No Present for Lufthansa

To welcome West German Chancellor Konrad Adenauer to the U.S. a fortnight ago, the State Department and the CAB had worked up a handsome present for Germany's reborn Lufthansa airline. In air-route negotiations the U.S. gave Lufthansa some prize routes, including a polar route from Germany to San Francisco or Los Angeles, a transatlantic route to Chicago, and one to Boston, New York and Philadelphia, then down to the Caribbean and South America. In return, U.S. air lines got routes to six German cities plus the privilege of picking up passengers to Scandinavia, the Near East, Africa and other destinations. But at the last minute the present was called off. No one had bothered to check with U.S. airlines, and the airline men were up in arms over what they considered a giveaway. By putting on the pressure, the airlines got the State Department to postpone the deal. Last week they took their case to the U.S. Senate.

In closed hearings before the Interstate and Foreign Commerce Committee, four U.S. airlines protested the deal. Only T.W.A., which stands to gain a new route through Germany, was for the agreement. Angry and scornful, the other lines called the State Department negotiators "stupid" and "inept," argued that they had been maneuvered into handing the Germans the entire Western Hemisphere on a silver platter.

Hunting License. What made the airline men angry was the fact that under the deal West Germany would get more than either Britain or France now has. This was bound to lead to demands for more routes from other nations. Neither British Overseas Airways, which flies from New York to 15 Caribbean points, nor Air France, which has a Mexico City run, may fly passengers between U.S. cities and such a wide array of Latin American points as Lufthansa might be able to do under the proposed agreement. Even worse, said the airline men, the Germans were about to get South American routes that even U.S. airlines have been unable to win. For years, Braniff has been anxious to fly to Colombia, but the State Department has allowed negotiations to drag. Under the deal, said the airlines, Lufthansa would get "a hunting license" for all South America.

The new German routes, said U.S. air men, would hurt many U.S. carriers, with only a few lines reaping a real benefit in return, would eventually mean increased U.S. subsidies. Both Eastern and National Airlines carry heavy Latin American traffic between Miami and New York, traffic that Lufthansa would cut into with its through flights. Snapped National's Vice President Alexander Hardy: "If Lufthansa should get a through route, we'd be right back on subsidy." Both Pan American and Braniff, which already get a $14.5 million subsidy on their Latin American runs, would need still higher subsidies if Lufthansa won away many passengers. And with its lower costs (Lufthansa's German pilots get a maximum of $600 monthly v. a top of $1,700 for U.S. pilots), there was little doubt that the German airline would prove a rugged competitor.

Argument Won. At the hearings, the State Department's Deputy Assistant Secretary Thorsten V. Kalijarvi, who helped negotiate the original agreement, tried to justify the deal. He said that the routes were necessary to keep West Germany from restricting U.S. airlines, and to win the right for U.S. lines to carry passengers from Germany around the world. Said Kalijarvi: "The [U.S.] airlines are their own worst enemy. They can't act like this and achieve order in the international airlines business. The Germans are going to have one of the world's biggest airlines, and they will eventually be in a position to retaliate against American carriers."

By week's end, the U.S. airlines had won their argument in the Senate, retaliation or not. Said one Senator: "I've never seen the U.S. so badly out-traded as in this deal." At the close, Committee Chairman Warren Magnuson announced that the State Department and CAB had agreed to re-examine the deal. The committee was also writing a letter advising the Department to check carefully with U.S. airlines in future deals. No matter which routes Lufthansa eventually gets, it will not be a strong competitor for some time to come. Lufthansa has just started a New York-to-Germany run twice a week with a fleet of four Super Constellations, will need years to build up a big air fleet.

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