Blocking Air Mergers

The U.S. airline industry, which suffers periodically from financial turbulence, last week ran into a patch of especially rough air. Items:

> Splitting along party lines (three Democrats to two Republicans), the Civil Aeronautics Board rejected a merger proposal by Eastern and American airlines to form the nation's largest domestic airline. Says CAB Chairman Allan Boyd: "The risk of concentrating so much power in one airline outweighed the benefit the merger might have had for American and Eastern." The refusal left Eastern in a grave financial state. Faced with withering over-competition and crippled by a recent flight engineers' strike, it has suffered a pretax loss of $60.3 million in the past three years, including a $3,100,000 loss last month. The CAB believes that Eastern can survive, but it may now have to help out by reducing competition on some of Eastern's routes.

> Hard-pressed Northeast Airlines faced the loss of six jetliners and nine turboprop planes. General Dynamics Corp. and Vickers-Armstrongs Ltd. moved to repossess their planes after a CAB examiner recommended that Northeast be refused a permanent certificate to fly the Miami-New York run. Without this route, most airline experts feel, Northeast has next to no chance of survival. Through his attorneys, elusive Industrialist Howard Hughes, who controls Northeast, began intense negotiations to stall off Vickers and General Dynamics until he can line up other planes to keep Northeast flying. He obviously hopes to find a merger partner, but since Northeast is staggering under a $60 million debt, a merger may be difficult to arrange.

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