Pan Am and TWA were allowed to fly those routes back then because the 'home' airlines did not have the international presence that PA and TW
enjoyed. Remember, Pan Am was not allowed domestic routes in the United States because it was considered an 'international airline'. And since the US Government considered it an international airline, then the other countries did also. On the other hand, TWA somehow got special treatment on domestic routes (before deregulation), but as the years progressed (especially after deregulation) they cancelled many international destinations.
That brings us to the current situation. After Pan Am and TWA, no other airline has enjoyed the benefits of flying such routes or of having such an international presence. (I know UA
both have Tokyo hubs, but nothing as extensive as what PA and TW
Most important though, I agree basically with what you said. I think foreign airlines should be allowed to fly US domestic routes (as long as US airlines are provided the same courtesy). BUT, one thing does concern me - that the foreign airlines would only cherry pick the most lucrative routes and that would force the major US airlines to abandon some smaller cities because of the financial difficulties stemming from such actions. (Kind of like what the LCC's are doing, but on a much larger scale!)