Pan American World Airways, Inc. v. United States

PETITIONER: Pan American World Airways, Inc.
RESPONDENT: United States
LOCATION: Bay County Circuit Court

DECIDED BY: Warren Court (1962-1965)

CITATION: 371 US 296 (1963)
ARGUED: Nov 08, 1962
DECIDED: Jan 14, 1963

Facts of the case


Media for Pan American World Airways, Inc. v. United States

Audio Transcription for Oral Argument - November 08, 1962 in Pan American World Airways, Inc. v. United States

Earl Warren:

Number 23, Pan American World Airways, Incorporated, Appellant, versus United States and Number 47, United States, Appellant, versus Pan American World Airways, Incorporated, et al.

Mr. Solicitor General.

Archibald Cox:

Mr. Chief Justice, may it please the Court.

These two appeals bring before the Court a major government antitrust case involving air transportation between continental United States, the Canal Zone, and South America.

The defendants are three.

First, Pan American Airways which is the largest international air carrier in the world, its route extend over most of the globe, but for the purposes of this case it's enough to note that Pan American is the dominant air carrier between the United States, the Caribbean, and Central and South America.

Somewhere from 66% to 85% of all passenger traffic to East and South American is carried by Pan American.

It carries 50% of all the traffic to South America either alone or with the baggage.

Pan American's view is always been, that it should be the only U.S. foreign air carrier, the chosen instrument and presumably it still adheres to that aspiration.

The second defendant, W.R. Grace and Company, is a holding company with very diversified interest, but for present purposes, it's enough to note that it owns the Grace Line, the dominant steamship company between the United States and the west coast of South America, and has a large number of agencies itself along the west coast of South America.

It carries today and has for most of the period of this suit I believe, carried simply from 81% to 94% of the steamship passenger traffic between the Eastern United States and Western South America.

And it carried more than 50% of the freight.

The third defendant is Pan American-Grace Airways, an airline whose routes as I shall show in more detail in a moment, extend from the Canal Zone along the west coast of South America, Panagra was formed by combination of Grace and Pan American, each owns 50% of the stock.

And Panagra carries 50% to 75% of the passenger traffic flying under the U.S. flag from the United States to western South America.

Potter Stewart:

I want to be sure I have the link to each share -- it's Grace Lines which owns --

Archibald Cox:

No, it's W.R. Grace and Company which owns Grace Lines.

Potter Stewart:

Grace Lines.

Archibald Cox:

These are two subsidiaries.

Potter Stewart:

I see.

It's a Grace -- W.R. Grace and Company owns 50% of Panagra and Pan Am owns --

Archibald Cox:

That's correct and Pan Am the other.

Potter Stewart:

And that Grace Line is a separate subsidiary of W.R. Grace --

Archibald Cox:

Fully owned, I believe.

The heart of the Government's case is the charge that the combination in 1928 and 1929 of the emerging dominant air carrier between the United States and South America, with the company that controlled the dominant steamship lines to the west South America, along with certain ancillary understanding.

And particularly in view of the 50th division of control which gave either the power to block acts by Panagra was in its inception and in its subsequent operation an illegal combination in restraint of trade.

Most of the facts, I'm not disputed although some of the inferences are and in stating them in somewhat more detail, I think it would be helpful if the Court had in front of it the small map that is in a folder in the back of our brief.

This shows the airline routes as they are today but it's useful to explain them as they were earlier.

In 19 -- the late 1920s and early 1930s, where the first period of rapid growth in air transportation, especially foreign air transportation and largely under subsidies from the Post Office for carrying mail.

The success of the U.S. flag carriers in south Latin America was regarded as having great diplomatic and commercial importance.

Late in 1927, Pan American began to plan the establishment of a complete system of air transportation, serving the Caribbean and Central and South America.