Aviation: Fare Play

With splashy, full-page ads in newspapers all the way from Chicago to Los Angeles, Denver’s Continental Air Lines last week set the aviation industry on its ear. Beginning Dec. 1, the ads announced, Continental plans to introduce “economy” class jet service with no meals or liquor—but at fares 25% below present coach rates. Executives of other airlines, many of whom have pressed for higher fares as the only way to beef up their industry’s slim profits, responded to Continental’s move with banshee wails. Shrugged Continental President Robert Six: “I’m not running a popularity contest. I’m running an airline.”

By rigid adherence to this lone-wolf code, rough and tough Robert Forman Six, 54, has made himself one of the least loved and most successful of U.S. airline operators. Six has converted Continental from an obscure puddle jumper into one of the nation’s eleven trunk airlines. And of all domestic airlines, Continental now boasts the lowest breakeven load factor (38%), the lowest jet operating costs and highest rate of jet aircraft utilization.

Three for Six. Six is a lifelong maverick whose three loves, in approximate order of importance, are airplanes, six-shooters and comely women. (Since he traded in Second Wife Ethel Merman for his third, TV Comedienne Audrey Meadows, Continental employees whisper a fresh gag: “Bob is batting .500—three for Six.”) The son of an Oakland surgeon, Six quit high school to become, successively, a merchant seaman, bill collector, copilot for China National Aviation, Beechcraft salesman and big-money California aviation consultant. During the Depression, Six bought a half interest in Varney Air Transport, which later changed its name to Continental. Chosen president of Continental in 1938, he began steadily adding routes throughout the Southwest.

In 1955, with typical Western derring-do, Six made two long gambles: he absorbed debt-ridden Pioneer Air Lines to get 1,860 additional route miles, and he ordered $60 million worth of new planes, including four Boeing 707s, though Continental’s assets at the time amounted to barely $14 million. To finance the new fleet, Continental saddled itself with a long-term debt that still bulges at $52 million and as a result has not declared a cash dividend in five years. But the new routes and jets paid other dividends: since 1955 Continental’s earnings have quadrupled, last year amounted to $700,000 on a gross of $61 million.

To compete with larger lines. Continental spends freely on gimmicky passenger extras ranging from TV sets to golden toilet seats in its jets. (By refusing to cut back on Continental’s lavish meals and service, Six recently shot down an industry plan to improve profits by eliminating some of the “frills” that go with a coach-class ticket.) Continental has also wooed new traffic by introducing in-flight ticketing that eliminates nagging waits at the ticket counter.

At the same time, Continental is among the nation’s most cost-conscious airlines. By servicing its jets at night, Continental keeps them flying 10½ hours a day (v. an industry average of 6½), yet has never had a passenger fatality. At the line’s headquarters in a hangar at Denver’s Stapleton Field, executive offices range from Spartan to shabby. Says Executive Vice President Harding Lawrence, 41: “We don’t go for frills on the ground. We don’t have an assistant to anybody.”

Shift in Seats. Unless the CAB disapproves Continental’s new rates. Continental jets will shift from their current seating pattern of 44 first-class and 76 coach seats to 28 first-class, 42 coach and 75 economy. American Airlines and TWA have already asked the CAB for permission to match Continental’s economy fares on competitive routes; United is expected to do so soon.

Most industry observers predict that the economy idea will eventually spread to other major domestic airline routes. When that happens, coach service is likely to disappear—as it did last year on North Atlantic runs—leaving only first-class and economy. Many an airline executive argues that this will achieve nothing but a decrease in passenger revenue. But burly Bob Six disputes this. Says he: “The only way to broader markets and higher profits lies in lowering certain jet fares to the level of surface transportation.”