Aviation: The Merger Cotillion

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As soon as the nation's second and third domestic airlines—American and Eastern—declared their agreement to merge, opposition revved up on all sides last week. Other airlines, fearing sharper competition, protested. Democratic Senator Estes Kefauver said the merger plan has "the most serious of monopolistic implications"; Representative Emanuel Celler said he would investigate. Mike Quill's Transport Workers Union worried about layoffs among the 9,000 American maintenance men that it represents, threatened to strike after Feb. 1 unless the two lines pledged that there would be no job cuts. Bobby Kennedy was yet to be heard from.

Bigness was the basic issue. Merger would produce the world's largest airline, the fourth largest private transportation system (in annual revenues, it would rank just after the Pennsylvania and New York Central railroads—which recently announced their own merger intention—and the Southern Pacific). The combined airline route would span 35,000 miles from Montreal to Mexico City, San Francisco to San Juan. Its 400 planes and 41,000 employees would serve 120 cities, handle some 35% of the nation's air traffic, ring up sales of $700 million (1961 total) v. $500 million for its nearest competitor, United Air Lines.

The Driving Force. If this marriage comes off (TIME, Jan. 26), American will play the husband. American will give its name to the combined company, and American's bluff president, C. R. Smith, will become chairman and boss. Eastern's chief, Malcolm A. Maclntyre, 54, a former Under Secretary of the Air Force (1957-58), will become president and next in command to "C.R.," who is a vigorous 62. Eastern's pioneering chairman, Eddie Rickenbacker, 71, who lately has been more active on the banquet circuit than in the board room, will probably fold his wings. And somewhere, keeping a weather eye on the finances, will be Laurance Rockefeller, 51, who, as Eastern's biggest shareholder (with 94,000 of the 3,235,000 shares), was the driving force behind the merger. Rockefeller will also be the biggest shareholder in the merged company.

For each Eastern share, now selling at $25.75, American will swap stock and warrants worth $33 at last week's close. American will wind up with 67% of the new company's shares, get 16 seats on the 24-man board.

More Matchmaking. With Eastern in the red by $5,400,000 last year, President "Mac" Maclntyre says that he has contemplated merger with almost every other major airline (and airmen buzz that he kept several of them on tippytoes to wangle sweeter terms out of American). American's C. R. Smith, flourishing a $6,800,000 profit and ardently disclaiming that he is fascinated by bigness alone, says the merger makes economic sense for both sides. Both presidents deny that the new line would be monopolistic, since it would still face from one to seven competitors on all its major routes. They figure that the merger would save them $50 million a year, mainly by eliminating overlapping in routes, ticket counters and hangars. But instead of closing either Eastern's sprawling maintenance center at Miami or American's still bigger plant at Tulsa, they may well let each plant handle what it is best geared for.