Changes in the Air

Though more people are flying than ever before, the U.S. domestic airline industry is in a continuing and deepening financial crisis. A few of the smaller trunk lines without heavy competition on their routes make a nice profit, but some of the biggest lines are losing money flying half-empty jets across the country. The industry as a whole manages to eke out only a paltry 2% or so on invested capital. While the causes are many and complicated, most of the losses could be wiped out by one asset: more passengers. Last week, on several fronts, the airlines were busy revolutionizing the old concept of air travel with a new pattern of fares and service designed to take some of the cost, complexity and confusion out of air travel, hoping thereby to tap the market of millions of non-flyers.

One trend that gives airline operators pause is the steady movement of passengers to the rear of the big jets. With flying hours cut in half by jets, most air travelers would rather have lower fares and fewer frills in the aft coach section than filet mignon and champagne in first class up front. Because the saving is considerable ($43.89 below first class from New York to Los Angeles), more and more corporations are directing their salesmen and executives to fly coach. So is the Government; only the top brass now fly first class. Some airlines have as little as 20% of their seating in first class, and the trend is so irresistibly backward that Continental Air Lines President Robert Six believes that "first class service is on its way out. along with the buffalo. There just isn't enough demand for it."

No Standing. What this has finally taught the industry (which has hiked its fares 28% in the last five years) is that lower fares will be necessary to attract the new passengers it needs. As a result, fares will probably be cut. at first about 5% in both first and coach classes. The latest evidence for a fare cut: when Continental's Six pioneered an experimental fare 20% below the jet coach rate for the Chicago-Los Angeles run, forcing his competitors--American Airlines. United Air Lines and TWA--to follow suit, traffic rose 30%. "There's always a big group of people who want to get there the cheapest way,'' says American President C. R. Smith. "Hell, they'd be willing to stand up all the way to California." They will not have to stand, but lower fares will mean the end of beverage and food service in coach class and less elaborate meals and tighter seating (five abreast v. present four) in first class.

The industry is also working at simplifying the present tangled structure of U.S. air fares. The airlines have concocted so many gimmicky promotional fares that even the travel agents are bewildered; on the New York-Boston route, twelve different fares are in effect. Backing away from this confusion, United Air Lines President William Patterson has asked the Civil Aeronautics Board for permission to start a one-class jet service with five-abreast seating and a fare that would be about 17% less than first class and only 5% higher than coach. Few other airline presidents expect one-class service to sweep the industry, as United does, but most of them are eager to streamline their fare systems.

At Nineteen O'Clock. Proof that passengers want more utilitarian air service is the success of Eastern Air Lines' no-reservation "shuttle." Eastern President Malcolm Maclntyre has boosted his line's share of the New York-Washington, D.C.. and New York-Boston air travel market from 30% to better than 70% in less than two years by introducing the Air Shuttle service, in which fares are low ($14.29 New York to Washington v. $20.05 for first-class jet service), frills are nonexistent, and the passenger is assured of a seat (a back-up plane flies any overflow). Tickets are sold in flight by a stewardess who trundles a ticket wagon down the aisle. Maclntyre intends next month to extend the no-reservation service to the Houston-New Orleans route. Between San Francisco and Los Angeles, Western and Pacific Southwest are already operating a shuttle-type service. American's Smith hopes to offer perhaps the cheapest form of air travel yet. Whenever there are any free seats on an American plane, he wants to let passengers who show up without reservations fly for half-fare. Says he: "This is a plan for the guy who does not care whether he leaves at 9 o'clock or 19 o'clock."

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