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United Gets Tentative OK To Buy Pan Am’s Pacific Routes

October 11, 1985

WASHINGTON (AP) _ United Airlines won tentative government approval Friday to buy the Pacific division of Pan American World Airways as the Transportation Department rejected arguments the sale would reduce competition.

Transportation Secretary Elizabeth 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 then could be reversed by President Reagan, although that is unlikely.

United also must still receive landing rights from various Asian countries including Japan, which may seek some concessions 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 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 and said United is prepared to begin expanded service across the Pacific by the first of the year if remaining hurdles were overcome.

″We are eager to get started,″ said Ferris in a statement. ″We are confident all necessary approval will be forth coming.″

United, the country’s largest domestic airline, and Pan Am announced 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, Mrs. 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 as had been suggested by the Justice Department to avoid a lessening of competition.

But the department ordered a regulatory hearing to determine whether United should be required to give up its current flights between Seattle and Tokyo as part of the deal.

Currently, Japan Air Lines holds the largest share of passenger business between the United States and Tokyo with about a 28 percent market share, followed by Northwest with about 25 percent and Pan Am with 14 percent.

If given final approval, the deal will mark the withdrawal of Pan Am from the Pacific where the airline made aviation history in the 1930s with its ″China Clipper.″ It inaugurated U.S. air service to such places as Japan, Singapore, New Zealand and Australia in the ensuing years.

Pan Am Chairman C. Edward Acker has said that the decision to sell the Pacific Division, which has earned a $132 million over the past two years for the financially troubled airline, was made to allow Pan Am to concentrate on its European and Latin American services.

The agreement would enable United, the country’s largest domestic airline, to expand with new or additional service to Australia, China, Hong Kong, Japan, South Korea, New Zealand, the Philippines, Singapore, Taiwan and Thailand.

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