Airlines in a Nose Dive

Reregulation is the cry as fares continue to slide

At no time in their history have U.S. airlines been in worse shape than they are now. Economic recession has cut deeply into the number of air passengers, slimming the market to a mere shadow of its once lusty self. Eight of the top carriers alone lost $824 million last year. Regional airlines did not do much better as a group. Many of the smaller carriers that initially prospered under fare-cutting schemes encouraged by the Airline Deregulation Act of 1978 are now in trouble and may not survive.

To lure passengers, the airlines have slashed fares suicidally almost without interruption since last fall. Last week TWA and Capitol Airlines joined United Airlines in offering $99 one-way night flights between New York and San Francisco, which is far less than the going Greyhound bus fare of $ 133.

So far, the rate cutting has almost totally failed in its principal objective: filling up the planes with enough bargain-hungry passengers to return the carriers to profitability. Industry "load-factors," or numbers of seats filled on scheduled flights, keep going down, from 59.1% in 1980 to 58.7% last year, with some individual airlines in far worse shape. During February, for example, financially ailing Pan Am's load-factor slipped to 54.8% of capacity, from 60.8% last year, while TWA's dropped even further in the first two months of this year, to 49.1%.

Among the most troubled of all the major carriers are Continental and Braniff, both of which are widely regarded by analysts as close to bankruptcy. At Braniff, sacrifices have become part of the job. Employees took a 10% pay cut in 1981 to help pull the airline out of its slump, and two weeks ago Braniff put its 9,500 employees on half pay for one week to save $8 million after its $94.8 million operating loss in 1981.

Braniff badly needed the wage deferral assistance from its employees to ease a sudden and potentially ruinous cash crunch. The trouble arose when approximately $9 million worth of Braniff tickets were unexpectedly presented for redemption by the airline industry's ticket clearing house. The clearing house operates like a kind of back-office ticket exchange, allowing reservation agents for one airline to accept tickets for fares written by another carrier.

Problems surfaced when rumors started to spread that Braniff was on the verge of bankruptcy. Thousands of passengers holding Braniff tickets panicked and traded them in at ticket offices for seats on BranifFs archrival, American Airlines. Last week allegations were made to the Civil Aeronautics Board by unspecified airline-industry insiders that American let the Braniff tickets accumulate, then abruptly dumped them into the clearinghouse hopper in a "dirty tricks" campaign designed to create a Braniff cash crunch and hasten the airline's demise. Though American Airlines dismissed the charge as "absolutely ridiculous," the CAB is looking into the matter anyway.

So bad have conditions become throughout the industry that pressure is mounting for a return to regulated fares. Several years ago, World Airways was one of the first to begin fare cutting. Last week World's chairman, Edward Daly, did an about-face and petitioned the CAB for a return to what amounted to reregulation. So far, the agency has resisted acting, but if fare slashing continues, it may have no choice. Since deregulation began four years ago, the number of commercial air carriers has increased sharply, creating a condition of overcapacity. Thus, even as fewer and fewer people are flying, more and more companies are competing for their business.

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