End of a Golden Age
"THE GOLDEN Age of Flying" was the ten years following World War II. That is how those airmen who remained in aviation during that period refer to it with certain nostalgia and affection. Orvis Nelson and his Transocean team would be among those fliers who would refer to it so, even though that era was not without its bitter experiences.
Despite fourteen years of remarkable accomplishments and the phenomenal growth of Transocean Air Lines, Nelson was never able to obtain the certification, financial backing, or aircraft necessary for the airline's expansion into the jet age. Therefore, the prospects for a happy ending looked bleak to this twentieth century adventure story.
Transocean and other supplemental airlines found themselves in a Catch-22 situation in the 1950s. Without the blessing of the Civil Aeronautics Board, they lacked respectability in the eyes of the financiers, and consequently the financiers would withhold an infusion of capital. But on the other hand, the CAB would not provide that respectability unless the airlines were well financed.
One of the ironies in the story is that Transocean itself was never subsidized by the government as were some well-known and established airlines. Rather, it relied on personal and bank financing, which was often difficult to obtain. Support for Transocean came from many quarters in the private sector, but all of it fell on deaf ears at the CAB. When Transocean requested the right to operate across the Pacific as a certificated airline, the Honorable John J. Allen, Jr. of California twice pleaded Transocean's case before the 83rd Congress of the United States, Second Session. On May 19, 1954, Allen included in his remarks to the Congress a review of the book, Transocean, the Story of an Unusual Airline, written by Richard Thruelsen, a senior editor of the Saturday Evening Post. The book review was written by Professor Bradley Jones, head of the Department of Aeronautics of the University of Cincinnati, and published in U.S. Air Services, April 1954:
"This country needs the know-how, the spirit, the courage, the ingenuity, and the resourcefulness of men like Orvis Nelson and his associates in Transocean. On March 19, 1954, Assistant Chief Examiner Wrenn, of the Civil Aeronautics Board, recommended that Transocean receive a certificate to transport persons and property between the United States and points in the Pacific Ocean areas. If this recommendation is favorably acted upon, this great non-subsidized airline will have a further opportunity to contribute to the national defense and to the advancement of our Nation's air transport industry."
On July 22, 1954, Representative Allen introduced into the Congressional Record an editorial
"...the line (Transocean) is now asking for the right to operate across the Pacific as a certificated airline. That operation would be in competition with the two airlines now certified for regular operations, but there are several distinctive circumstances in Transocean's planned operations that make it an aerial trailblazer in a still different direction.
"Transocean, in asking for the right to compete in the certificated Pacific route, from Oakland to Honolulu, Guam, Wake, Manila, and Hong Kong, has pledged not to seek one cent from the United States Government for mail pay or subsidy. That is in contrast to the minimum of $6 million a year asked by one of the two competitors in its application for a renewal.
"Transocean is not opposing renewal of the application for the other line. It is asking only that the recommendation made by the examiner for the Civil Aeronautics Bureau that it be certificated for irregular service, without subsidy, but depending upon its own skill, knowledge, ability, and administrative organization to pay the way, and be given final approval by the CAB. It is an application that should be granted, without delay and without quibble."
Western Aviation in its March 1955 issue, made the following comments:
"Transocean Air Lines announced full scale continuation of all of its air and ground operations in California and throughout the world under its restricted authority as a Large Irregular Carrier and the launching of an appeal to the White House and Congress for a reversal of orders denying its certification to operate non-subsidized scheduled passenger and freight service between Oakland, Burbank, Hawaii, and the Orient.
"These steps were taken in the wake of the issuance of a White House directive requesting the Civil Aeronautics Board to deny the war and airline veterans' – founded California airline's application for certification in the West Coast – Hawaii and transpacific certificate Renewal cases."
Commenting on the unprecedented White House action by President Eisenhower in the cases, Transocean's executive vice president Sam Wilson said: "If the announced intended action is carried through, the Civil Aeronautics Board will have preserved its dubious record of never having issued a new major route certificate in all its sixteen year history and also will have protected from competition the subsidized carriers which were blanketed in under the grandfather's rights of 1938."
In October 1955, the board of directors and a majority of the stockholders of Transocean Air Lines approved a plan of reorganization of the company's corporate structure. Essentially an air carrier regulated by the CAB, Transocean had engaged for some years in non-air carrier aeronautical activities and other activities that were only remotely connected with aviation. TAL was also the parent company of subsidiaries engaged in both aeronautical and non-aeronautical activities. The purposes of the plan were defined to the stockholders as the following:
1. To simplify administrative controls, accounting procedures, and reporting practices.
2. To divide into separate corporations certain activities previously administered as divisional activities.
3. To revive a dormant corporation now wholly owned by the company and assign divisional activities to it.
4. To provide a basis for future financing for the parent or subsidiary companies to best serve the interests of the stockholders and the public.
Transocean Air Lines changed its name to The Transocean Corporation of California, effective June 1, 1956.
After the reorganization of TAL in 1956, R. Stanley Dollar, of the Dollar Steamship Line (who had been involved financially with TAL as early as 1952), lent $500,000 to the ailing Transocean and agreed to finance a fleet of aircraft in exchange for a large block of stock. But before that deal could be completed, Dollar backed out in early 1957.
Shortly thereafter, Nelson's own lawyer informed him that the Atlas Corporation, a Wall Street investment company, might be willing to provide the needed financing. When Nelson demurred, saying he was not impressed by the people who managed Atlas, the lawyer produced a handful of documents, threw them down on Nelson's desk and told him that he had no choice. The documents showed that through purchases and proxies the Atlas Corporation had acquired forty percent of Transocean's stock.
To attempt to explain the circumstances leading up to this point in Transocean's history, it is necessary to return briefly to earlier years and instances.
In July 1946, Transocean had filed an application with the CAB for certification as a supplemental carrier, along with several hundred other small airlines, started during that same period. By January 1958, only a few carriers remained, including TAL. Nearly all had ceased operations after twelve years. They had all flown under the dark cloud that their authority to operate could be canceled on thirty days notice by the CAB.
Finally, in January 1950, Transocean received a five-year certificate as a supplemental carrier for domestic and overseas operations. This limited and temporary authority made public financing impossible. Nelson continued through the years to investigate the possibilities of private financing which ultimately led to the agreement with the Atlas Corporation of July 1957. The original agreement between Transocean and Atlas called for Atlas to sell the Babb Company, an Atlas subsidiary, to Transocean Corporation of California. Atlas, in return, would receive Transocean stock, would assist in the financing of a minimum fleet of six large aircraft of the Super Constellation type, and would further assist in raising a large amount of working capital. CAB approval of the agreement was necessary because Atlas owned a controlling interest in Northeast Airlines. According to Nelson, it was probably Atlas's control of Northeast that caused or at least contributed to the long delay in processing the case by the CAB.
There was a remarkable amount of intrigue surrounding the entire affair. R.E.G. Davies, Curator of Air Transport, National Air and Space Museum at the Smithsonian Institution in Washington, D.C., effectively sums up the raiding of Transocean in his book, Rebels and Reformers of the Airways, in these excerpts from the chapter titled, "Orvis Nelson – Mr. Transocean":
“...Interference with management and the consequent loss of some good executives forced Nelson to ask for a new agreement with Atlas, which on November 20, 1958, turned over to (Floyd) Odlum's corporation almost all of the Transocean organization except the airline itself.
“By the time the CAB approved the amended Atlas Agreement, Transocean was only a shadow of its former self. Under the insidious influence of Atlas, which was aided consciously or unconsciously, by the CAB's agonizing delay in making decisions, Transocean just fell apart, deprived as it was of its affiliated maintenance, manufacturing, and construction companies through the Atlas deal.
“The treatment of Transocean by the government agency was a travesty of justice. The CAB seems to have carried out a policy of deliberate extermination by procrastination, following the blueprint supplied in a memorandum dated September 16, 1948, written by its chief of the Bureau of Economic Regulations, Louis W. Goodkind, who was far from being either good or kind to the nonscheduled airlines. He outlined ways in which their attempts to attain legitimacy in the eyes of the board could be thwarted, and the board's treatment of Transocean was a textbook case.”
The memorandum Davies refers to would eventually serve as a requiem to Nelson's bold vision and Transocean's pioneering contributions to international aviation, both military and commercial.
Beginning of the End
Despite Nelson's valiant and persistent efforts to keep the airline flying, and the purchase of fourteen Stratocruisers in 1957 from British Overseas Airways (BOAC), the end was in sight by late 1958. The inability of the airline to obtain the certification to fly specified routes and into specified markets was unquestionably the root of the problem. Nelson's persuasive charm was ineffective at the CAB, as was that of industrialist and resort builder Henry J. Kaiser at the Honolulu hearing of the CAB's Transpacific Case in 1959. Kaiser rocked the hearing room with ten pages of commercial developments being planned that cried out for more air transport [ation] with designated routes between the fiftieth state and the mainland, and even beyond Hawaii. He unveiled plans for building 5,000 hotel rooms and a resort city on 6,000 acres of land at the eastern end of Oahu.
Kaiser gave nine reasons for the need for additional air service to the Hawaiian Islands. He also predicted an increase to one million tourists a year (a nearly four-fold increase) to Hawaii by the late sixties. He foresaw that within ten years tourism would be the Islands' number one industry. He put forth in convincing terms that “the dynamic power of free competition unleashed through the certification of additional competitive airlines would result in vastly increased travel to Hawaii." He concluded, "We sadly need – we badly need more air transportation."
The cross-examination by Pan Am's Elihu Schoot was intended to develop the argument that Pan Am and United should be given a chance to show that they could handle the expected increase in traffic to the islands. Witness Kaiser bluntly replied, "The traffic should NOT be left in your hands – at any rate. That is not free enterprise."
Near the end of 1959, Transocean was in its final days and in need of financial life-support systems. But there were none available. Now owing an enormous amount to the Internal Revenue Service for unpaid taxes and in debt to its suppliers, the airline was on the verge of collapse. After several major oil companies revoked the airline's credit for fuel, the aircraft were grounded one by one as they returned to Oakland. Cash became unavailable, and even flight captains and other employees who had only recently financed the purchase of gasoline with their own money, could no longer do so. On one occasion, a Transocean captain borrowed a passenger's credit card to buy fuel to continue a flight when he found out his TAL credit card had been canceled due to non-payment. The passenger was reimbursed by the airline, but the story made news in Time magazine. Paychecks were missed, and employees at headquarters in Oakland and those stationed overseas were getting nervous.
A Personal Account
Captain E.M. "Red" Wickkiser was based in Iran when rumors about the company being in trouble began to surface (as far back as 1952 and 1953). He recalls one of the several occasions which most Transocean employees also well remember and which serves to highlight Nelson's charisma.
"Our pay was late, and we were 12,000 miles from the home office and could get no confirmation of anything except that we weren't being paid. At this time, Iranair had six DC-3s, and we were just getting by on our local cost of living allowance. We were about to revolt, to shut down the operation. Why work with no pay when we didn't know what was going on? Don McAfee was the general manager at the time, and he did the best he could, but he couldn't get our money for us. He did tell us, however, that Orvis was on one of his round-the world swings and was to stop in Teheran and that he would have answers to our questions.
"By the time Orvis arrived, feelings were running high. We were all invited to drinks and canapés at McAfee's home where Orvis started with the history of Transocean and went on to Japan Air Lines, Lufthansa, Air Jordan, and Air Djibouti plus the plans of expansion, the eventual combining of routes of all the airlines to be a truly global airline to compete with Pan American. "He promised to pay us immediately, even told us where the money was coming from. And the expressions on the faces of the employees changed from glowering rebelliousness to smiles. "We still didn't have the money owed us, but Orvis had charmed us to the point of believing, and certainly we soon did have our money. Orvis could come in, read our attitudes, and satisfy us with his explanations, but particularly with his charm."
End of a Dream
When Transocean ceased operations in bankruptcy in 1960, the papers filed with the bankruptcy court contained the technical and financial reasons but still did not explain the complete story, which had to do with forces within and without the airline. It had to do with the unending quest for certification and the seemingly indifferent-and even antagonistic-federal bureaucracy, rich but overcautious merchant banks, and apprehensive aircraft manufacturers. Within the airline, it had to do with the character and personality of a visionary leader and his reflection on his totally loyal but totally unquestioning administrative staff.
Those who are gifted with creative and leadership abilities, who build dreams into large organizations, are sometimes brought down by those same characteristics that made them successful. Their unbridled enthusiasm and fearlessness, their single mindedness, idealism, and self-confidence: all these qualities equip them for victory. But at times these charismatic leaders are overly idealistic, and often unwise in their judgments of other people.
There were those who believed that Orvis Nelson, the founder, president, and continuing force of Transocean was just such a man. While his accomplishments have already been recorded, there are those who suggested that these qualities led to the company's resources being spread too thin by over-diversification. Others felt that Nelson's weakness was that he was too trusting of certain members of his staff, that he delegated an excessive amount of authority to them, and that he failed to insist on more efficient bookkeeping methods.
Many believed there were political machinations at work behind the scenes that effectively blocked Transocean from securing the new Boeing 707 jets that the airline needed urgently to enter the jet age in the Pacific. A former officer of the airline recalls that Transocean had negotiated with Boeing to buy three 707s – two of which Cubana had on order from Boeing, but canceled when the Cuban government fell before their delivery. Boeing was anxious to sell, and Transocean began negotiations involving the manufacturer, Japan Air Lines, and some banking institutions for the acquisition of the three 707s. To generate the capital for their purchase, Transocean planned to charter two of them to Japan Air Lines for two years because JAL was extremely anxious to beat Pan American in the Pacific with the first jet aircraft. Japan Air Lines agreed to guarantee payments to the lending institutions, and entered into an agreement with Transocean for a back-to-back lease of the aircraft until the delivery of its own DC-8 aircraft from Douglas. The third 707 was to be used by Transocean for its own charter flights if the deal was consummated.
There was evidence to suggest that one of the major scheduled airlines pressured Boeing Aircraft Company not to sell the aircraft to Transocean, with the implied threat that if they did so, their company would not buy any jet aircraft from Boeing. This alleged conspiracy became the basis of a $199 million restraint of trade suit against Boeing and the parties named in the legal action. The suit contended that the defendants blocked TAL's purchase of three Boeing planes and interfered with its re-financing program. San Francisco lawyer Joe Alioto, an antitrust specialist, accepted the case. But during the early phase of the proceedings, Mr. Alioto campaigned for the office of mayor of San Francisco and won. The case was prepared and tried in court, not by Mr. Alioto, but by his associates in his law firm.
When the verdict was pronounced, it was against Transocean. It was a crushing loss, and observers within Transocean felt that had Joe Alioto tried the case, the airline would have won. There was recourse, however, and that recourse was to appeal to a higher court. But no one from TAL had the $30,000 for the transcripts from the trial, much less the filing fee for a new trial. (Trans International Airline would be the first non-scheduled airline with a jet in its fleet-one of the earlier DC-8s late in 1963)
In the meantime, the corporate life of Transocean became more critical every day. But as late as January 15, 1960, Nelson was still optimistic about keeping Transocean in business despite what he termed another major setback. The following is excerpted from a letter he sent to stockholders of The Transocean Corporation of California on that date:
"...This setback was triggered in August 1959 by a misleading press dispatch from Washington, D.C. concerning CAB approval for the agreement between Transocean and the Atlas Corporation. The dispatch stated in part ‘...the CAB today approved control (by Atlas) of Northeast Airlines and Transocean Air Lines...’ Actually, the agreement approved by the Civil Aeronautics Board allowed Transocean Corporation of California to sell to the Atlas Corporation its aircraft maintenance and non-flying companies. Transocean, in return was relieved of a substantial amount of indebtedness and received a twenty percent interest in a new corporation, called International Aviation Services, to be formed by merging the Babb Company, an aircraft brokerage firm owned by Atlas, with Transocean's companies. Transocean Corporation of California would retain Transocean Air Lines as its major operating entity. The `control' aspects of the approved agreement referred only to long term debt to the Atlas Corporation which remained after the closing in August 1959. Transocean had up to five years to liquidate this obligation."
Nelson went on to explain that Transocean creditors who had carried substantial debts during the months the CAB was considering the case were startled by the erroneous announcement, and many moved quickly to collect. This caused a run on the company's funds which was complicated by delays in receipt of regular funds in transit. TAL fell behind in its payrolls and tax payments, as well as other obligations. The management of the airline had to decide whether to liquidate or stay in business. Liquidating meant that the company's 1,200 employees would be thrown out of work, the stockholders' investment would be lost, and that the creditors would have to take substantial losses.
He said that Transocean management was convinced that the interests of all concerned could be best served by continuing in business. They thought that by continuing operations, the airline had a reasonable chance for a successful recovery from its difficulties.
The overwhelming majority of the employees, he noted, had immediately pledged their support, and he had been able to assure the stockholders that an agreement for deferred payments had been worked out with the company's major creditors. He reminded them that operations during August and September of 1959 were generating more than $1.5 million each month and that conservative projections indicated that earnings could continue at a rate that would permit normal operations once the financial difficulties were overcome. A $500,000 bank loan had also been arranged to assist in meeting the most pressing cash problems.
Nelson's January 15, 1960 letter to the stockholders ended with the encouraging statement that a refinancing program for Transocean, one that seemed promising, was being studied by a leading New York financial institution. He expressed the hope that the long-awaited unlimited certificate authorizing Transocean as the third unrestricted carrier in the Pacific would be forthcoming- a hope that was doomed even as Nelson signed his name at the bottom of his letter to the Transocean stockholders.
But every one of Nelson's heroic last-ditch efforts failed to save the airline. The death blow was dealt by the airline's insurance company when it canceled the company's insurance policy. Without that coverage, the airplanes could not fly. On a chilly morning in January 1960, the last Stratocruiser flown by Transocean Air Lines landed at the Oakland International Airport where the rest of the once proud fleet was already grounded. And Transocean Air Lines folded its wings forever.
By October 1961, most of TAL's remaining equipment was liquidated for $60,000 at a bankruptcy sale. The company had previously sold aircraft worth some $14 million for $105,000 to satisfy four creditors. At involuntary bankruptcy proceedings, officials revealed that Transocean owed a total of $13,962,000 to some 1,200 creditors. The Internal Revenue Service also wanted the back taxes owed by Transocean. However, the bankruptcy court had been assured by Nelson that a majority of the creditors, in number and amount, had accepted a plan to arrange for payment of debts in a legal document already presented to the bankruptcy court. According to a newspaper account of those proceedings, Transocean's attorney, Maxwell Newmark, said that all that would be needed to put the airline on an operational basis was consent by three states to a plan for delayed payment of back taxes. Three other states had already agreed. Newmark said that under the plan presented to the bankruptcy court, a new corporation had been formed to supply initial financial support at a minimum of $250,000 and provide any further money needed.
Transocean's newest financial angel, The Rhone Company, which had been incorporated in Nevada, was backed by unnamed Eastern capitalists. Transocean would, in effect, become a subsidiary of Rhone, but would continue to fly under its own name, reactivating its routes to the Pacific islands and Europe. Newmark said he had been advised that Transocean's rights to do so were still valid under authority of the Civil Aeronautics Board.
But again the airline's hopes were dashed by a lack of enthusiasm from the U.S. Government. This became patently clear after Assistant U.S. Attorney General Thomas A. Kennelly revealed that a letter received by him from the U.S. Controller stated, "...we are not aware of any vital necessity to revive this carrier's operation."
The reason, Kennelly said, was that the government currently had a claim of $590,978 against Transocean, not including $150,000 owed the Internal Revenue Service, and was not anxious to risk incurring heavier claims.
Nelson and hundreds of loyal employees reeled under the devastating defeat as did his wife, Edith and his family. The blows were personal and financial. But Nelson's Norwegian upbringing, his stubbornness, and his love of aviation would not permit him to abandon his dream. He was down but not out. He would continue to try to resurrect Transocean Air Lines. Finally, in 1965 a $42 million damage suit was filed on behalf of bankrupt Transocean against Atlas Corporation of New York. The suit charged fraud and misrepresentation on the part of Atlas in its financial dealings with Transocean. The charges concerned Atlas's acquisition of capital for TAL to purchase pressurized aircraft.
The complaint against Atlas was brought by Federal Bankruptcy Trustees, not TAL, appointed to oversee the affairs of Transocean and its parent corporation, Transocean Corporation of California. It stated that Atlas had "assumed direction and control of Transocean's operations and through mismanagement drove Transocean into bankruptcy." The complaint asked for $27 million general and compensatory damages and $15 million punitive damages. The verdict was once more against Transocean.
Nelson Never Gives Up
During the 1960s, Orvis and Edie Nelson moved to Europe where Nelson started a new company, Air Systems. Based in Copenhagen, Air Systems employed three flight crews. Among them were former TAL employees Don McAfee, Ed Landwehr, and Jesse Morrison. The airline transported cattle and race horses in C-74 transports by night throughout Europe and Asia. Nelson had purchased seven of the C-74s in Arizona, along with the spare parts. The huge transports could carry sixty cows or sixty-eight horses, and each one had an elevator in the center section of the fuselage to allow access for the livestock. Air Systems lasted for about one year. The end came soon after a newly hired pilot crashed a cattle-loaded C-74 five feet from the top of a mountain at Marseilles, France. The law suits that followed proved too much for the struggling young company.
Now Nelson's first concern wasn't the pursuit of capital for Transocean but for just enough money to provide for his family. Now just a pilot and not an entrepreneur, he agreed to fly one trip to Nigeria in 1966 as copilot on a DC-4 owned by an acquaintance. Legal papers and the export papers for the freight they carried had been filed in Brussels, departure point for the flight. In fact, Nelson, concerned that part of his load was guns, checked with the department of trade in Brussels to be sure everything was legal. It was.
While flying over Cameroon in West Africa, the DC-4 ran out of fuel. The flight captain had apparently neglected to bring along the proper maps and became lost. They were past the point of no return when the fuel ran out. There was no choice but to put down in a crash landing. The captain was, fortunately, unhurt, but as he had no landing permit for Cameroon, he panicked and abandoned Nelson who was trapped and injured inside the wrecked aircraft. Orvis spend five months in a local hospital and was held responsible for the landing violation as well. This left him in desperate financial straits.
Rumors that Nelson had transferred all of his wealth to his wife and mother, or that he had large sums of money in Swiss bank accounts were unfounded. These rumors were partially squelched when it became known that Edie Nelson had to borrow two hundred dollars from friends to help finance Orvis' return to the United States.
Disillusioned and weary after recovering from this latest ordeal, Nelson moved his family back to Minnesota for a few years to regain his strength and to put his life back in order. But the time came when he could no longer ignore his persistent love for aviation, and the family returned to California. There Nelson developed an aviation consulting business for several years, all the while pressing his case in Washington, D.C. at every opportunity.
Nelson had struggled for sixteen years to obtain the CAB certification which had long been denied. On October 6, 1976, he prepared what would be his last statement before the United States Senate Small Business Committee regarding the CAB transpacific renewal case, Docket 5031 et al, in a final attempt to restart Transocean. He forcefully recounted the travesty of justice wrought by the CAB upon Transocean Air Lines and other non-scheduled carriers. Yet, his concluding remarks were filled with the optimism and vitality so characteristic of the man: "...We have people standing by, many of the Transocean originals, eager to get Transocean back in the air."
Orvis Nelson was not to savor the triumph of building a new Transocean Air Lines. He died from a heart attack less than two months later, on December 2, 1976.
On October 24, 1978, eighteen years after the demise of Transocean Air Lines, President Jimmy Carter signed into law the Airline Deregulation Act. Transocean Air Lines' certificate was revoked on December 8, 1987.
Arue Szura, Folded Wings A History of Transocean Air Lines,
Pictorial Histories Publishing Company