Big Year for Airlines

For U.S. airlines last week the air was full of flying saucers--all of them shaped like silver dollars. Never before had the industry seen such a prosperous year. In the first five months of 1951, the 15 biggest carriers revved up an operating net income of $42 million v. $4,100,000 in the same 1950 period*--a vertical climb of 924%.

American Airlines' President C. R. Smith had a simple explanation: "More people are traveling greater distances, and they want to get there in a hurry." His line, the world's biggest carrier, turned in the biggest dollar gain of all (see box). Only Northwest and Colonial were still in the red. But Northwest had managed to slice last year's $3,800,000 deficit by $3,000,000; Colonial trimmed its loss from $431,000 to $40,000. And United turned its $1,600,000 deficit into a $7,800,000 net.

To the airline operators, the booming passenger traffic was a welcome payoff for their heavy postwar investment in bigger, faster planes, and their patient plugging of such promotional stunts as the Air Coach and the Family Fare Plan (wives & children travel half-fare on slack midweek days). They had managed to raise their average load factor--the percentage of seats occupied--from 57% to 66.7%, reach the point where every additional traffic gain caused a bigger proportional rise in profits.

But last week the industry's Big Four--American, United, Eastern and T.W.A.--found an embarrassment in their riches. The Civil Aeronautics Board announced that it will reduce their airmail pay from an average 63-c- a ton-mile to 45-c-, will order them to refund some $5,000,000 on airmail overpayments dating back to 1947. The airlines were doing so well they raised not a single squawk. With the new 45-c- rate which CAB proposes as the actual cost-plus-reasonable-profit of carrying the mail, the Big Four will reach a historic milestone: for the first time, all were officially free of any Government subsidy.

* Figures compiled by Brooks Earning Indicator, Inc.

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