Passengers gain as airlines sort out deregulation
The worst may be over at Continental, but US airlines are heading for more turbulence. The only smooth ride in sight is for consumers, who are sure to get lower prices and better travel options.Skip to next paragraph
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''What we're seeing today is deregulation successfully at work,'' states Dan McKinnon, chairman of the Civil Aeronautics Board. He explains that since new carriers have entered the deregulated market, flyers now have ''more chances of getting a flight where they want to go, at the times they want to fly, and at lower costs.''
Despite a pilots' strike initiated on Saturday against Continental Airlines, the shrunken carrier has been able to keep almost all flights going (with some delays and cancellations) and over half its seats full. Spokesman Bruce Miller says the Houston-based airline, which filed for bankruptcy on Sept. 24, has plenty of pilots on hand beyond their immediate needs. The airline has even added 10 more flights to its daily schedule.Granted, it's been inconvenient for consumers to get at Continental's new $75 fares. At first, they could only get them at Continental counters. Lines are still long and phones busy. ''They're confused with what's going on right now, but they'll do anything for a discounted fare,'' says Betty Wilcox, a travel agent in Denver.
For the old carrier lines, the upheaval is ''sobering,'' as an Eastern Airlines executive puts it. In this year's second quarter, Eastern, TWA, Delta, Continental, Republic, and Western lost a total of $169.6 million. The airlines say low-cost competition, along with recession and high labor costs, have been the cause of their problems. While Republic and Western have been gaining labor's cooperation in cost-cutting, Continental's way out was bankruptcy.
''If Continental is successful operating with a Chapter 11 filing in effect, I believe other airlines unable to get labor concessions will adopt the same procedure,'' says Alfred Norling, an airline analyst for Kidder, Peabody & Co., the brokerage house. Eastern has already said it will follow the Continental strategy if it can't reduce labor costs by 15 percent.
''What is probably going to result is that a number of the carriers, as we know them today, won't be around in a few more years,'' says another analyst, who asked not to be named. Even a spokesman for TWA said his airline would have to think about changing its character if it couldn't cut labor costs.
As the airlines navigate through deregulation, they are bumping into a number of issues.
Prices: On routes where competition is heavy, prices will stay low, analysts say. For example, Frontier Airlines, a Denver-based carrier, is beating the special Continental fare with a $69 price. And, now that airlines are entering their lower-traffic season, more fare wars could break out.
Safety: National ads run by the Air Line Pilots Association (ALPA) ask people not to fly Continental. Pilots who have remained at the airline ''have been ordered to fly irregular shifts under new and untested work rules,'' the ads warn.
Gary Thomas, a 727 captain and spokesman at the union's Houston office, says the new work rules at the airline ''can cause a pilot to fly tired'' because they have less duty-free time.
Continental denies the airline is unsafe. Miller says he has heard of no cases of tired pilots, though pilots are under ''tremendous'' pressure by the union to strike.
CAB chairman McKinnon confirms that flying is safe. ''Pilots aren't going to risk their lives. Airlines have every incentive in the world to be sure of safety. The (Federal Aviation Administration) safety rules in effect are stringent.''
Reregulation: Because of continued unprofitability in the industry and the prospect of more layoffs, union pressure is growing for some kind of reregulation. Mr. Thomas, at ALPA, says union members are voting on a national pilot strike that would ''get the government to look at the problem.'' The vote won't be in for several weeks.
But, argue experts outside the union, the chances of reregulation are slim. ''Deregulation is finally correcting inefficient management,'' says McKinnon. ''Economically, regulation makes no sense whatsoever. Congress so far hasn't listened much (to reregulation), and consumers are happy with low fares.''
Some believe reregulation could restore the industry to the smooth-working, far-reaching system of the old days. ''What's the future for the traveling public . . . if the industry just proceeds into a mass of minimal service, low-fare airlines?'' asks an Eastern spokesman.