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The Delta–C&S Merger: A Case Study in Airline Consolidation and Federal Regulation
Published online by Cambridge University Press: 11 June 2012
Abstract
The road to merger is strewn with fortuitous events, surprises, and disappointments for most firms even under ordinary circumstances, but the airline industry following World War II faced special problems of postwar readjustment, rapid technological change, and government intervention by a Civil Aeronautics Board that was determined to shape the future of American commercial aviation. Congruence with federal regulatory policy was a key element in the success of the merger with which this essay deals.
- Type
- Research Article
- Information
- Business History Review , Volume 53 , Issue 2: Featured: Early Commercial Aviaton , Summer 1979 , pp. 161 - 179
- Copyright
- Copyright © The President and Fellows of Harvard College 1979
References
1 For these and other aspects of the history of American commercial aviation in the era prior to World War II, see particularly Smith, Henry Ladd, Airways: The History of Commercial Aviation in the United States (New York, 1942)Google Scholar, and Davies, R.E.G., Airlines of the United States Since 1914 (London, 1972), passim.Google Scholar
2 The financial plight of the airlines during the immediate postwar years forms a recurrent theme in issues of the leading industry periodical, Aviation Week (hereafter cited AW) throughout this period. For statistics on passenger miles flown by American domestic airlines from 1945 through 1950, see AW, February 26, 1951, p. 109. For other assessments of the postwar situation, see “What's Wrong With the Airlines,” Fortune August, 1946, pp. 73–74, 190–192, 195–196, 198–199, 201, and Aircraft Year Book for 1948 (Washington, D.C., 1948), passim.
3 Finletter, Thomas K.et al., Survival in the Air Age: A Report by the President's Air Policy Commission (Washington, D.C., 1948)Google Scholar, reprinted in Aircraft Year Book for 1948, p. 69; Charles Adams, “Who's to Blame in Airline Crisis,” AW, November 8, 1948, p. 45, quoting from O'Connell's speech. See also Selig Altschul, “Airline Merger Signs Increase,” AW, August 23, 1948, p. 30.
4 Memorandum in Delta Air Lines, Inc., General and Administrative Files (hereaftercited GAF), 1948–1949, folder marked “Delta-National Merger.” For information on the route structures of Delta and other American domestic airlines in the immediate postwar period, see Frederick, John M., Commercial Air Transportation (rev. ed.; Chicago, 1946), 125–172.Google Scholar
5 This much-condensed discussion is based largely on a mass of scattered documentation in Delta's corporate files for the postwar era; see particularly GAF, 1947–1950, folders marked “Confidential,” “Delta-National Merger,” “Delta Air Lines, Inc.,” “Management Corporation — Colonial & National Airlines,” and “National Airlines, Inc.” The course of the National Airlines strike and other problems plaguing that company is voluminously covered in various issues of AW in 1948 and 1949. On the final abandonment of Delta-National merger plans, see Delta Air Lines, Inc., Annual Report for 1949 (hereafter cited AR, with appropriate year), p. 7.
6 On the early history of Northeast Airlines, see particularly Mudge, Robert W., Adventures of A Yellowbird: The Biography of An Airline (Boston, 1960), 15–100.Google Scholar Information on the Delta-Northeast merger negotiations, and a copy of the merger agreement itself, can be found in GAF, 1950–1951, folders marked “Delta Air Lines,” “Merger — (Northeast-Delta Airlines),” and “Northeast Airlines, Inc.”
7 Materials pertaining to Delta's efforts to win CAB approval for a Columbia-New York route and favorable consideration for the Delta-Northeast merger are contained in GAF, 1951–1952, folder marked “L. Welch Pogue.” See also “Delta Seeks N.Y. Route Through North Carolina” and other articles, chiefly by Delta attorney D. Franklin Kell, in the company's in-house magazine Delta Digest (hereafter cited DD), June, 1950, p. 4; November, 1951, p. 4; March, 1952, p. 5; and May, 1952, p. 8, as well as Selig Altschul, “Will CAB Let Delta, NEA Merge?” AW, October 16, 1950, p. 17.
8 The course of Delta's efforts to purchase Capital's southern routes is documented in materials scattered throughout GAF, 1951–1952, folders marked “Airlines — Other,” “Capital Airlines, Inc.,” “Directors — General,” “Ernest V. Moore — Attorney,” “L. Welch Pogue,” “L. Welch Pogue, … No. 2,” “Merger — (Northeast-Delta Airlines),” “Mergers-General,” “Mergers (Proposed) DAL-Capital,” and “Northeast Airlines, Inc.”
9 On the history and development of Colonial, see Davies, Airlines of the United States Since 1914, 342–343; Frederick, Commercial Air Transportation, 140–142; and “Aviation: Colonial's Sig Janas,” Investor's Reader, July 19, 1950, pp. 16–19. Copies of CAB documents providing details of what Delta director Edward Gerry appropriately called “the Janas mess” are included in GAF, 1951–1952, folder marked “L. Welch Pogue.” On negotiations between Woolman, Gardner, and the new Colonial management, see GAF, 1951–1952, folders marked “Airlines — Other” and “Northeast Airlines, Inc.”
10 “Delta Requests CAB to Consolidate Hearing,” DD, April, 1952, p. 4; memorandum from D. Franklin Kell to C. E. Woolman, April 8, 1952, GAF, 1951–1952, folder marked “D. F. Kell, Attorney”; letters from L. Welch Pogue to C. E. Woolman, May 10 and 13, 1952, GAF, 1951–1952, folder marked “L. Welch Pogue … No. 2”; D. Franklin Kell, “Keeping Tab on CAB,” DD, June, 1952, p. 10.
11 On the momentary dream of a Delta-Northeast-Capital merger, see particularly memorandum from E. M. Johnson, Director of Economic Research, Delta Air Lines, to C. E. Woolman, May 23, 1952, with accompanying combined route map, in GAF, 1951–1952, folder marked “Mergers (Proposals) DAL-Capital.” On the subsequent fortunes of Colonial and Capital during this period, including their mergers with Eastern and United respectively, see Davies, Airlines of the United States Since 1914, 342–343, 497–500.
12 The early history of Chicago and Southern, along with the experiences of its founder, is traced in Putnam, Carleton, High Journey: A Decade in the Pilgrimage of An Air Line Pioneer (New York, 1945)Google Scholar, passim. See also Herrick, George, “Chicago & Southern History,” Air Transport, May, 1946, p. 22Google Scholar, and Erma Murray, “Chicago and Southern Air Lines, Inc., Historical Chart,” undated memorandum, copy on file at Delta Air Lines, Inc., General Offices (hereafter cited DGO), Atlanta, Georgia.
13 Details on the postwar history of Chicago and Southern are available in Annual Reports of the corporation and copies of its in-house peridical, Sky Steps, sets of both on file in DGO; and historical memoranda prepared for the authors by R. S. Maurer, dated October 15 and 22, 1975, copies in Auburn University Archives, Auburn, Alabama. Putnam's resulting work on Theodore Roosevelt was ultimately published as Theodore Roosevelt: The Formative Years, 1858–1886 (New York, 1958).
14 Interview of Carleton Putnam by the authors, January 22, 1976; testimony of Putnam before Civil Aeronautics Board in Delta-C & S Merger Case, copy in Todd Cole Papers, Delta Air Lines (hereafter referred to as TCP), folder marked “Delta-C & S Merger”; copies of correspondence and other materials in Civil Aeronautics Board, Docket No. 5546, Delta-C & S Merger Case: Joint Exhibits (hereafter referred to as Joint Exhibits), Vol. I (Washington, D.C., 1952), passim.
15 AR, 1951, pp. 10–11; Chicago and Southern Air Lines, Inc., Annual Report for the Year Ended December 31, 1951, pp. 8–9, 12–15; Joint Exhibits, Vol. I, Exhibit 4, pp. 3–9; Putnam merger testimony, loc. cit. Delta stock at this time was selling over the counter in the mid-20s; C & S stock was fluctuating between 9⅞ and 13⅜ per share. After the merger agreement was announced in 1952 Delta stock rose by the end of that year to the high 20s and C & S stock to 18½. See Barron's, December 10, 1951 and December 29, 1952.
16 Interview of Richard S. Courts by the authors, July 11, 1975; correspondence between Courts, Longmire, Putnam, and Woolman, Joint Exhibits, Vol. I. Exhibit No. 4, passim; interview of Maurer by the authors, January 19, 1978.
17 Courts interview, Putnam interview; interview of L. Welch Pogue by Newton, August 30, 1976; “Draft of Resolutions” letter of agreement submitted by Woolman to Putnam, April 24, 1952, and other materials in GAF, 1951–1952, folder marked “L. Welch Pogue … No. 2”; Minutes of the Board of Directors, Delta Air Lines (hereafter referred to as Minutes), July 8, 1952; reports to C & S stockholders, July 17 and 30, 1952, copies in GAF, 1952–1953, folder marked “Chicago and Southern Air Lines, Inc., No. I.” For the complete text of the definitive merger agreement, see Joint Exhibits, Vol. I, Exhibit No. 5a, pp. 1–44.
18 “Bureau Counsel's Proposed Statement of Issues, Request for Evidence and Stipulation,” July 9, 1952, GAF, 1951–1952, folder marked “L. Welch Pogue … No. 2”; the evidence prepared in response to these questions is contained in Joint Exhibits, Vols. I, II, and III (Washington, D.C., 1952), passim.
19 The evidence presented at these hearings is summarized in Civil Aeronautics Board, Delta-Chicago and Southern Merger Case, Docket No. 5546, Recommended Decision of William F. Cusick, Examiner, November 13, 1952 (hereafter cited as Examiner's Decision), copy in TCP, 1951–1952, folder marked “Delta-C & S, 1952,” passim; see also “Control Tower,” DD, August, 1952, p. 3; letter from Woolman to Delta stockholders, August 8, 1952, GAF, folder marked “Stockholders.”
20 News release, September 24, 1952, in TCP, 1951–1952, folder marked “Delta-C & S, 1952”; Examiner's Decision, loc. cit., passim; “Flash: Merger Approved” and D. Franklin Kell, “Keeping Tap on CAB,” DD, January, 1953, pp. 4, 8.
21 Interview of T. P. Ball, Chief Pilot of Delta Air Lines at the time of the C & S merger, by Lewis, August 28, 1975; interviews of William Spangler and S. W. Hopkins, C & S pilots at the time of the merger, by Newton, January 20 and March 28, 1976; “Statement of Pilots of Chicago and Southern Air Lines, Inc., in Opposition to Merger,” CAB Docket No. 5546, copy in TCP, 1951–1952, folder marked “Delta C & S Merger”; correspondence between Putnam and Woolman, November 19–20, 1952, GAF, 1952–1953, folder marked “Chicago & Southern Air Lines, Inc., No. I.”
22 Minutes of special stockholders meetings of April 22, 1953, copies in DGO; articles in Atlanta Constitution and Atlanta Journal on ratification of the merger, April 23, 1953; materials on final preparations for the closing of the merger in TCP, 1952–1953, folders marked “Delta-C & S Bank Account Transfer,” “DAL-C & S Distribution of Joint Agreements of Merger,” “Final Closing,” and “May 1st Board Meeting.”
23 “Airline Personnel Convert to Delta-C & S,” “‘M’ Day Brings New Name: System Converts,” and “Two Pioneer Airlines Merge,” illustrated articles in Delta-C & S Digest, May–June, 1953, pp. 4, 6–7.