More Competition Means Cheaper Fares

U.S. AIRLINE POLICY

TO U.S. travelers, the airplane is fast becoming almost as familiar as the family car. In 1955 scheduled domestic airlines will gross an estimated $1.1 billion, flying 35 million passengers 20 billion miles, 20% more than last year’s alltime record. A few years hence, airmen predict, the fast-growing airlines will push out railroads as the No. 1 public means of mass travel. As a result, U.S. civil air policy, as laid down by the Civil Aeronautics Board, is undergoing a radical change. Once CAB nursed along the fledgling industry by spoon-feeding it Government subsidies and holding back competition. Not only is this method now out-of-date; it does not fit an expanding industry. CAB Chairman Ross Rizley feels that the time has come for additional service, lustier competition and new route awards. The question is: How much new competition?

To many airline men, the mere thought of more competition means trouble. Some of them argue that more competition has often led to fewer passengers for individual lines, lower earnings, and thus increased need for federal subsidies to keep flying. But CAB thinks that the airlines underrate their strength, and points to the industry’s own skyrocketing growth. In 1951 every U.S. carrier, both big and little, was on Government subsidy. Today only the smaller feeder lines and a few shaky trunk lines need a direct Government handout. Though they still earn heavy mail pay, all nine of the biggest carriers (American, Eastern, United, T.W.A., National, Northwest, Capital. Delta, Western) are self-supporting on their domestic runs. Overall estimates are that the industry will tot up a net operating profit of at least $150 million in 1955 v. $99.5 million last year. As a result, federal subsidies have dropped from $73 million in fiscal 1954 to an estimated $52.5 million in fiscal 1955.

To help the industry grow even faster, CAB has laid out a gradual, carefully charted course of expansion and competition. Since the big trunk lines no longer need coddling, CAB has cleared its docket of a dozen major decisions, some of which had been hanging fire for seven years. Recently, it approved a whole series of competitive new routes. T.W.A., Capital and Northwest got new, nonstop runs between New York and Chicago in competition with United and American; United got a nonstop Chicago-to-Seattle run in competition with Northwest, while Northwest in turn got a local nonstop Detroit-to-New York flight in competition with American and United. To improve service between the Northeast and Southwest, CAB has tentatively approved new route segments totaling 6,810 miles for American, Eastern, Capital and T.W.A.

Furthermore, it is doing its best to beef up 13 small feeder airlines (Mohawk, Allegheny, Bonanza, etc.), put them in position to get off their $25 million annual subsidy by handing out new routes—some of them in competition with big airlines—and permanent certificates as scheduled carriers. The airlines view the new routes as mixed blessings. The airlines liked getting new routes that gave them a crack at someone else’s passengers, but almost all have protested new routes that increased their own competition.

Despite the gripes, the effect of competition on U.S. airlines in recent years has been all to the good. The entire scheduled industry rose up angrily when nonscheduled airlines first tried cut-rate flights, argued that there was only so much business, that rates had to be kept high to provide efficient service. But the nonskeds did so well that the big airlines were forced into air-coach service. Result: 10 million passengers now fly air coach annually, while the four biggest scheduled lines currently get 34.3% of their total revenue from low-fare flights. As a final salute to the nonskeds, American, United and T.W.A. recently chopped transcontinental coach fares to $80 one way, v. $158 first-class, and are now on a level with the cheapest nonsked.

More important, CAB is now considering giving nonscheduled airlines a big lift. Though the big scheduled carriers insist that the nonskeds be knocked out of the air, CAB feels that they have proved their worth by pioneering cut-rate flying. In an initial decision, which the full board will probably follow, a CAB examiner recommended that 27 of the weakest nonskeds be eliminated, but that the 33 survivors be permanently certified for a specific number of scheduled passenger flights (possibly ten) each month, plus an unlimited number of nonscheduled flights.

All this means that a new air age is coming for the U.S. As a result of the rapid expansion of routes and increased competition, dozens of new cities will be tied into the air web. Instead of relying on planes largely for long-distance runs, U.S. travelers will soon be able to fly anywhere they choose, day or night, and do it faster and cheaper than ever before.