Cutting Air Fares

"A travel revolution," editorialized the Montreal Star. "A stab in the back," groaned a U.S. airline official. "A death blow," conceded one Canadian railroadman. All were reacting in their own way to the announcement by Trans-Canada Air Lines and Canadian Pacific Air Lines that starting Jan. 2 all fares on continental flights of more than 600 miles will be slashed up to 25%. No longer, said the Star, would air travel in Canada be "considered the prerogative of the rich, the daring, or those on emergency missions."

The airline-fare cuts are the result of a year-long study by five top TCA executives. In response to President Gordon McGregor's desire to increase the number of travelers by decreasing the cost of traveling, the team re-examined the entire airline cost structure. They concluded that since take-offs and landings are the most expensive part of every flight (heavy fuel consumption, airport fees, ground expenses), fares should not be calculated on a straight price-per-mile basis. Instead, statisticians worked out a new cost curve that drops as flights get longer. Thus, round-trip flights from Montreal to Vancouver, now $246, could be cut to as low as $182, while the $24 tab on the short Montreal-Toronto run should go up a few dollars.

Faced with government-owned Trans-Canada's decision, privately owned Canadian Pacific had no choice except to go along. Neither have the U.S. lines--including American, Eastern and United--that compete with TCA on routes between the two countries. Though U.S. carriers complain that TCA can chop fares only because it has government support, U.S. lines will probably have to follow suit to stay competitive (See BUSINESS). Bound to suffer: Canada's railroads, which already lose money on their cross-continent runs (one-way tourist fare, including a berth but no meals or extras: $115.40). TCA Boss McGregor is not concerned about his competitors. "The lower we can keep fares without getting into a chronic deficit position," he says, "the better it will be for both TCA and the traveling public."

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