Blood Feud

CCLXVII

Although Juan Trippe had temporarily stymied Joe Kennedy in his role as head of the U.S. Maritime Commission, Kennedy was never one to take a cocked snook lightly, and he set about undercutting Trippe’s eroding authority in the Pan Am boardroom with a vengeance.

After Trippe had returned from Hyannisport with the tale of his awful meeting with Kennedy, the Board of Directors finally authorized his attempt to purchase American Export Airlines. Pan Am stock was offered for AEA’s assets, including the three big VS-44s. The heads of AEA agreed to the purchase, but then Kennedy’s C.A.A. stepped in to disallow the merger on the basis of dusty antitrust regulations. To back up its argument against the merger the C.A.A. leaked a “confidential” memorandum on Pan Am’s business practices. It was damaging, particularly since it seemed so evenhanded. In truth, it had been written by Grover Loening at Joseph Kennedy’s request, and was pointedly designed to discredit Pan American by damning its success with faint praise:

Pan Am’s international monopoly, so went the memo, was based on Trippe’s unquestioned talent in “ably and consistently present[ing] such a complicated and delicate foreign diplomatic situation . . . [that] the State Department . . . welcome[s] the simplicity of having only one company [ ] to deal with. [C]ompetition of any kind (the memo asserted) [will] ruin these . . . relations [and] Mr. Trippe successfully ma[kes] it appear that only he [can] handle such delicate matters. To . . . foreigners Pan American has represented that they [a]re the only authorized foreign airline in this country . . . Pan American gets all the ballyhoo, and has ably made use of it,” the memo summed up. “A great talking point for further monopoly.” But, it concluded, “The American public doesn't want monopolies. Let it give Trippe and his wonderful airline the highest praise but not prohibit other Americans from having a chance to show what they can do.”

At the same time unpleasant rumors began to sweep the markets about Pan Am’s lack of liquidity, which had been a closely held secret until then. Trippe was in a fury. He knew, as did the rest of his unhappy Board of Directors that the leaks had to have come through Grover Loening or one or more of the other men who’d walked out. 

Soon it became difficult for Pan Am to arrange even a short-term bridge loan at anything less than triple-digit interest. Larger loans for capital improvements just stopped existing. 

Juan Trippe’s chickens were coming home to roost. His years of secret dealings, his habitual silence, his convoluted fiscal arrangements, and the bizarre table of organization he’d designed for the airline began to weigh heavily against him. As pressure for accountability rose against the airline from outside, the inside pressure on Trippe kept pace. And this was where Juan Trippe’s lack of bonhomie began to tell, for he had few real allies and even fewer friends on the Board of Directors. The company had started out with Trippe’s own Country Club set in the boardroom, old acquaintances mostly, who had given the airline cash infusions in its early days. Of that group, of men with names like Rockefeller, only Sonny Vanderbilt, his old college chum, was left.  

Once Pan Am had gotten established, he had brought on industry titans like Donald Douglas and Grover Loening and Sherman Fairchild. He had asked railroad tycoons and shipping magnates, and investment bankers to sit on his Board, and their names alone had kept the regulators at bay and the banks lending freely. For Trippe, it was all good. He took notes during board meetings and then tossed them away at meeting’s end. Nobody seemed to mind as long as the airline was thriving. 

By the close of the 1930s, the era of the Great Depression, Pan Am was the largest and most prestigious airline in the world, with 54,000 miles of routes, 126 aircraft, 145 ground stations, and more than 5,000 full-time employees. It served landing sites in 47 separate countries. It was, in a phrase, world-conquering. And it was also, as they had recently found out, broke.

Of the Pan Am Board of Directors in 1939, none of them (save Whitney) had any personal loyalty to Trippe, and when the scales fell from their eyes they were collectively furious. They had been stunned at the Gordian knot that Trippe had made of the corporation’s inner workings and were still struggling to untie it when Kennedy declared his covert war on Pan Am. Although Juan had won the first skirmishes in that war, Joe Kennedy had more power --- and he was meaner. Again, the Board demanded explanations from Juan. And again, Juan pleaded ignorance or engaged in doubletalk, or simply stayed silent. Someone nicknamed him “The Mummy,” and the name stuck. 

About the only thing everyone was sure of was that Trippe wasn’t bilking the airline, and that was largely because he saw it as his own creation. Forensic accountants wanted tens of thousands of dollars to delve into the company’s fiscal records. They were paid and everyone came away more confused. Trippe had made documents disappear by the boxcar load during the Black Committee hearings, and they had never reappeared. It seemed the only thing the Board could do to restore investors’ faith in Pan Am was to offer up a sacrifice.  

Joe Kennedy got what he really had wanted all along. On March 14, 1939, Juan Trippe was dismissed as Chairman of the Board of Pan American Airways.