Back to Subsidies?

It was a sad day for private enterprise. For the better part of 15 years, the two giant U.S. international airlines, Pan American and TWA, have been competing on roughly equal terms with a host of nationalized, subsidized foreign carriers ranging from Air France to Air India. But last week both Pan Am and TWA applied to the Civil Aeronautics Board for the first subsidies they themselves have received since the 1950s. In separate petitions, the two lines contended, in effect, that without federal help they will go broke combating two trends: a drop of about 5% in passenger traffic and, far more damaging, a breathtaking rise in jet-fuel bills that has raised the cost of refueling as much as 400%.

Pan Am, which carries 48% of America's international air traffic, received its last subsidy in 1958, a payment of some $200,000 for Latin American operations. Predicting a $374 million fuel bill for 1974 ($204 million over the 1973 total), Chief Executive William Sea well last week asked the CAB for a $194 million annual subsidy. Seawell, who last year piloted his fleet into the profit column for the first time in five years, told the CAB: "We were overwhelmed in our efforts to stay in the black." TWA, which unlike Pan Am has a far-flung network of domestic routes to supplement its international operations, has been off subsidy for 20 years and did not specify the exact amount of aid it seeks. Nonetheless, President Forwood C. ("Bud") Wiser Jr. estimated a 1974 pretax loss, without subsidy, of $47.2 million, compared with a 1973 profit of $19.5 million. Together, the two lines' applications could cost the U.S. Treasury about $300 million a year.

The two lines, along with Alitalia, have been considering a pooling of equipment and passengers on international flights. Pan Am applied last month for permission to discuss such an arrangement, and the CAB approved it last week. But the Justice Department formally objected on antitrust grounds; the subsidy applications promptly followed. CAB Chairman Robert Timm has expressed public support for the idea of federal financial assistance to U.S. international airlines to help them pay for excessive fuel costs, and legislation is pending in Congress to provide exactly that assistance. The only alternative appears to be outright nationalization.

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