Memorandum by the Director of the Office of Transport and Communication ( Norton ) to the Assistant Secretary of State for Economic Affairs ( Clayton )
Mr. Landis reached me on the telephone when I was in a meeting at the Civil Aeronautics Board at 5 o’clock and said that the agreement was ready for signature, that it represented no departure from [Page 480] the Bermuda principles and that the only remaining unsettled point was the matter of Pan American routes. He said that Mr. Pawley was simultaneously talking on the telephone with Mr. Clayton and that both of them urged us to authorize them to sign the agreement leaving out Pan American’s historic east coast route. This would leave Pan American with the so-called “cut-off” route from Belém to Rio, and would also allow them to serve Belém and Natal on the route to South Africa. At this point I ascertained from the Civil Aeronautics Board that they had that morning been in conversation with Mr. Landis on this matter and had given his proposal their approval. I suggested to Mr. Landis that we ought to clear this with the Army. He said something about being in touch with the US military attaché but the connection was poor and I did not understand him. I said that I also felt we should, in addition to clearing with the military, consult Juan Trippe.89 Landis again urged speedy action and authorization to sign at once. After talking to Mr. Clayton who had been similarly urged by Mr. Pawley, I got in touch with General Lauris Norstad90 who promised to give us the Army’s answer Thursday morning. I asked him to telephone me in Mr. Clayton’s office at 8:45 Thursday morning.
General Norstad telephoned and said that the Army shared with the State Department and the Civil Aeronautics Board the desire for the immediate conclusion of an air transport agreement with Brazil that would not do violence to the Bermuda principles. He made it clear that he was fully aware of the significance of such an agreement in view of (a) the Mexican situation; (b) the presence of an Argentine delegation in Washington now attempting to negotiate an air transport agreement;91 (c) the recent action of Chile in turning down the Argentines on their so-called ABC proposal; and, (d) the imminent departure of Messrs. Landis, Burden, Norton and Brownell to England to confront the British with their deviations from the Bermuda principles. He said that although the Army felt that, from the military viewpoint, it was desirable that Pan American should continue to fly the coastal route, the importance of signing a satisfactory agreement at this time was greater. The Army therefore requested that one final attempt at the highest level be made to retain this route but that if this attempt was unsuccessful they urged that we sign the agreement. Mr. Clayton said that this proposal conformed with our thinking and that we would so do. Mr. Clayton then put in a telephone call [Page 481] for Mr. Trippe and was unsuccessful in reaching him although he made repeated attempts during the day. At 5:30 he turned over to me the matter of trying to reach Mr. Trippe and telephoned Mr. Landis informing him of the Army’s attitude as well as confirming the clearances by the Civil Aeronautics Board and asking that Ambassador Pawley see President Dutra and urge on him the desirability of allowing Pan American to continue the coastal route. Mr. Clayton then confirmed this conversation in a cable in which he cited (a) the heavy expenditures made by the Army on that route, (b) Pan American’s investment, and (c) the fact that this was Pan American’s historic route which the company had pioneered. I continued efforts to reach Mr. Trippe and traced him to his home in East Hampton but was unable to get in touch with him throughout the evening. Mr. James H. Smith, Vice President of Pan American, and General George A. Brownell dined with me that night and the General and I had a frank talk with Mr. Smith on the attitude of Mr. Trippe toward negotiations of this sort. It is believed that Mr. Smith contacted Mr. Trippe late that night and asked him to call Mr. Clayton in his office the first thing next morning.
Mr. Trippe telephoned Mr. Clayton who was unable to accept the call and referred Mr. Trippe to me. I informed him of the alternatives presented and of the clearances described above. Mr. Trippe urged that we ask Mr. Landis to press for retention of the coastal route and the cut-off route, offering to the Brazilians what Mr. Trippe described as Pan American’s contribution to the solution of this problem; namely, that Pan American give up in favor of Braniff the Rio-Asuncion route, thereby enabling the newly certificated American flag carrier to reach Rio without increasing United States competition against the Brazilian lines. I promised to report this immediately to Mr. Clayton and Mr. Trippe asked me to also tell Mr. Clayton that Pan American wanted to be a “good soldier” and would, of course, go along with whatever Messrs. Landis and Clayton felt was in the best interests of the United States. However, he pointed out the serious blow that loss of the coastal route would be to Pan American, particularly as the company is now in the midst of financing its new equipment in a difficult market situation. I asked him what the Pan American investment in the coast route amounted to and he said approximately $200,000. He said that the company had invested approximately twice that amount in the cut-off route. He also pointed out the complicated relationship of Pan American to the development by the United States of the airfields along this route. He said loss of the coastal route would jeopardize our position with [Page 482] the Brazilians both under the ADP contracts and under the so-called “Decree Law”. He admitted that the traffic volume on this route was relatively unimportant from an income point of view and that the bulk of such traffic would inevitably be carried by Brazilian airlines since it is mostly cabotage.
I asked Mr. Trippe whether the Manaos–Rio route would be acceptable to Pan American in lieu of the cut-off route, provided Pan American could also keep the coastal route. He said that such an alternative would be entirely satisfactory to the company and indeed advantageous, provided that the company were given a year in which to repair and construct the necessary facilities over the Manaos route. He said that the Manaos–Rio route is the shortest of all and that with the new four-engine equipment it would be more desirable than the cut-off route.
I reported this conversation to Mr. Clayton who authorized me to telephone Mr. Landis and to inform him of the alternatives acceptable to Mr. Trippe. Mr. Clayton asked me to tell Mr. Landis that, if he was unable to obtain Brazilian acceptance of these alternatives, he and Mr. Pawley should feel free to go ahead and sign, using their best judgment. I readied Mr. Landis at 3 o’clock and gave him the above information. He said that Mr. Pawley at that moment was seeing President Dutra and urging upon him the contents of Mr. Clayton’s cable. Mr. Landis understood the alternative proposed by Mr. Trippe but said that the Rio–Asunción route was “politically impossible” in a bilateral agreement. The connection was poor and I could not ascertain whether he was referring to Pan American’s present Rio–Asunción route or to the newly certificated route for Braniff. It was clear, however, that he understood Mr. Trippe’s proposal regarding that route as well as my suggestion about Manaos–Rio.
In this connection he said that we could have the Manaos–Rio route any time we wanted it, whether or not it was in the trade as finally worked out under this agreement. He attributed this to the fact that considerable development and expense would be required to get this route going and that the Brazilians would welcome the assistance of Pan American or any other American flag carrier in the development of this route.
I made clear to him that he and Ambassador Pawley were authorized to sign after they had satisfied themselves that all of the above alternatives had been thoroughly canvassed with the Brazilians and after they had done their very best to retain the coastal route for Pan American.