Troubled Airlines Blame CAB

JET-AGE SLOWNESS

THE CAB is a creature imprisoned by its own structure and procedures. It is unable to form clear policy. It is unable to make sound and comprehensive plans. It is unable to administer its affairs with vigor and dispatch." Such was the biting indictment of the Civil Aeronautics Board made by former CAB Member Louis Hector in his letter of resignation to President Eisenhower last fall. Last week this view was echoed--and then some--by the U.S. airline industry. The industry is beset by jet-age problems that cry for solution--and airmen feel that CAB is trying to solve them with all the speed and performance of an oldtime Jenny.

For example, CAB finally approved a fare hike based on the airlines' return on investment--four years after it began its fare investigation. Its announcement was so ambiguous and confusing that not even airline lawyers could figure out what the board really meant. The hike seemed to amount to about 2%, but Braniff announced that it will ask for a 3% hike, Capital for a 4% hike, Eastern for 5% (with Capital and Eastern also asking an additional $1 a ticket).

The four-year delay points up one of the chief accusations against CAB: that it takes forever to decide even routine matters. Such indecision has hobbled the industry just when it needs fast action to deal with the new economic and regulatory problems of the jet age. During the first quarter of 1960, U.S. domestic trunk lines lost $24 million, v. a pretax profit of $16 million for 1959's first quarter. Bad weather and a spate of crashes account for some of the gap, but most of it is due to two major problems facing the airlines: fares are too low (at about the level of ten years ago), and competition too great.

The CAB had a hand in both problems. After World War II, many airlines exuberantly overexpanded. Instead of using its power to impose restraint, CAB approved patchwork and often uneconomic route structures. Result: subsidy payments to airlines jumped from $19.7 million in 1946 to $83.8 million in 1950, before dropping again. Though all trunk lines are now off subsidy, CAB expects to dole out $69.3 million in fiscal 1961 to small feeder airlines, which still do not have enough money to replace their obsolete equipment.

In adopting a policy of trying to strengthen middle-sized regional trunk lines, CAB awarded them long hauls already amply served by the major lines. Today seven markets are served by five or more airlines; in 1955 there were none. Sometimes, as in the case of Delta and Braniff airlines, the plan worked. Often everyone got hurt. Says American Airlines President C. R. Smith: "Competition is good. It becomes bad when it is wasteful and there is insufficient business to provide a profit even for the most efficient."

The classic example of such competition was CAB's award of a blue-ribbon Florida route to Northeast Airlines to "strengthen" the line, which formerly only flew between New England and New York. Two carriers--Eastern and National--had previously made a profitable living on the Florida run, but the addition of Northeast has meant losses for all three. With a $7,000,000 loss in 1959, Northeast itself is in perilous financial condition. One of the major troubles at Capital Airlines (TIME, April 25) is its bad route structure. Though the routes were asked for by Capital and approved by CAB, they threw Capital into competition with big lines.

What is wrong with CAB? It is red-tape-tied by rules dating back to simpler times, is second-guessed in its decisions by Congress and the White House. Many industry men also feel that CAB's deepest trouble is the men who run it. Men with better qualifications are often not willing to serve the long hours at the comparatively modest salary ($20,000 a year) that the job offers. Three of the present CAB members, all appointed within the past few months, have little or no experience in commercial aviation.

The new board got off to a promising start by expressing its intention not to give out new lines to any carrier that comes crying for them. The old board did not anticipate the revolutionary impact of the new jets, which carry almost twice as many people at twice the speed of the old piston planes. The real problem is how to keep them filled and keep profitable. Higher fares are only part of the answer. Airmen feel that what the U.S. air industry needs--and CAB should provide--is a broad and permanent master plan for U.S. air transport to make it more economically sound. This might well call for less U.S. competition (especially since foreign lines have increased their competition), more flexibility in fares, mergers of such ailing lines as Capital and Northeast, and a redrawing of the route structures. Above all, airlines say it should provide for more vigor and dispatch on the part of CAB in making up its mind.

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