Pan Am

Formation

Pan American Airways, Incorporated (PAA) was founded as a shell company on March 14, 1927, by United States Army Air Corps officers Henry "Hap" Arnold, Carl Spaatz, and John Jouett out of concern for the growing influence of the German-owned Colombian air carrier SCADTA, in Central America. Operating in Colombia since 1920, SCADTA lobbied hard for landing rights in the Panama Canal Zone, ostensibly to survey air routes for a connection to the United States, which the Air Corps viewed as a precursor to a possible German aerial threat to the canal. In the spring of 1927, the United States Post Office requested bids on a contract to deliver mail from Key West, Florida, to Havana, Cuba, before October 19, 1927. Arnold and Spaatz drew up the prospectus for Pan American after they learned that SCADTA hired a company in Delaware to obtain airmail contracts from the US government.

Also competing for the contract, Juan Trippe formed the Aviation Corporation of the Americas (ACA) on June 2, 1927, with $250,000 (equivalent to $3.62 million in 2024) in startup capital and the backing of powerful and politically connected financiers, including Cornelius Vanderbilt Whitney and W. Averell Harriman. Their operation had the all-important landing rights for Havana, having acquired American International Airways, a small airline established in 1926 by John K. Montgomery and Richard B. Bevier as a seaplane service from Key West to Havana. A third company, Atlantic, Gulf, and Caribbean Airways, was established on October 11, 1927, by New York City investment banker Richard Hoyt to bid for the contract.

The Postal Service awarded Pan American Airways the US mail delivery contract to Cuba, at the end of the bidding process, but Pan American lacked aircraft and landing rights in Cuba. Just days before the October 19 deadline, the three companies decided to form a partnership. ACA chartered a Fairchild FC-2 floatplane from a small Dominican Republic carrier, West Indian Aerial Express, allowing Pan Am to operate the first flight to Havana on October 19, 1927. The three companies merged on June 23, 1928. Richard Hoyt was named president of the new Aviation Corporation of the Americas, but Trippe and his partners held 40% of the equity, and Whitney was made president. Trippe became operational head of Pan American Airways, the new company's principal operating subsidiary.

The US government approved the original Pan Am's mail delivery contract with little objection, out of fears that SCADTA would have no competition in bidding for routes between Latin America and the United States. The government further helped Pan Am by insulating it from its US competitors, seeing the airline as the "chosen instrument" for US-based international air routes. The airline expanded internationally, benefiting from a virtual monopoly on foreign routes.

Trippe and his associates planned to extend Pan Am's network through all of Central and South America. During the late 1920s and early 1930s, Pan Am purchased a number of ailing or defunct airlines in Central and South America and negotiated with postal officials to win most of the government's airmail contracts for the region. In September 1929 Trippe toured Latin America with Charles Lindbergh to negotiate landing rights in a number of countries, including Barranquilla on SCADTA's home turf of Colombia, as well as Maracaibo and Caracas in Venezuela. By the end of the year, Pan Am offered flights along the west coast of South America to Peru. Following government favors for the denial of mail contracts to their competition, a forced merger was created with New York, Rio, and Buenos Aires Line, giving a seaplane route along the east coast of South America to Buenos Aires, Argentina, and westbound to Santiago, Chile. Its Brazilian subsidiary, NYRBA do Brasil, was later renamed Panair do Brasil. Pan Am also partnered with the Grace Shipping Company in 1929 to form Pan American-Grace Airways, better known as Panagra, to gain a foothold in destinations in South America. In the same year, Pan Am acquired a controlling stake in Mexicana de Aviación and took over Mexicana's Ford Trimotor route between Brownsville, Texas, and Mexico City, extending this service to the Yucatan Peninsula to connect with Pan Am's Caribbean route network.

Pan Am's holding company, the Aviation Corporation of the Americas, was one of the most sought-after publicly listed shares on the New York Curb Exchange in 1929, and flurries of speculation surrounded each of its new route awards. In April 1929 Trippe and his associates reached an agreement with United Aircraft and Transport Corporation (UATC) to segregate Pan Am operations to the south of the Mexico–United States border, in exchange for UATC taking a large shareholder stake (UATC was the parent company of what are now Boeing, Pratt & Whitney, and United Airlines). The Aviation Corporation of the Americas changed its name to Pan American Airways Corporation in 1931.

Clipper era

Pan Am started its South American routes with Consolidated Commodores and Sikorsky S-38 flying boats. The S-40, larger than the eight-passenger S-38, began flying for Pan Am in 1931.