Take-Off of the Feeders

The fastest-growing segment of the airlines industry is distinguished neither by speed nor frills nor fame. It is the 13 U.S. regional airlines, or "feeders," which use prop planes (more than half of them 190-m.p.h. DC-3s), serve no meals or free liquor and are generally unknown to people outside the areas in which they operate. Yet regional lines have doubled in size during the past five years and, with plenty of room to grow, are expanding at the rate of 15% yearly --or three times faster than the big trunk airlines.

In 1963's first nine months, the regionals flew a record 1.4 billion passenger miles and collected $167.7 million in revenues. They not only aggressively seek more American passengers at home, but are now out to capture the growing U.S. foreign tourist trade. Last week the regionals were promoting a new "Visit U.S.A." ticket that for a bargain $100 entitles a foreign visitor to 15 days of unlimited flying on any of the 13 lines.*

Short Hops. With each line serving five or six states, the regionals span the entire U.S., performing the dual function of linking smaller communities and feeding air travelers into large airports for connections with the major airlines. Airports on regional routes are often spartan, but under a multimillion-dollar federal program have recently been equipped with new landing and safety aids. The regionals have a safety and reliability record that is generally every bit as good as the huge trunk airlines, and they serve nearly twice as many points (577).

Because the hops are short (an average 93 miles v. 335 miles for the trunks) and the towns usually small, planes spend much money-losing time on the ground and often fly only a third full (one reason for trying to attract foreign tourists). The regionals have depended on federal subsidy ($69 million in 1963) since they came to life after World War II, and have only barely scraped by. But Civil Aeronautics Board Chairman Alan S. Boyd has increased subsidies, enabling them to make an operating profit of $13.4 million last year and to hope to do almost as well this year.

Though modest, the profits have restored the faith of the shareholders and awakened the interest of bankers. Last month Lewis W. Dymond, 43, the president of Denver-based Frontier Airlines, declared the first dividend in the line's 17-year history, and Robert E. Peach, 43, president of Mohawk (upstate New York), became the first regional president to raise money in Wall Street--$12 million to buy four British Aircraft Corp. One-Eleven jetliners.

Strength Through Size. Will the regionals get off the dole? Part of the problem is that the CAB, under pressure from Congressmen and local politicians, requires the regionals to fly unprofitable "public service" routes. Even so, some regional presidents expect in time to go it alone. Edmund Converse, 56, president of Las Vegas-based Bonanza, has reduced his line's per-mile subsidy to the industry's lowest by attracting more passengers through promotional fares. At Minneapolis' North Central Airlines, President Hal N. Carr, 42, is saving $5,000 monthly with a new computerized reservation service. Converse and Carr both feel that they would be stronger if they were bigger, have each proposed mergers with weaker neighbors.

But the best hope of the regionals to gain altitude financially lies in the desire of the majors to get out of the short-haul business. Says Bonanza's Converse: "As the trunks turn increasingly to faster jets and longer routes, we'll come up right under them and take over the short-haul market."

-Allegheny, Bonanza, Central, Frontier, Lake Central, Mohawk, North Central, Ozark, Pacific, Piedmont, Southern, Trans-Texas and West Coast.

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