A Civil Aeronautics Board administrative law judge recommended yesterday that the bids of both Pan American World Airways and Texas International Airlines to control National Airlines be rejected.
In a decision that will be reviewed by the full CAB, William H. Dapper found that both takeover proposals would violate the antitrust laws.
Board approval of a takeover of National would not only elminate the Miami-based carrier as an actual competitor but also would trigger a wave of additional merger proposals that would further reduce the number of airlines available to the traveling public, Dapper said.
Noting that the Airline Deregulation Action signed into law last October made clear that Congress intended to establish a regulatory regime in which vigorous competition among airlines would be the "touchstone," Dapper said the pending applications "raise the serious question of whether the essential purpose of the deregulation legislation will be defeated if the size of the air carrier industry is substantially reduced by merger."
In his discussion of each application, Dapper said there would be a substantial loss of actual competition on certain relevant routes and a substantial loss of potential competition
In the case of Pan American, Dapper found there would be a substantial loss of potential competition.
In the case of Pan American, Dapper found there would be a substantial loss of actual competition in the United States-Western Europe and U.S.-London markets served by Pam Am and National. Rejecting Pan Am's contention that it needs to pick up a domestic route system like National's in one fell swoop to remain a viable air carrier, Dapper found that Pan Am was a potential entrant in several markets served by National
". . . Pan Am's position that it will not enter selected domestic markets is simply not credible," Dapper wrote. "In order to accept the carrier's thesis, it is necessary to conclude that if this merger is disapproved Pan Am will passively accept its fate as an international carrier and make no serious effort to penetrate some of the lucrative domestic markets." On the contrary, he said, if the merger is turned down, there are reasons to believe that Pan Am will establish itself in certain domestic markets on a meaningful basis.
In the case of Texas International, Dapper rejected its contention that the entire country is the relevant geographic market and found that actual competition would be lost in the Houston-New Orleans market in which it and National compete. He also found Texas International a potential entrant on many routes served by national in the southern region, particularly out of Houston and New Orleans.
Dapper also ruled that Texas International had violated the Federal Aviation Act not seeking CAB approval before it purchased National stock, and he said the airline should be required to divest itself of its holdings. In the case of Pan Am he recommended that the board consider diverstiture in a separate proceeding.
Both Pan Am and Texas International have nearly 25 percent each of National's stock, which has been placed in trusts that don't allow the two to exercise control over National.
Texas International started the scramble for National last July with its initial purchase of 9.2 percent of National's stock; it was followed by Pan Am, Eastern and to some extent, Air-Florida. Eastern's proposal to acquire control of National is being heard in a separate proeceding by a different administrative law judge.
Reaction from the airlines to the initial decision was predictable. A spokesman for National said the airline must study the 138-page document before offering any comment. Pan Am said the flag carrier would continue to press vigorously for approval of the merger and will give the CBA a detailed rebuttal of the law judge's recommendations.
Texas International said it strongly disagreed with the judge's assertion that its proposaed combination would be anticompetitive and called "absurd" his finding that it was in control of National before it sought CAB approval.
Eastern sait it was gratified by the decision since it had argued that both applications should be turned down. In its case, the facts were "different, and it was confident its proposal would be approved, an Eastern statement sadi.