The Civil Aeronautics Board yesterday denied interim approval of Braniff International's proposal to transfer its South American routes to Pan American World Airways for four years in exchange for $30 million.
Instead, the board said it would make its decision by the end of July after an expedited hearing.
However, some industry sources believe the board's action may doom the Braniff-Pan Am proposal as presently drawn. At a news conference yesterday, CAB Chairman Dan McKinnon said the board is willing to consider other financial agreements that Braniff might reach with other airlines involving the transfer or use of its South American assets, including its route authority.
In taking its action, the board apparently resisted strong pressures from other governmental agencies and Congress to approve the agreement and "save" cash-short Braniff. The Dallas-based airline had contended that its very existence could be threatened should the CAB turn down its route proposal, but yesterday Braniff was not so pessimistic.
The board's decision "disappointed" both Braniff and Pan Am but cheered officials of other airlines seeking some of Braniff's routes who had argued that the proposed agreement would grant Pan Am a virtual monopoly on air service between the United States and South America. Braniff and Pan Am are the two U.S. airlines that fly to most South American countries, directly competing on several routes that would be affected by the proposed arrangement.
McKinnon said the board felt the competitive issues raised by the proposal were so complex and contested that it couldn't consider approving it without an evidentiary hearing.
McKinnon noted, though, that the board would consider expeditiously other interim agreements involving Braniff's South American routes that do not raise the broad competitive and public-interest issues presented with the Pan Am deal, and that provide for a continuation of service over Braniff's South American route system.
The board said it is striking out a provision of the Braniff-Pan Am agreement that prohibits Braniff from discussing other agreements with other airlines.
Braniff Chairman Howard D. Putnam said last night that he was disappointed by the board decision and still believes the Pan Am agreement to be "valid." Because the board appeared to "invite" Braniff to seek alternate agreements, he said Braniff would consider how to begin expeditious negotiations in order to reach similar agreements with other airlines.
A Pam Am statement also expressed disappointment, adding that Pan Am intends to move forward with plans to implement alternate domestic and international service, including some expansion in Latin America. Under the Braniff agreement, it would have taken over Braniff's routes on April 25. When Pan Am reached its agreement with Braniff, it pared back earlier plans for expanding international services. Presumably, some of those might now be reinstated.
At yesterday's news conference, Daniel M. Kasper, director of the CAB's bureau of international aviation, noted that a favorable board decision on the Braniff-Pan Am deal would have represented a significant change in more than 30 years of U.S. international aviation policy seeking to have more than one U.S. airline in South America.
The board is not ruling out such a change, he said, but it concluded that a change of such magnitude "is so complex, so difficult, so far-reaching and so contested" that the board must allow the various parties to be heard.