,000 shares. The remaining 400 shares went to Lehman Brothers in pay-
ment for their management of the syndicate. Lehman Brothers later sold
W. H. Coverdale, for one dollar a share, 165 shares of their own 400
shares. For this promissory total of approximately $1,200,000 the hold-
ing company acquired substantially all of the stock and certificates of
participation in a second mortgage on the steamships of the Export Line.
The out-of-pocket investment in the holding company was $600,
represented by the 600 shares of stock issued in conjunction with the
sale of the notes. The steamship company, thus acquired, continued to
receive an annual subsidy of approximately $1,500,000. The new manage-
ment was evidently efficient. It overcame the wastes - and worse - of
the Herberman regime. And, by May 1936 - only one year after the finan-
cial operations above described - the operations of the steamship company
had been so profitable that it paid off its entire second mortgage. This
payment (to the holding company) enabled the holding company to pay off
its bank loan, its own promissory notes, and all the notes held by the
syndicate. By August 1936, when all promissory notes had been canceled
and the holding company, through earnings from the steamship company,
had paid off the 2nd mortgage, the syndicate, of course, owned complete
control with its original cash investment of $600.
At this time - in the fall of 1936 and when everything was in
the clear - a new company was finally formed, the present American Ex-
port Lines, Inc. This new company issued 400 shares of its stock in ex-
change for each share of stock of the holding company. (In terms of
Mr. Coverdale's original investment of $165, for instance, his 165
shares of stock now represented $66,000 par value.)
During 1936 and 1937 American Export Lines, Inc. received
approximately $1,500,000, each year in mail and subsidy payments. Its
net income, after taxes, was $708,000 in 1936, $1,059,000 in 1937.
This represented returns of 25% and 50% respectively for these years
on the net worth shown in the company's balance sheet - and a return
of 70,800% and 105,900% respectively on the amount actually paid by
the new owners for their stock. (This computation credits Lehman Bro-
thers with a cash investment of $400 for their 400 shares, which credit
the records do not show.) During the last four months of 1936, $440,000
in dividends were paid on the stock and an additional $750,000 in divi-
dends were declared during 1937. In other words, the new ownership,
which had already been repaid its entire investment, except for its $600
in stock, received in this period $1,190,000 in dividends - equivalent
to almost half of the amount the Government subsidies paid the company
during these two years.
The Merchant Marine Act of 1936 caused a reduction in Ameri-
can Export's subsidy payments from $1,500,000 per year to approxi-
mately $1,200,000 per year. It also required that annual net profits
above 10%, based on the amount of equity capital invested in the
steamship company, should be held in a special reserve fund, half of
which would ultimately go to the Government. This, in effect, limit-
ed profits to 10% plus.
At this point American Export Airlines begins to take form.
Now, under the steamship company's contract with the Maritime Com-
mission they were obliged to undertake a construction project to
replace their outmoded fleet with a new fleet of vessels which
would cost approximately $20,000,000. Under the terms of the Mari-
time Act the Government, through subsidy, agreed to put up $15,000,000
of this amount, loaned them another $2,500,000 at low interest rates
for twenty years and then required the company, over a period of five
years, to put up the other $2,500,000. Subsidies of $1,200,000 plus
per year should help them get this together. That took care of their
steamship business pretty well and left considerable earning power
with which to finance subsidiary enterprises.
The subsidy contract with the Maritime Commission, how-
ever, required that the Company would not directly or indirectly
embark on any new enterprise or business activity not directly con-
nected with the business of shipping on the route for which they
held a monopoly of American shipping rights and for operation under
which they were being subsidized by the Government. For reasons -
undisclosed in the records - the Maritime Commission ultimately con-
sented to the steamship company's organization of a subsidiary for
aviation purposes. It prohibited them, however, from using steam-
ship earnings for this purpose, requiring that any financial aid
given the subsidiary should be obtained by a separate stock issue
designated for that purpose. This rather unusual compromise, while
requiring the steamship company to continue to hold its own cash,
still permitted the company to use its earning power, based on the
Government's maritime subsidy, as a basis for raising funds for its
aeronautical enterprises. Thus the public was sold stock in the
steamship company but the money went into the airline company.
The available records show that all the money so far put
up for the airline has come from this source. In the fall of 1938
American Export Lines, Inc., put out a new stock issue. Some in-
dication of the profits of the venture is given by the fact that
while the 400,000 shares previously outstanding represented a cash
cost to the owners of 1/44 a share, 68,000 new shares of stock
were sold publicly at $10.50 a share and 12,000 shares privately
at $9.00 a share. The underwriters' commission on the stock sold
to the public was something over 14% - or $1.50 per share. Other
expenses of the issue amounted to some $46,000.
Of the amount raised by this sale of the steamship com-
pany's stock, on the basis of its subsidy and other earnings, the
steamship company advanced approximately $500,000 to the airline,
in exchange for all of the airline company's 480,000 shares of
stock. The steamship company then declared 30% of this stock as
a dividend to its stockholders. That left the promoters with 80%
control of the steamship company and 70% of the airline company -
for that original $600.
One of the financial journals in the latter part of De-
cember 1940 published the following statement as to the present
earning position of American Export Lines:
Net Profit: After charges and Federal income taxes, but
before adjustments as provided in the Merchant Marine Act:
1940
1939
9 mos. to Sept. 30
$5,894,955
$216,631
Times pfd. divs.
235.80
-
Earn., pfd. share
589.50
-
Earn., com. share
12.23
0.45
No. 5% pfd. shs.
10,000
I
No. of com. shs.
480,000
480,000
Dividends: Com. $0.25 Dec. 17, 1940.
Estimated Earnings: Earnings of American Export Lines,
Inc., for the final quarter of 1940 are estimated to be fully as
good as those of the last quarter of 1939, which amounted to
$1,241,994, although the management stated that "in such unsettled
times, it is difficult to make any estimate of future earnings."
F.D.R.
PSF 2/2/41.
amn Export
I see from the
that your frends
Export airlines hor
Entreled your Clum.
action Crock in their
propaganda! !
Doe.
P.S. Waybe got Kennedy
co in this preture
somewhere!
Memo from: BASIL O'CONNOR
The appropriation committees
thought otherwise last Summer. Now
American Export has renewed its ap
peal to Congress to live up to its own
direction in Section 2 of the act. It has
made an even stronger case than be-
fore. The Navy, represented by Ad-
miral Towers, chief of the Bureau of
Aeronautics, and the CAB; represented
by: Mrs Miller, chief of the Foreign Air
Carrier Section, are warmly in favor of
the appropriation for American Export
The new company got permission
from the Maritime Commission in 1937
to engage in air transport. Up to that
time, under the name of American Ex-
JANUARY 30, 1941.
port Lines, it was exclusively in the
shipping trade. More than $3 millions
have since been spent in financing the
In The Nation
subsidiary air transport line, which has
& $2 million equipment program. It is
now building three four-engined
The Fight for Atlantic
Vought-Sikorsky flying boats, each of
which can carry sixteen passengers and
Clipper Competition
a large amount of mail and express non-
stop across the Atlantic. American
By ARTHUR KROCK
Export seeks to put immediately into-
WASHINGTON, Jan 29 When
service a two-engine flying boat, simi-
after exhaustive hearings the Civil
lar to the Navy's PBY bomber, which
Aeronautics Board-with the Presi
is highly endorsed by Admiral Towers.
dent's approval-granted to: American
This would be used until the Autumn of
Export Airlines last July two certiff-
1941.
cates to operate across the Atlantic, the
Experience has proved that large
new company confidently approached
passenger and mail loads cannot both
Congress for: the necessary appropria-
be carried on the clippers at the same
tion. But the appropriation was denied
time. The result is that now there are
on the ground of economy, and now
often 100 persons on the waiting list at
American Export Airlines is seeking it
Lisbon. Also the government's need
again with another uphill battle in
for a steady and ample volume of mail
prospect,
service to and from Europe has grown
The economy ground was furnished
greater with the events of the war. Of
by American Export's intended rival,
course, this is merely an argument for.
Pan American Airways, pioneer in the
more frequencies-more weekly trips-
transocean flying business. This com-
and it is as good an argument for Pan
pany enjoys a monopoly of the trade
American's request as American Ex-
and hopes to keep it. Pan American
port's. So the issue narrows down to
made an expertly timed offer to handle
this: Is the probable 'value to defense
three more frequencies per week at
of competition in transocean air trans-
Lisbon, this providing six westward
port worth the extra money it will
should
Pan
American's
The appropriation committees
thought otherwise last Summer. Now
American Export has renewed its ap-
peal to Congress to live up to its own
direction in Section 2 of the act. It Name
made An even stronger case than be
fore. The Navy, represented by Ad-
miral Towers, chief of the Bureau of
Aeronautics, and the CAB." represented
byn Mr>-Miller, chief of the Foreign Air
Carrier Section, are warmly in favor of
the appropriation for American Export,
The new company got permission
from the Maritime Commission in 1937
to engage in air transport. Up to that
time, under the name of American Ex-
JANUARY 30, 1941.
port Lines, It was exclusively in the
shipping trade. More than $3 millions
have since been spent in financing the
In The Nation
subsidiary air transport line, which has
& $2 million equipment program. It is
now building three four-engined
The Fight for Atlantic
Vought-Stkorsky flying bosts, each of
which can carry sixteen passengers and
Clipper Competition
a large amount of mail and express non-
stop across the Atlantic. American
BRUERTHUR KROCK
Export seeks to put immediately into
WASHINGTON, Jamies When
service a. two-engine flying boat, aimi->
after: exhaustive heartngs the Civil
lar to the Navy's PBY bomber, which
Aeronautica Board-with the Prest-
is highly endorsed by Admiral Towers.
dent's approval-granted American
This would be used until the Autumn of
Export Airlines last July two certifi-
1941.
cates to-operate across the Atlantic, the
Experience: has proved that large
new company confidently approached
passenger and mail loads cannot both
Congress for the necessary appropria-
be carried on the clippers at the same
tion. But the appropriation was denied
time. The result is that now there are
on the ground of economy, and now
often 100 persons on the waiting list at.
American Export Airlines is seeking It
Lisbon. Also the government's need
again with another uphill battle in
for a steady and ample volume of mail
prospect,
service to and from Europe has grown
The economy ground was furnished
greater with the events of the war. or
by American Export's Intended rival,
course, this is merely an argument for
Pan American Airways, pioneer in the
more frequencias-more weekly tripa--
transocean flying business. This com-
and It is as good an argument for Pan
pany enjoys & monopoly of the trade
American's request as American Ex-
and hopes to keep st. Pan American
port's. So the issue narrows down to
made an expertly timed offer to handle
this: Is the probable value to defense
three more frequencies per week at
of competition in transocean air trans-
Lisbon, this providing aix westward
port worth the extra money It will
trips a week, with a sliding scale of
cost? And should Pan American's
rates which would Involvei about
monopoly be further established as a
$1,200,000 less cost to the government
matter of policy The questions will
than if the / American Export company
probably have to be settled on the Sen-
gets its subsidy for two new frequen-
ate floor, since the House committee
cles. The Pan American's backlog of
still seems disposed to make an imme-
frequencies already authorized made
diate saving if It can on any Item. 1/1
this offer possible.
The CAB, the Navy and others who
But to deny the appropriation again
favor the application of American Ex-
would fix the monopoly of Pan Ameri-
port are sure that competition is worth
can in this trade, and that is the crux
the extra cost in this instance. It would
of the present Issue, In Section 2 of the
assure, they say, the training of ani
Civil Aeronautica Act Corrigress di-
additional operations personnel and of
rected the CAB to take into considera-
for an incentive to the development of
tion as an element of public Interest
new and different operating techniques-
the need for competition so that there
On its own behalf American Export as-
serts that "In all cases except when
might be established an air transporta-
there was potential competition Pan
tion system which would meet the re-
American Airways bld the maximum
quirements of domestic and foreign
amount. There is little in the record,".
commerce, postal service and national
says American Export, "to Indicate that
defense. The CAB in giving the certifi-
where no competition Impends the mo-
cates to American Export said: "Eco-
nopoly makes any serious attempt to
nomie regulation alone may not be
reduce costa with increasing volume."
relied on to take the place of the stim-
If international air transport com-
titus which competition provides to the
petition is to exist at all It is called for
advancement of technique and service
on the North Atlantic route, which
in air transportation.
We are un-
handles 80 per cent of all overseas pas-
able to agree that the advantage in
senger transport and 63 per cent of
cost to the government which the serv-
our foreign mail American Export la
Ice proposed by Intervener. [the Pan
the only Pan American competitor
American) would have over that pro-
which has qualified with the CAB for
posed by applicant [American Export]
so extended an operation. The appli-
can be accorded controlling signifi-
cant contenda that if it should now be
cance on the issue of public convenience
rejected, no other, rival will appear
which seems likely. But the obstacles
and necessity in this case.
are the foothold, the excellent service
and the shrewd management of Pas,
Ametriosn, plus the desire of the House
committee to make any savings it canil
INSURE
the
PSF amer Terport
Committee on Appropriations
house of Representatives
Mashington, D. €.
Feb. 8, 1941.
RECEIVED FIRID 850 8 MILL AM, is HOUSE
My Dear Mr. President,
Your note of February 6th e oncerning
the Post-Office subsidy for the American Export Line to
Lisbon has been received. 1 find upon inquiry that the
matter was up last session of Congress and was not acted
upon favorably by this Committee or the Committee on
Appropriations of the Senate. I have consulted with the
Subcommittee which has the item under C onsideration and
find tj:em practically unanimous in their opinions
concerning it. I dont know whether +can do anything
about it or not at this stage.
with every good wish, 1 an,
Very ordially yours,
Edward Maylaylar
Chairman.
THE WHITE HOUSE
WASHINGTON
PRIVATE
February 6, 1941.
MEMORANDUM FOR
CONGRESSMAN TAYLOR
I do hope the Appropriations
Committee can put in the Post Office
subsidy for the American Export Line
to Lisbon. It 18 my thought that
when peace comes, the Pan-American
should have the northern European
line and the Export line have the
Mediterranean trade. In the mean-
time, we can well use more equipment
in the only connecting link we have
with Europe.
F. D. R.
THE WHITE HOUSE
WASHINGTON January 31, 1941
Memorandum For The President.
American Export Airlines
You recently saw John Slater, Vice President of the American Export Air-
lines and explained to him your idea of government-controlled foreign airline
monopolies.
The recommendation of the Post Office for an appropriation to American
Export to fly to Lisbon (and, when peace comes, to the Mediterranean) is now
before an Appropriations subcommittee in the House. American Export has spent
millions of dollars developing this Line. Nonetheless the subcommittee will
report to the Appropriations Committee that Export should get no subsidy.
American Export officials are convinced that once again Juan Trippe's
lobby has blocked them. Last session you sent word to Jimmy Byres you wanted
American Export to have this subsidy. But the Senate refused.
It is generally believed by Harllee Branch, Frank Walker, and the in-
terested officials in the State Department that Trippe is blocking this.
Trippe is now persona non grata with every executive agency, particularly
the Budget Bureau, but still seems to get his way.
Trippe has also taken your American Export decision of last year to
court. CAB is arguing the courts have no right to interfere with your
decisions on foreign affairs. Yet Trippe's lawyers are fighting this point
of view tooth and nail.
Sam Rayburn says unless you send word to the Appropriations Committee,
this appropriation will be defeated and American Export will collapse. This
will leave Pan American as a virtual world monopoly and your plan for
government-controlled airlines to foreign countries would also end. Your
word must be strong and emphatic.
If you wish to send word to the Appropriations Committee the deadline
is probably Tuesday, February fourth.
Do you want to send word again? (If you did so already, it was not
sufficiently clear.)
14R
James Rowe, Jr.
PSF
February 11, 1941.
AMERICAN EXPORT AIRLINES
Here is another example of tactics Burke and American
Export Airlines are using:
In Burke's recent statement to the Senate Committee
you will recall that he said:
"There is every reason to believe from the reports
which we have received in the American Legation at
Lisbon that, in the near future. the Legation will
succeed in reaching an agreement with the Portuguese
Government which will permit of the additional serv-
ice. while at the same time protecting any contrac-
tual rights - other than complete exclusivity - which
may have been accorded to Pan-American Airways by the
Portuguese Authorities under the operating contract
entered into between the Portuguese Government and the
Pan-American Airways in 1937.
Attached hereto is a copy of a letter from Pan-American
to Givil Aeronautics Authority, dated February 9, 1939 - two
years ago - in which Pan-American made the following definite
offer to waive its exclusivity in Portugal. as you will see
from the last sentence of the letter:
"If the Civil Aeronautics Authority will confirm our
understanding that it is now of the opinion that it
would be in the interest of American aviation that
Clause 3 of the agreement of this Company with the
Portuguese Government be waived, our Company will ad-
vise that Government promptly that it waives such
Clause 3 in its entirety.
To date Pan-American has not been asked to waive that
provision!
COPY
RECEIVED
D'COMMOR Pc FARBER
120 DR. WAY.N.Y.
1941 JAN 31 PM 5:20
February 9, 1939
Civil Aeronautics Authority
Washington, D. C.
Gentlemen:
As you are aware, Pan American Airways has been actively
engaged in development work looking toward the organization and operation
of trans-Atlantic air transport services since 1930. Prior to 1930, a
French Company, Societe General d'Aviation, through a subsidiary organized
in Portugal, had obtained a monopoly of flying and landing rights in the
Azores. Prompt action appeared necessary if American aviation was to have
a reasonable share in the eventual operation of trans-Atlantic service.
To this end, Pan American Airways reached an agreement with
Imperial Airways, Ltd., and with the French company mentioned above, as
a result of which there would have been made available to the aircraft of
these companies landing and flying rights in the Azores on which the
monopoly was held by the subsidiary of the French company. Under this
agreement Pan American Airways was to operate one-half the total services.
Shortly thereafter, the Purtuguese Government cancelled the
monopoly concession in the Azores, due to failure on the part of the
Portuguese subsidiary to conduct certain operations required in the
monopoly concession. Pan American Airways then entered into new discus-
sions with Imperial Airways, Ltd. Due to the traditional relations between
Great Britain and Portugal, that company occupied a strong position in
Portugal.
Both Imperial Airways and Pan American Airways undertook direct
negotiations to acquire commercial landing and flying rights in the Azores
and in Lisbon. After years of effort including work on alternate routes,
generally identical agreements were concluded with both companies by the
Portuguese Government. During this entire period no other American in-
terests had taken any steps, or, to our knowledge, even made any plans,
looking toward the development of an American trans-Atlantic air service.
Included in the agreement between the Portuguese Government and
Imperial Airways, Ltd., is a clause to the effect that the Portuguese
Government will not for fifteen years grant to any British company other
than Imperial Airways the right to land in the Azores and Lisbon for the
purpose of conducting trans-Atlantic service. The corresponding clause 3
in the agreement with Pan American Airways states that during the same
period no such rights will be granted to any American company other than
Pan American Airways.
- 2 -
This agreement was concluded by Pan American Airways long before
the enactment of the Civil Aeronautics Act of 1938, and, as above stated,
before any other American company had indicated any interest in developing
a similar service.
Irrespective of Clause 3, referred to above, the agreement granted
the Company for twenty-five years the right to land at the Azores and Lisbon
in trans-Atlantic service. No limitation on frequencies was imposed, nor
was reciprocity involved. Other important provisions relate to advantageous
duty exemptions and tax limitations. Obviously, the agreement was valuable
not only to our Company but to American aviation and our foreign commerce
as well. It justified the Company in proceeding actively with its trans-
Atlantic plans and in pushing the aircraft procurement program including
the new Boeing super-Clipper flying boats now being delivered. Today, as
a result, the United States is a leader in trans-Atlantic service.
Recently, we have been advised that the Civil Aeronautics Authority
is now of the opinion that it would be in the interest of American aviation
if any American company, planning to operate trans-Atlantic services, were
in a position to secure a permit from the Portuguese Government to land in
the Azores and Portugal, as intermediate ports of call.
In view of this assumption and of the changed legislative position
since Pan American Airways concluded its present agreement with the Portu-
guese Government, our Company is willing to take the following action. If
the Civil Aeronautics Authority will confirm our understanding that it is
now of the opinion that it would be in the interest of American aviation
that Clause 3 of the agreement of this Company with the Portuguese Govern-
ment be waived, our Company will advise that Government promptly that it
waives such Clause 3 in its entirety.
Respectfully,
J. T. Trippe
President
/
PSF american
Line folder
I thought you would want this memorandum back for
3-41
your files - we have kept a copy here.
Frances Kelly
Mr. winton's office
3/13
We
Tile
Dear they
THE WHITE HOUSE
WASHINGTON
will you
March himdle
1941 Than
Memorandum For The President.
Pan American - American Export
Despite your memorandum to the House Appropriations Committee
quick the
that you wanted the American Export Airlines to get the subsidy
included in the Post Office appropriations bill, the House Committee
rejected the item.
Starting Monday hearings will be held by the Senate Appropria-
tions Committee on this item.
This i.s the last chance for American Export. If they do not get
it this time they are washed up and four million dollars will have been
wasted.
This will leave Pan American with a world monopoly, and will have
the practical effect of frustrating your idea of limited competition
by American companies on the world airways. (1 understand Frank Walker
is working on the general problem now). During the last session of
Congress, you sent word to Jimmie Byrnes you wanted this appropriation.
Byrnes replied he could not get it for political reasons (the campaign)
but could get it next time.
Every interested government department has recommended time and time
again that this appropriation be granted. The Civil Aeronautics Board
studied the problem for a year. The State, War, Navy and Post Office De-
partments have appeared before committees urgently requesting the appro-
priation. By your action in approving the decision of the CAB, the bud-
get estimates and the memoranda you have sent, you are definitely in favor
of this appropriation.
Yet it is always blocked and the answer is very simple - Juan Trippe.
He is rapioly becoming persona non grata with all the agencies which must
tieal with him, particularly the Budget. Nonetheless his lobby will be
successful, operating through Millard Tydings, unless you indicate firmly
you want the appropriation. This is the last chance.
incidentally Thurman Arnold, 1 have been told, has an excellent anti-
trust suit against Pan American, and L can't understand why it has not
been held.
I have two recommendations:
(1) You personally talk to Juan Trippe and tell him the government
is sick of his maneuvers. (If you do not know of his Nazi connections in
South America, 1 think your State Department should tell you).
(2) Ask Sherman Minton to make a personal effort in the Senate
to make sure this appropriation goes through.
Otherwise Juan Trippe will be left alone in the aeronautics field
and in foreign relations with South America and will be more powerful
than the government of the United States. I use these words advisedly.
ftiR
James Rowe, Jr.