Transportation Secretary Elizabeth Hanford Dole tentatively approved yesterday United Airlines' offer to buy Pan American World Airways' Pacific routes, airplanes and employes for $715.5 million, the biggest deal in civil aviation history.
Dole largely rejected arguments from other airlines and the Justice Department to the effect that the transaction would harm consumers by reducing the number of U.S. airlines serving the Pacific. But, Dole wrote, "based on its financial and operational strengths, the transaction may enable United to provide stronger competition than Pan Am and United now can separately."
If the tentative decision becomes final, United will have what it has coveted for so long: a major presence on the routes connecting the West Coast to the Far East, routes that Pan Am pioneered before World II and has developed into a major connecting complex at Tokyo, which United would acquire.
Since those glory days, however, Pan Am's fortunes have rarely been storied. It has not shown a profit since 1980 and was in the black only five times since 1970. By divesting itself of its Pacific Division, Pan Am gets cash and the opportunity to concentrate on the transatlantic market and its domestic routes, which are oriented to the East Coast.
United has the nation's most pervasive route structure with a strong western orientation, including major bases in Chicago, Denver, San Francisco and Seattle.
Richard J. Ferris, United's chairman, said, "We're gratified by the decision. This is a significant first step towards United's acquisition of the Pacific routes and it will lead to substantially improved service for the traveling public."
Ferris, in a May interview, said, "I guess I would be happy to be known as the 900-pound gorilla who is now going to be 1,200 pounds."
Dole proposes to let that happen, and the reaction from United's major domestic competitors was predictable.
Steven G. Rothmeier, president and chief executive officer of Northwest Orient Airlines, said, "Obviously we are extremely disappointed with the tentative decision . . . because it does not address the serious anticompetitive problems that the sale will create. Further, it ignores the recommendation of the Department of Justice which was designed to minimize the anticompetitve effects of the acquisition."
He said that Northwest will decide whether to seek "judicial review" after the final decision is issued. Northwest is the largest U.S. carrier across the Pacific and said in Transportation Department hearings that it might have to retrench or even withdraw if United gets what it wants.
Northwest said that United's powerful computer reservation system, used by thousands of travel agents to ticket passengers, and its mighty domestic network give it a considerable advantage. Dole responded that Northwest competes successfully against United and that regulations "are in place to eliminate the abuses" of computer reservation systems.
Lowell Duncan, a spokesman for American Airlines, said, "We're very disappointed. We feel if this decision is finalized it will put in doubt the new routes that were recently negotiated between Japan and the United States and will concentrate so much strength in the hands of one carrier that it is going to be very, very difficult to compete on any one route."
American, United's biggest domestic competitor, is hoping for access to the Far East through Tokyo when new U.S.-Japan routes are awarded later this year.
The biggest airline across the Pacific is neither Pan Am nor Northwest, but Japan Air Lines. It is implicit in Dole's decision that the transaction will give financially strong United the weapons to go full tilt at JAL in the world's fastest growing aviation market.
Dole's tentative decision imposed three minor conditions on the sale, but two of them are predictable and the third is considerably less than the Justice Department sought in its recommendation.
Dole said that there should be no guaranteed labor protection in the transaction, a stock Reagan administration position, and that the routes United would receive from Pan Am would be subject to challenge in five years, another stock position.
Justice suggested that anticompetitive problems of the Pan Am sale could be solved if United were required to spin off the one route it presently has to Tokyo, six days a week from Seattle and once a week from Portland, Ore. Dole said that the Transportation Department "will, in a future proceeding, determine whether another carrier can and should be authorized to replace United" on that route.
That is a far cry from a mandatory spinoff. Further, Dole said that the record "presents serious questions about the ability of any carrier, other than United or Northwest, "to meet the needs of Pacific Northwest-Japan consumers."
Eastern Air Lines, among others, has expressed interest in Seattle-Tokyo. An Eastern spokesman said that Dole's tentative action "will permit the issue to be explored thoroughly . . . and Eastern would expect to be a strong participant."
Even if United were eventually to lose its Seattle/Portland-Tokyo routes, it would still have Pan Am's Los Angeles/San Francisco-Tokyo connections.
After comments on the tentative decision are considered, a final decision will be announced by Oct. 31. It will take effect in no more than 60 days unless President Reagan disapproves, which he can do based on "foreign relations or national defense considerations," but not because of "economic or carrier selection considerations."