The Airline War

LXXXII

Henry “Hap” Arnold and Carl Spaatz would become famous in World War II as prime movers behind America’s air war against Nazi Germany, but in early 1927 they did something just as important: They founded Pan American Airways. Or, rather, they filed the required paperwork with the state of Delaware to bring Pan Am into existence. It would be up to Juan Trippe to build the airline.

 

General Henry "Hap" (for "Happy") Arnold got his nickname for his generally sunny disposition. Besides co-founding Pan Am, Arnold, an advocate of air power, became a five star General of the Army in World War II and a five star General of the Air Force in 1947, the only man to hold the highest rank in two U.S. military services

General Carl "Tooey" Spaatz (the name was Dutch and pronounced "Spots") got his nickname because he looked like a Lieutenant Toohey of West Point. Aside from co-founding Pan Am, Spaatz was in charge of U.S. Strategic Bombardment during World War II, and became Chief of Staff of the Air Force in 1947

Juan was busy with the sale of Colonial Airways (the future American Airways) and was putting out a few quiet feelers about acquiring international routes when the Yale Old Boys Network began to hum. Arnold, Spaatz and a third General, John Jouett, were asking around for someone who could put an airline together. Someone, maybe Dave Ingalls, had pointed them in Juan Trippe’s direction, and when Spaatz, Arnold and Jouett called for a meeting Juan began to do his homework. What he found intrigued him. 

The three Generals were military men. They were clearly not investors, but they represented one of the biggest investors around, the United States of America.  Juan also discovered that they were assigned to Military Intelligence. So whatever this was, it was cloak-and-dagger stuff at its core. He began to put the pieces together when he looked at recent business activity involving airlines (he had finally found a practical use for what he’d learned on Wall Street). It wasn’t hard to track what was going on in the air transport business then. There were only two major airlines in the world in 1927, the German DELAG founded in 1909, which limited itself to zeppelin transport, and the Colombian-and-German Air Transport Society (SCADTA) founded in 1919. When Juan pierced SCADTA’s corporate veil he discovered that SCADTA was an all-German operation with no Colombians involved. 

SCADTA was founded by German expats living in Colombia in 1919. SCADTA's banner during the World War II years, with its red, white, and black coloring and its spread-eagle, has a distinctly Nazi feel

The flag of the National Socialist War Veterans Association (1933-1945)

An early SCADTA floatplane by Junkers, Huila-2

It made sense. Domestic German business expansion was limited by the Treaty of Versailles, and so German money was spreading itself around in places where it wasn’t subject to the Treaty. Not for the first time, Juan Trippe wondered if that peace treaty would lead to war. 
  

When the four men met in Key West, Florida, in mid-1927, the Generals got right to the point. Yes, their concern was SCADTA. SCADTA had been operating domestic airplane routes in Colombia for years, but it had suddenly begun to expand its routes to other Latin American countries. Now it was bidding on a route to the Panama Canal Zone. Then they told Juan something he didn’t know:

--- “SCADTA is heavily but secretly subsidized by the German government, and the airline is lousy with German Abwehr agents.” One of the Generals told him. 

--- “They’re using a Spanish name, but they’re entirely European. It misleads people,” another one of the Generals pointed out.

 Juan chuckled. He knew exactly how those people felt. 

--- “For years now, SCADTA has been very busy and far too undisturbed in creating an espionage network in Latin America. Now SCADTA clearly wants to extend its reach to the Canal Zone. That is flatly unacceptable,” Juan was told. He was also told that there were indications that German spies were inside Cuba and possibly even operating in South Florida, using the Key West-Havana Ferry to commute.

It was not only all a flagrant violation of the Monroe Doctrine, the Generals stressed, it was a matter of national security. 

--- “What better way to fight the enemy than by creating a rival airline to operate in SCADTA’s territory?” someone asked rhetorically. 

Juan was quietly thrilled. It looked like he was finally going to be able to fight the war in the air that he’d trained for, and if he did it with airliners and without weapons, so much the better. 

 

He asked the Generals if they were directing him to form a U.S. national carrier. No, they answered, they weren’t authorized to do that. Juan shrugged it off. He could push the point later. 

Pan American World Airways was founded in this Key West house when Juan Trippe met with three Air Corps Generals and plotted to take over the world --- at least the aviation world. It is a bar today

Then he looked at their numbers. Numbers that were all wrong. A budget that wouldn’t cover Colonial Airways operating costs for three months. He shook his head. It was obvious other people would have to come to the table. Investors. And a lot of them. With a lot of money. A lot of money. 

“We have to do this right or we don’t do it at all,” Juan warned the Generals. “If Pan American fails, it will only strengthen SCADTA. I know what I’m saying. I know airlines. I know money.  And I know it will run at the first sign of trouble.”

 

And there was trouble, right here in the papers he was looking at. “Is there any way of pushing back the bidding deadline? It’s very close. The prerequisites for bidding include having aircraft capable of fulfilling the contract. It’s about 1,500 miles from here to Panama. Needless to say, we don’t have a plane that can cover that distance because we don’t have a plane at all. Right now, we don’t have the money to get one. And even if I could raise the money today, I can’t guarantee we’d have a plane in time given this window.”

Pan Am almost lost the U.S.-to-Cuba airmail contract and its $25,000.00 deposit when it couldn't produce a plane to fly from Key West to Havana. At the literal last minute, Juan Trippe leased a Fairchild FC-2 floatplane --- La Niña --- from West Indian Aerial Express, sloppily covered over the WIAE logo and replaced it  temporarily with Pan Am's. There was so much mail  (700 pounds) aboard that the plane's flight mechanic had to take the ferry across to Havana. The flight landed an hour and two minutes after leaving Key West, and Pan Am logged its first success in the air

The first airmail delivered to Havana by Pan Am on October 19, 1927, signed by the pilot, Cy Caldwell

--- “Well, the deadlines are set by the General Accounting Office, Mr. Trippe. It would take an Act of Congress to change them.” 

 

--- “Then bidding on Panama is out. At least for this season.” 

--- “So SCADTA gets the contract?”

For the first time, but not for the last, Juan Trippe was amazed by the herdlike mind of government officialdom. “Why should they?” he said with some heat. “Look, the Canal Zone is a sensitive area, and you don’t want a foreign power mucking around down there. Washington controls the bidding process. Get SCADTA locked out on national security grounds. And while you’re at it, you’d better include all of Panama in that Directive. Panama was a province of Colombia until I was four years old. It’s only 500 miles from Bogota to the Canal.  They may want to take it back.”

--- “If we don’t bid on the Canal Zone, then where do you suggest?”

--- “Havana. It’s only 90 miles from here, it’s popular with Americans, and there’s plenty of mail and cargo to make it profitable for the investors. Plus, Havana’s got an infrastructure. SCADTA uses floatplanes on rivers. We’ll have an actual airport. We just have to buy the landing rights. I think another airline holds them, but we can acquire them. It’s not a grandiose beginning, but from small things big things one day come. Now, gentlemen, if you’ll excuse me, I have an airline to run.”    

Eventually Pan Am's Latin American routes dominated South America. It must have been a particularly great day in Juan Trippe's office when Pan Am bought out SCADTA