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Tuesday, May 31, 2005

25 years later: how Washington created monopolies that are anti consumer, and undermined the South Florida economy.

(Part one)

Twenty Five years ago today, two legendary American air carriers were merged together, forming one single global carrier. New York based (but Florida born, and Miami hubbed) Pan Am and Miami based National were the largest and third largest US commercial carriers to Europe in 1980. Miami was also the home to Eastern Airlines, then the world largest commercial air carrier outside of the Soviet Union. A half-year earlier, Eastern had attempted to merge with National, but the Civil Aeronautics Board (CAB) which was known throughout the 70s for its strong opposition to Eastern's further growth rejected the merger on the grounds that it would lessen competition and create a virtual monopoly on routes between the Northeast and Florida. This was in fact not true as Delta Airlines, then a smaller carrier than Eastern, and low cost carrier Air Florida were active, though lesser players than Eastern and National in this lucrative market. In fact prior to deregulation in 1978, National had given up many of its routes from Florida to the Northeast to focus on routes within the Sunbelt and to Europe. Eastern had been routinely denied East-West routes by the C.A.B. and the acquisition of National could have helped with that. Thus, the competition between Eastern and National was already limited and in very few markets would the combined airline have had anything close to approaching a monopoly Air Florida post deregulation had grown to be a major factor on Florida-NE routes. Pan Am, pre-deregulation was prohibited from flying domestically. Pan Am decided that they needed to acquire a major domestic airline, and when they offered to buy National, the CAB approved the merger and allowed the poorly run and inefficient Pan Am to gobble up one of the most successful domestic carriers. It was an airline marriage that would lead to a collapse of South Florida's economy ten years later and the destruction ultimately to three legendary American carriers. South Florida to this date has yet to attract a major airline to base management and/or maintance facilities in the region.

The merged airline in fact did more to lessen competition in important arenas and to increase un-needed flights in others. The United Kingdom and United States in 1977 negotiated an extremely restrictive air treaty which limited access for US carriers to London's Heathrow Airport. (the treaty also limited US Airlines from serving Heathrow from only 10 gateways which included Miami but excluded Atlanta) Only 3 Us carriers, TWA, Pan Am and National were allowed to fly to Heathrow. When National was merged into Pan Am, Eastern attempted to fly the abandoned National routing from Miami to Heathrow, but was rejected by both the CAB and UK authorities. Thus, from 1980 until the present day only two US carriers have been permited to serve Heathrow Airport. Secondly, rather than permitting a major domestic carrier like Eastern to enter the European market and thus marry a legitimate feeder system to international traffic, the merged Pan Am-National still flew to fewer cities in the United States than the airline did abroad. Most importantly, Pan Am was an ineptly run airline that was in business mostly due to subsidies from the US Government to fly to certain nations as a cold war propaganda tool. Pan Am and National's corportate cultures and fleet types clashed and the merger was destined for failure.

In the next blog on this subject, tomorrow I will discuss the effect this merger had directly on the long term health of the South Florida economy.

1 comment:

Mark said...

I disagree totally. Eastern was being held hostage by its unions even in 1979 and a merger with a low cost airline like National would have been a disaster. Moreover, today American flies to more destinations and offers more daily flights from Miami than Pan Am or Eastern ever did. I know where you are going with the second half of this article, that American has a monopoly over Miami, something you feel Eastern was blocked from having. Times are different now, and Miami isn't quite the key market it was then. In 1980 all flights from the US to Latin America went from either New York or Miami. Now, Chicago, Atlanta, Denver, Dallas, Houston, Orlando, Charlotte, Washington even fort Lauderdale handle flights to Latin America. Also, Eastern was allowed to purchase Braniff's Miami-South America flights in 1982 over Pan Am's loud objections, and thus PA and EA competeted head to head on Miami-south America routes from 1982 thru 1990. Pan Am was not allowed to have a monopoly on Latin traffic from MIA, just as EA was not allowed to have a monopoly on Domestic traffic.

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I am the host of the Major League Soccer Talk and EPL Talk Podcasts and am frequent guest on other (world) football shows. I am also the publisher of various other websites including this one. I work in public/government relations in addition to my soccer work and have a keen interest in history, politics, aviation, travel,and the world around us.

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