New Rate Policy

The Civil Aeronautics Board moved last week to take the subsidy out of airmail payments to the booming U.S. domestic air transport operators. In two rate decisions it bypassed the old contract-type flat payment per mile flown, irrespective of the amount of mail carried, and substituted a pound-mile rate payment. The new policy affects Eastern Air Lines and American Airlines: in both cases the carriers will receive .3 mill for each mile a pound of mail is flown.

CAB estimated that this new rate will slice $773,000 off Eastern's annual mail pay, cut next year's mail revenue to $1.3 million. But CAB pointed out that Eastern stands to clear in the next twelve months an operating profit of $3.3 millions from its non-mail operations.

In the American Airlines decision the reduction in mail pay will amount to more than $1.3 million annually, but will still enable them to collect $2.4 millions for flying the mail. Adding to this passenger and express revenues CAB figures American will show an operating profit of $7.7 millions per year before taxes.

CAB's decision to follow the orthodox formula of paying a carrier for the actual pounds of mail carried times the distance flown is based on the solid ground of weighted cost of service plus a reasonable profit. This is a policy the air transport industry will go along with so long as it is not used to penalize efficient operators, support inefficient ones.

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