The Skies Are Friendlier

Just a few months ago, the domestic-airline industry was bracing itself for a prolonged period of rough flying. Passenger traffic was dwindling as the rest of the economy began to slow down. The energy shortage was sending fuel costs through the ionosphere. And many airline men were worried that the Civil Aeronautics Board, which was winding up a four-year study of the industry's fare structure, was about to order disruptive changes in ticket prices.

The turbulence never came. Traffic started climbing in January, partly because the gasoline squeeze forced many motorists to take to the skies for long trips. Airlines have used the energy crisis as an excuse to drop hundreds of unprofitable flights, and have been allowed to raise fares 5% to help cover higher costs. Last week the CAB put the finishing touch on that pleasant scenario: it ordered its long-awaited restructuring of fares, but the net effect for most lines should be a slight gain in revenue.

Dearer Luxury. Under the CAB plan, which will take effect July 16, coach fares for long-haul flights (more than 750 miles) will be cut by as much as 5%, and short-haul coach fares will be raised by as much as 30%. As a result, the price of a one-way coach ticket for the 2,585-mile flight from Miami to San Francisco will drop from $167.59 to $158.33, and the fare for the 91-mile flight from Boston to Hartford will rise from $15.74 to $18.92. In addition, the board ordered an increase over the next two years in all first-class fares, from the present 130% of coach fare to 163%. A first-class ticket from Dallas to Chicago, for example, will rise from $90.64 to $112.47.

The agency's motive is to make ticket prices reflect operating costs more closely. At present, the carriers subsidize short hops by taking a smaller profit on them than they do on long flights. That pattern emerged in the late 1950s when the industry shifted from propeller-driven planes to jets, which operate much more efficiently over long distances. Even before the advent of jets, first-class passengers enjoyed extra leg room and fancier treatment literally at the expense of coach passengers, whose fares in effect subsidized the money-losing luxury service.

The fare overhaul ordered by the CAB should raise industry revenues a bit more than 1% above last year's levels. Reason: most coach passengers take the short-haul trips that will become more expensive. Braniff International appears to be the biggest winner; its web of short routes across the Southwest will bring in a projected 3 1/2% more revenue. National and TWA, both mostly long-haul carriers, will each lose about 1/2 of 1% in revenues. The nation's seven other domestic trunk lines will fall somewhere in between.

The impact of the first-class-fare rise on demand for that service is less certain. Much first-class travel is done by businessmen, and many companies are cutting back on that frill to help weather a possible recession. Some airline officials would like to eliminate first-class service because costs for the extra food, champagne and stewardesses involved are rising sharply. Still, many airline men expect that as long as first-class seats are sold people will pay top dollar to be pampered. "The first-class passenger is a funny animal," says Continental Airlines Vice President Joe Daley. "He just may go ahead and pay more."

Back to Cars. There are a few clouds on the industry's horizon. Traffic may level off when airborne ex-motorists find it easy to buy gasoline again, and the general economic slowdown may eventually catch up with air travel. Yet most airlines have already made enough energy-related flight cutbacks to weather such a storm. And the CAB is expected to rule favorably on the industry's request for yet another fare increase, this time 6% effective April 16, to cover the rising cost of fuel.

The two biggest U.S. international airlines, Pan American and TWA, have not been flying quite so high as their domestic counterparts. Fuel costs have risen far faster outside the U.S. than at home, and the two American flag carriers are finding it increasingly difficult to compete with government-subsidized foreign airlines. Last week Pan Am, which lost $7.6 million in January alone, asked the CAB for permission to discuss combining a number of its routes with TWA, which lost $21 million in January. The request raises antitrust complications and will have to be cleared by the Justice Department. If approved, the partial merger likely would allow Pan Am to abandon some foreign cities now served by both lines--London, Paris, Rome, Frankfurt and Lisbon--and pool its revenues with TWA on other international routes. TWA professes "interest" in the idea, and Vice President George Burns raises the possibility that TWA planes might fly someday with Pan Am stewardesses.

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