Sky Wars over North America

Paring fares for pairs

A corporate blow for economy--and togetherness. This week Eastern Air Lines, the aggressive carrier headed by ex-Astronaut Frank Borman, inaugurates a bargain fare that brings the concept of the fixed-price, go-anywhere Eurailpass to U.S. air travel. For no more than $323, a passenger can buy an "Unlimited Mileage" ticket that allows him up to 21 days of travel to any or all of 101 cities--excluding Canada--on Eastern's route map, which stretches from coast to coast and to Mexico City, Acapulco and twelve Caribbean islands. The only catch, aside from the fact that the minimum three-stopover itinerary must be settled and paid for in advance; the fare is available only to passengers traveling in pairs.

For the incurably peripatetic, the Eastern plan could offer big savings. A pair of Unlimited Mileage passengers could conceivably lay out a route that would take them from Boston to Seattle, Los Angeles and Mexico City, through the Caribbean to Florida, adding up to about 23,000 air miles of flying--worth about $1,725 at the economy-class fare rate of about 7 1/2-c- per mile. Delta and National have just come out with their own versions of Unlimited Mileage.

These plans are only the latest salvos in the air-fare war. This month Pan Am, TWA and some foreign flag carriers will begin offering New York--London cut-rate fares that compete with the $236 round-trip Skytrain shuttle designed by Britain's upstart Laker Airways. Within the U.S., airlines have been announcing a profusion of cheap fares since last April; that was when American Airlines set off the bargain binge by offering advance-booked coast-to-coast flights at a "supersaver" round-trip fare of $231, which is 45% under the standard economy rate. Other carriers have spurred further price competition with bargains of their own.

Many major airlines view the trend away from standard fixed fares with varying degrees of horror and resignation. The airlines are at last making money again: having lost by one estimate $94 million as recently as 1975, the major carriers could collectively earn a record $500 million this year, thanks partly to a post-recession upturn in air travel. But bargain plans will almost always have a "modestly negative" impact on earnings, insists Theodore Shen, airline analyst at Donaldson, Lufkin & Jenrette. So why are the airlines slashing fares?

The answer is the threat of charter competition and fear of Government deregulation. Fare cutting really began to take off after the Civil Aeronautics Board approved the Advance Booking Charters, liberalized charter schemes that promise to become the hottest thing in cut-rate travel. At the same time, the scheduled lines have concluded that it is wise to show some willingness to compete on price now that Congress is considering a sweeping airline deregulation bill, sponsored by Senators Ted Kennedy and Howard Cannon, that would allow airlines more freedom in changing fares and make it easier for new airlines to start up.

The CAB has quietly been putting what amounts to price deregulation into effect simply by approving almost any new low-fare proposal that it gets. Says Alfred Kahn, an economist who has been CAB chairman since June: "If a carrier is enterprising enough to come up with a new, low fare, I see no reason why it should be penalized. It's up to the competitors to respond."

The deregulation push has split the scheduled airlines into two warring camps. Certain carriers, notably United, whose fleet of 364 planes is the nation's largest, believe they could survive and benefit from the new competition that would come if Washington threw the airline business open to any and all who wanted to enter it. But most other lines, including Eastern, are bitterly opposed. Eastern's Borman believes opening up airline service to all comers would mean "wasteful capacity wars" that would benefit the largest, strongest carriers--like United--which could expand into new routes now denied them. The smaller carriers, says Borman, would be forced to "retrench severely." Whatever the implications of the sky wars for the airlines' finances, as long as the great deregulation battle goes on, travelers can expect more fallout in the form of bargain fares.

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