Business: Too Much Competition

Pan American World Airways last week discharged some 5% of its 5,400 Latin American Division employees. Chief reason: "A runaway competitive situation in Latin America." Another carrier operating in Latin America, Panagra. last month asked the U.S. for a yearly $6,800,000 subsidy,* citing the drop in passenger loads (from 60% to 53%). Both Pan Am and Panagra blamed the fall in revenue on "the entry of a large number of foreign carriers into the area; the cut-rate fare policies instituted by many of these carriers."

Almost every Latin American country boasts its own airline, and some have two or three. Most of the carriers are not members—as are Pan Am and Panagra—of the International Air Transport Association, which taboos price warfare. The local airlines set fares as they please, often undercut Pan Am or Panagra by close to half. Samples: Guatemala's Aviateca charges $99 for a round trip between Guatemala City and Miami; Pan Am gets $147.60. I.A.T.A. fare for a Lima-Miami round trip is $473.40; Aerovias Panama Airways asks only $260. Aerolineas Peruanas sells a Santiago-Miami two-way ticket for $276.50; Pan Am and Panagra are required to charge $678. To top it all off, U.S. airlines are limited by local regulations as to the number of seats that they can sell. Brazil restricts Pan Am to 430 seats a week (a figure set years ago) while major Brazilian airlines, Varig and Real, run without quotas. Some ten years ago Pan Am and Panagra were two out of nine companies servicing Latin America; today the total is 60.