Airplanes in the Wrangells
  "Mergers"

  By Kenny Smith

      Photo courtesy Ken Smith
Cordova Airlines 55 passenger super C-46. March 1967
  By 1967 there were nine Civil Aeronautics Board (CAB) certificated interstate air carriers in Alaska; these were classed as “Alaska Service” carriers. In the rest of the United States there were eleven “Domestic Trunk” carriers and twelve “Local Service” carriers. In addition there were two Hawaiian carriers and the International carrier “Pan American.”
  Today this classification system for air carriers no longer exists nor does the CAB nor do most of these carriers. This was primarily due to the Airline Deregulation Act of 1978. Large Trunk and International carriers such as Braniff, Eastern, National, Northeast, Western, Pan American and now TWA have disappeared. All the Local Service carriers, such as Allegheny, Bonanza, Central, Frontier, North Central, Southern, Mohawk, Ozark, Piedmont, TransTexas, and others are also gone. Some of the Local Service carriers combined to form the current US Air which itself may now be merging.  
  In 1967 the Alaska interstate carriers were: Alaska, Alaska Coastal Ellis, Cordova, Northern Consolidated, Reeve Aleutian, and Wien Alaska. Two smaller Alaska carriers also held CAB authority but were relegated to operate aircraft with gross weights of 12,500 pounds or less, these were: Kodiak Airways and Western Alaska Airlines. Pacific Northern Airlines (PNA), the largest of the Alaska carriers, had just been absorbed into Western Airlines and Alaska Coastal Airlines had acquired Ellis Airlines in 1965.
  With the exception of Reeve and PNA all the Alaska carriers were recipients of federal subsidy. The CAB’s 406 Subsidy Program had been in existence since 1938 when Congress stabilized the US air transport system by enacting the Civil Aeronautics Act.  All the US Local Service Carriers also received this subsidy as well as one Domestic Trunk, Northeast. This subsidy program had been politically unpopular for some time. By 1967 the handwriting was on the wall, “get off subsidy or close up shop.”
  This article is about airplanes in the Wrangell Mountains. As I discussed in the previous series, Cordova Air Service/Airlines was the first organized flying operation in the Wrangells, if we consider Harold Gillam to be the founding father of that company. Therefore, it just so happens that Cordova Airlines was the catalyst that led to a national parade of subsidized carrier mergers that culminated in economic deregulation of all airlines in 1978. This story concerns those events and as Vice President of Cordova Airlines, I was there to witness it.
   In February 1967 Northern Consolidated Airline’s (NCA) Chief Financial Officer, Stuart Fitzugh (Fitz) and long time friend of Merle K. “Mudhole” Smith, paid him a visit. NCA was unquestionably financially strongest of the subsidized Alaska carriers. Fitz said his boss and CEO of NCA, Ray Peterson, was more frustrated than he had ever seen him. Like Mudhole, Peterson was an early Alaska bush pilot and the two were long time friends. Peterson was also an excellent businessperson.  In my opinion he was the shrewdest and perhaps smartest of all the Alaska carrier CEOs. Fitz explained that Ray’s anxiety came from his belief that the infrastructure of Alaska aviation was about to drastically change and Ray did not want NCA to be secluded. He said Ray had considered all possible options and earnestly wanted to explore merger with Cordova Airlines (COA).
  Business the winter of 1966/67 was slower than usual for carriers in Alaska and that made it even more difficult to scratch up payroll funds. On top of that, Mudhole had, for some time, shared Ray’s uneasiness. It was definitely time to talk. In order to prevent rumor from circulating among the employee groups it was decided to hold discussions in Washington D.C. where both carriers had legal council and CAB specialists.
  Within a few days Mudhole and I met Fitz in Washington. Strangely, Ray had suddenly come up with a reason to temporarily stay behind. Fitz said Ray was obligated to show a visiting politician around and would join us in a few days. Along with our legal councils we spent the better part of a week listening to NCA rhetoric involving virtually everything but merger.

      Photo courtesy Ken Smith
First landing by large turbojet transport at Cordova. March 1967.
  Finally Ray arrived. Ray also put on a good show, expounding upon NCA’s corporate history for hours but never once did we get down to considering consolidation. It was obvious that both Ray and Fitz lacked enthusiasm for the merger that Fitz had seemingly promoted just days before. They had suddenly gotten cold feet. After another day, the four of us had a final lunch together after which Ray planned to catch a flight to Colorado in order to visit his son in college. The lunch was like a wake. It appeared to me that Ray and Fitz might wanted to sweat COA a little longer in hopes the financial stress might make negotiations a little more favorable for NCA.
  Mudhole was not a happy camper. We went back to our hotel and discussed COA’s options. It just so happened that the Chief Executive Officer (CEO) of Alaska Airlines (ASA) had a residence in Washington D.C. and he was home at the time.
  His name was Charles F. Willis Jr.; Charlie was married to Elizabeth Firestone, (an heir to the famous Firestone Tire Company fortune) and he had quite a reputation. He was a World War ll hero, a navy pilot who had earned, among his many attributes, three separate Distinguished Flying Crosses in addition to the purple heart he received after being wounded during the Pearl Harbor attack. He once served on President Eisenhower’s White House staff of aviation advisors. He ran his airline like he fought the war, taking such extreme risks that he was continually driving company directors and stockholders nuts.
  Willis had suggested merger to Mudhole on a number of occasions. Alaska Airlines desperately wanted to gain a foothold in the southeast Alaska market and a jet airport at Sitka was just about to be completed.  Alaska Coastal’s CAB route authority confined it exclusively to southeast. PNA, which was just completing a merger with Western Airlines, had the only authority between southeast and Seattle and they shared authority with COA between Juneau and Anchorage. Willis believed that an ASA/COA merger would give the CAB grounds to grant ASA authority from southeast on into Seattle (ASA already had AnchorageSeattle authority). But Mudhole had been afraid of Willis’s eccentricities. Besides, they didn’t call him “Whiskey” Willis without reason.
  As we sat in the hotel room discussing COA’s plight, Mudhole suddenly reached for the phone and called Willis at home. Willis was ecstatic. In those days Willis had ASA ticket offices everywhere, he even had them in Tokyo and Paris. Of course he had one in Washington D.C., which was located up on Connecticut Avenue. Willis wanted us to meet him there in thirty minutes. We did. Within fortyfive minutes we had a deal, much better than what Mudhole had ever dreamed he would get out of a NCA/COA merger. Mudhole would own 14% of the merged carrier. That night Mudhole did not suffer from insomnia.
  Willis wanted to meet with the CAB the next morning so that a press release could be issued as soon as possible. It seemed like every member of the CAB was at the meeting. They were extremely enthusiastic. Normally a stolid bunch, this time they were all but slapping us on the back. This was the first break they had after many years of trying to persuade the subsidized carriers to consolidate. Mudhole made a speech in which he suggested to the CAB that they not screw the merger up this time. Nobody including Willis knew what he was talking about. Remember, in 1942, when Mudhole was off working on the war effort, the stockholders of Cordova Air Service had agreed to merge with Alaska Star Airline. The CAB had turned that one down but was so slow in doing it both companies pretty much went broke.

      Photo courtesy Ken Smith
First landing by large turbojet transport at Yakutat. March 1967.
  After the session with the CAB I was sent to Seattle to meet with other ASA executives. After that I was to head for Anchorage with a nice fat ASA check that was certainly going to help with future payroll problems. In Seattle I was greeted by a headline and story in the local newspaper expounding on the big merger between Alaskan air carriers.  That evening, while in my Seattle hotel room, Mudhole called. He said Peterson had just called from Colorado and doubled the ASA offer. Mudhole had to tell him “he was a day late and a dollar short.”
  Within two weeks Willis had organized a special flight using one of ASA’s brand new Boeing 727s (complete with plush “Gay Nineties” decor and Robert Service rhyme flight announcements) so that a bunch of us from COA and ASA could travel down the coast and make the first ever large turbo jet transport landings at Cordova and Yakutat. At the time, the runway in Cordova was much shorter than it is today. A local FAA employee was said to have lost a wager that day, in which he bet that no jet would ever land in Cordova.
  After Yakutat we stopped briefly at Juneau en route to Seattle. In Juneau we picked up Alaska Coastal Ellis’s Chief Financial Officer and Vice President, O.F. “Ben” Benecke.  On the way into Seattle, Willis and I, while sipping liberally from Whiskey’s store of fine whiskey, worked on Ben in an attempt to convince him that Alaska Coastal’s best interest would be served by merging with COA and ASA and not NCA or Wien Alaska.  Even through my boozy haze I could see in Ben’s prudent eyes that he harbored the same concerns about Willis that Mudhole had.
  Nevertheless, three months later, Alaska Coastal decided to join us in our merger with ASA. The marriage turned out to be a good one for all. A few years later the CAB removed Western Airlines from southeast Alaska giving ASA exclusive authority there, a move that undoubtedly saved ASA from aviation’s economic hard times in the 1970s. Alaska then went on to become the large and financially successful carrier it is today.
  Willis didn’t survive past 1972, as he was fired during a nasty board of director’s coup orchestrated in part by O.F. Benecke, who then became ASA’s CEO. Even though Willis often played fast and loose with the airline, even bordering it on bankruptcy, he contributed much to the carrier and was instrumental in its positive evolution over the long haul. Although Willis sometimes gave him fits, Mudhole remained loyal to Willis until the end. Mudhole was an ASA director and said that he always believed Willis to be a man true to his word except that Willis frequently over committed to the point it was simply financially impossible to keep all his promises.
NCA ended up merging with Wien Alaska Airlines, NCA being the surviving corporation and the merged airline was named Wien Consolidated Airline. When Ray ran the merged carrier it enjoyed a stretch of profitable years, but it ended up bankrupt. That occurred after Ray had retired and sold out. The two CAB carriers which operated only small aircraft, Kodiak and Western Alaska, also merged, but they too ended up selling their assets and getting out of business. Recently, Reeve Aleutian Airways announced that they were closing down all scheduled passenger and freight operations and terminating most of their work force. So, of all these early Alaska carriers, only ASA remains solvent today, therefore we can say, Harold Gillam’s legacy still continues.