Aviation: The Merger Broker

In a major policy turnabout, the Civil Aeronautics Board last week went out in search of a merger partner for ailing Northeast Airlines. Historically, CAB has been hostile to airline mergers. But under its new chairman, Democrat Alan S. Boyd, 38, the board has decided that mergers are “one of several highways out of the airlines’ current problems.” For Northeast, which lost $8,000,000 last year, merger is probably the only way out.

Like Capital Airlines, which earlier this month merged with United Air Lines, Northeast is in part a victim of CAB’s ill-advised attempts to strengthen weak airlines by granting them additional routes. To shore up Northeast, which began as a regional carrier in New England, the board five years ago granted the line the right to fly the blue-ribbon New York-Miami route, which Eastern and National Airlines were already flying. Against such entrenched lines, Northeast could not attract enough passengers to make money for itself, and it cut so deeply into Eastern’s and National’s traffic that they began losing money on what had been a profitable run.

CAB has no legal authority to force mergers, but can make them the easiest way out. Northeast’s certification to fly the New York-Miami route is due to expire in November. Simply by okaying the renewal application, CAB can create a situation in which either National or Eastern might well be willing to merge with Northeast just to get rid of the overcompetition.