United Gets OK to Buy Pan Am Pacific Routes
United Airlines won tentative government approval Friday to buy the Pacific division of Pan American World Airways as the Transportation Department rejected arguments that the sale would reduce competition.
Transportation Secretary Elizabeth Hanford Dole said that air travel between the United States and Asia “is likely to become significantly more competitive” as United expands its operations and competitors are forced to respond.
The purchase must still clear final approval by the department and President Reagan, which is considered likely.
United also must receive landing rights from various Asian countries, including Japan, which may seek some concessions for its own airline from the United States in return, industry sources say.
The decision was immediately criticized by Northwest Airlines, which currently accounts for about one-fourth of the traffic across the North Pacific and is the dominant U.S. carrier between the United States and Asia.
“Obviously we’re extremely disappointed,” said William C. Wren, vice president for public relations at Northwest. He said the decision “does not address the serious anti-competitive problems the sale will create.”
Wren indicated that Northwest may challenge the decision in court once it becomes final.
Richard Ferris, chairman of United, called the tentative ruling “a significant first step” toward the deal becoming final. He said United is prepared to begin expanded service across the Pacific by the first of the year if remaining hurdles are overcome.
“We are eager to get started,” Ferris said in a statement. “We are confident all necessary approval will be forthcoming.”
United, the country’s largest airline, and Pan Am reported the deal last April. It calls for United to pay $750 million in cash for 18 Pan Am jumbo jets and other facilities in the Pacific and absorb about 2,700 Pan Am employees, including 410 pilots.
In giving the sale her approval, Dole disputed contentions by a number of airlines, including Northwest, American and Eastern, that it would make United a dominant carrier against which it would be hard to compete because of United’s extensive domestic feeder system.
United’s acquisition of Pan Am’s routes across the Pacific “will not result in substantial lessening of competition as it currently exists,” she said in a statement.
The Transportation Department approved the deal without requiring specific divestiture of any routes by United to another carrier.