Captain Edward Vernon Rickenbacker was the No. 1 U. S. War Ace, is currently the hardbitten, harddriving, general manager of Eastern Air Lines. John Daniel Hertz has bagged enough businesses in his 58 years to be an ace at U. S. finance. A Chicago reporter, he founded Yellow Cab Co. in 1915, sold most of it to General Motors Corp. ten years later for $43,000,000. Currently he is a partner of Lehman Bros., potent Wall Street investment house which controls Transcontinental & Western Air. For several months Aces Hertz and Rickenbacker have been engaged in an air duel which was small stuff for Ace Hertz but big for Ace Rickenbacker. Last week it became apparent that "Eddie" Rickenbacker had won, as North American Aviation, Inc., which owns Eastern Air Lines, filed notice with the New York Stock Exchange of intent to sell Eastern to Eddie Rickenbacker rather than to John Hertz.
Lacing the eastern seaboard like a big X, one of whose axes runs from Chicago to Miami and the other from New York to Houston, Tex., Eastern Air is the fourth biggest U. S. airline and the only major domestic one to make a sizable profit in 1937—$270,000 before income tax deductions. This makes it a choice business property, but North American Aviation found possession embarrassing because the Air Mail Act of 1934 forbids one company both to have airmail contracts and to manufacture airplanes. North American is the only U. S. concern to have gotten away with this since the act passed (by building military planes exclusively) and the Government has been scowling at the situation. Since North American's manufacturing division has a backlog of $9,300,000 in orders, anticipates many more and made a profit of $460,000 before taxes last year, it obviously is more valuable a property than Eastern and for nearly a year Eastern has been unofficially for sale.
Eastern's system would be a magnificent addition to Transcontinental & Western Air, whose slim East-West line from New York to Los Angeles needs North-South feeders. Last month, therefore, John Hertz and his associates in Lehman Brothers offered to buy it for $3,250,000 ($1,000,000 cash, rest in notes). It so happens that North American Aviation is controlled by General Motors Corp. through ownership of nearly 30% of its stock. The various Hertz truck and bus lines are General Motors' valued customers and shrewd Financier Hertz knew G. M. would think twice before snubbing his bid for Eastern. But John Hertz reckoned without Eddie Rickenbacker.
As Eastern's general manager, Eddie Rickenbacker has made it almost a one-man line. He well knew that this pleasant state would be unlikely to continue after a merger with TWA. He also knew that TWA is in anything but healthy financial shape. So he asked General Motors to stall for a few weeks while he hunted for other buyers. These he found in the Wall Street investment houses of Smith, Barney & Co. and Kuhn, Loeb & Co. When they agreed to put up $3,500,000 in cash, keep the line independent and give General Manager Rickenbacker complete operating control, John Hertz gracefully folded his wings and yielded the battle. Said Eddie Rickenbacker: "I am glad to be able to save the airline for the gang that made it."