United Airlines' $715 million acquisition of Pan American World Airways' Pacific routes has cleared its last major hurdle, following Transportation Secretary Elizabeth Hanford Dole's final approval of the purchase, government and industry officials said.
Dole's decision on the largest airline acquisition in history, sent to the White House for a statutory review by President Reagan, is expected to stand. Reagan has 60 days to consider Dole's ruling, which was announced yesterday. The president can veto it only for national security or foreign policy reasons, and that is not expected.
Overriding arguments by the Justice Department and United's competitor Northwest Orient Airlines that the deal would hurt competition, Dole said an expanded United would increase the strength of U.S. air carriers in the Pacific. Their share of the Pacific market has been increasingly squeezed by competition from Japan Air Lines, the largest carrier in the Pacific, and the expanding government-backed airlines of other Asian nations.
The Justice Department said United should be required to turn one of Pan Am's West Coast gateways over to another American carrier. Dole didn't agree, but she did call for further hearings to determine whether United should be allowed to keep its Seattle/Portland route to Japan.
"United is ready to begin service on the new routes as soon as possible," United Chairman Richard Ferris said yesterday. The airline had no precise estimate of how soon that would be, assuming there is no objection from the White House.
As it celebrated Dole's decision, United also announced an order of up to 116 new airliners from Boeing Co. for more than $3 billion, which would be the largest purchase in the history of the civilian aircraft industry. James J. Hartigan, United's president and chief executive officer, said the new aircraft -- six 747 jumbo jets and 110 smaller 737s -- would handle United's aircraft needs into the 1990s.
Robert Joedicke, airline industry analyst with Shearson Lehman Bros. Inc., said that only a portion of the order, worth about $750 million, appeared to be firm. "It's a very measured plan of expansion," Joedicke said.
In the first nine months of this year, Boeing earned $378 million, or $2.53 a share, on sales of $9.4 billion. Prior to the United announcement, Boeing's largest previous order came in 1980, from Delta, for about $3 billion worth of aircraft.
In its first nine months of 1985, UAL Inc., United Airlines' parent company, lost $69.4 million, or $2.52 a share, on sales of $4.5 billion, results that the company attributed to the affects of a 29-day strike by its 5,000 pilots in May and June.
Purchase of the jumbo jets is contingent upon approval of United's acquisition of Pan Am routes by Japan and the other Asian nations to which United would fly, including Hong Kong, the People's Republic of China, South Korea, the Philippines, Taiwan, Australia and New Zealand. Transportation Department officials said United would be designated by the Reagan administration as Pan Am's successor on the Pacific routes and then would seek landing rights from the foreign governments. A United spokesman said the company anticipated no major difficulties.
Joedicke noted that United will represent a stronger competitor in the Pacific than Pan Am because of United's ability to feed passengers into the new routes from its extensive service in all 50 states, Canada, Mexico and the Bahamas. United expects to initiate Pacific service from New York, Los Angeles, San Francisco, Seattle and Portland. The Pan Am acquisition will add 35 flights a day to United's current total of 1,475.
"Pan Am didn't have the convenience of a feed into the West Coast gateways," said Joedicke, referring to the long-standing regulations that restricted Pan Am's service within the United States. By realigning its schedules, United can offer that convenience, he said.
From Pan Am's standpoint, the sale strengthens its ability to upgrade and modernize its remaining service, he said. "I think it's an advantage to both."