Monday, Oct. 20, 1975
No Cheers for Decontrol
President Ford, who has been drawing ringing cheers from audiences of businessmen by promising to get the Government "off your back," took a first step last week toward making good on his rhetoric. He sent to Congress a plan to loosen greatly federal control of airlines--the tightly regulated industry --with the aim of introducing enough new competition to lower fares significantly. The response to this plan could not have been more different from that to Ford's speeches: airline executives forecast disaster if the President's proposed reforms ever go fully into effect, and critics predicted, probably accurately, that Congress would never approve the whole package.
At present the Civil Aeronautics Board approves fares, determines routes and decides which lines will be permitted to fly where in the U.S. That system has been denounced as a breeder of inefficiency among airlines because it shelters them from aggressive competition. Ford branded the setup "protectionist." Key parts of his plan:
P: Airlines would be permitted to raise fares as much as 10% in any one year, or cut them up to 20% in each of the first two years that the plan was in operation, without getting CAB approval.
P:Supplemental airlines, now engaged mostly in charter business, could expand into flying scheduled routes, and companies that wanted to start new airlines would be encouraged to do so, on routes of their own choice, if they were "fit, willing and able" to fly.
P: Starting in 1981 airlines could expand their route networks 5% to 10% a year by starting flights to cities that they do not now serve, without CAB O.K.
P:The CAB would be forbidden to approve any deal among airlines that would reduce competition, such as the agreements between lines to cut back schedules jointly.
Most airline executives were aghast.
Said Trans World Airlines Chairman Charles C. Tillinghast Jr., in a burst of metaphor mixing: "The current regulatory system has served this country well, and before we play Russian roulette with it, we should make doubly sure that the cure proposed is not worse than the disease." The Air Transport Association, meeting in Washington, called the President's proposals "misconceived."
The airlines' central fear is that while they would be exposed to new competition on their most desirable routes, they would be forced to continue flying to many cities that do not generate enough traffic to be profitable. In theory the proposed law would give them greater freedom to drop as well as add routes; as many as 50,000 intercity connections could be endangered. But the carriers simply do not believe that Congress will ever give them authority to drop unprofitable flights in any major way; each of the cities that might lose airline service can put pressure on a Congressman to stop that from happening. Meanwhile the lines fear that a host of new carriers would jump into such heavily traveled routes as New York to Miami or Chicago to Los Angeles--especially since the CAB could no longer require them to extend service to less central points as a condition for getting into the big markets. The result, the lines believe, is that some present carriers would be forced to apply for federal subsidy--scarcely what Ford intends--to keep from going broke. Secor Browne, former CAB chairman and now a professor at MIT, says nationalization could result from the process.
There is reason to believe too that airline fares in general would go up instead of down under Ford's plan, at least at first. Some lines might be encouraged to introduce more promotional and discount fares like the no-frills service started by National. Besides, the airlines are already in financial trouble. Eastern's latest report shows an eight-month loss of $2.9 million, while TWA went $86 million into the red during the same period. Fuel and labor costs are rising.
Wall Street analysts expect the airlines to use any new rate-setting freedom to push up the general level of fares.
Such arguments can be expected to weigh heavily with Congress, where the airlines have an effective lobby. Introducing Ford's plan, Transportation Secretary William Coleman Jr. said that the Administration has "a case good enough and persuasive enough that when Congress listens, they will accept our point of view." But there were indications that the Administration was offering the plan for image building purposes, anticipating its defeat. Deputy Undersecretary John Snow gives the decontrol plan only one chance in three or four of being accepted.
This file is automatically generated by a robot program, so viewer discretion is required.