Jet-Age Problems

Winging from Augusta, Ga. to Washington aboard the Columbine one day last spring, President Eisenhower sprang a question on General Elwood Quesada, his special assistant for aviation. What, asked Ike, is the state of U.S. airlines as they prepare to enter the jet age? "Pete" Quesada's answer: Not so good. Though airlines are committed to spend $4 billion for new jet equipment by 1962, they have run into sliding earnings and difficulties in financing their purchases. Ike asked for a special report on the airlines' plight. Last week Quesada sent him a 44-page document prepared by Harvard Business School Economist Paul Cherington. Among its top conclusions: the airlines need a fare hike--and quickly.

The report called for "immediate action" to adjust fares, restore higher earnings and investor confidence. It thus presented a White House mandate to the Civil Aeronautics Board, which has been dawdling over a general passenger-fare investigation since the spring of 1956, is not scheduled to complete it until next March. "By that time," noted Quesada in a covering letter to the President, "the success or failure of major segments of the equipment program may well have been determined. The CAB must examine the carriers' proposals promptly."

While spanking CAB, the report also slapped the airlines. It questioned whether the carriers will be able to fill the additional 40 billion seat-miles that the speed and greater capacity of the new jets will make available by 1962. The report's conclusion: The airlines will not be able to unless they get busy right away researching new markets and developing special programs to attract new passengers. The Government can lend a hand in assisting traffic growth, said the report, by repealing the transportation tax and turning over to commercial carriers more of the passenger and cargo traffic now carried by the Military Air Transport Service.

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