US airline competition: the sifting has begun
Washington — ''A simple-minded notion'' is the way Alfred E. Kahn, former chairman of the Civil Aeronautics Board (CAB) describes the view that deregulation means ''something for everyone.''
It does not, says Dr. Kahn. Deregulation, in the case of the nation's airlines, freed them to make mistakes, to fail, as well as to succeed.
''And,'' he concludes, ''some people want to be protected'' from the chill winds of competition.
This brings up the question: Was deregulation good or bad for the airlines and for the United States itself? Good, says Kahn promptly, a view echoed by Marvin Cohen, another former chairman of the CAB.
''Broadly speaking,'' said Kahn, reached by telephone while on vacation in the English lake country, ''deregulation was predominantly on the plus side.''
''Route structures were rationalized,'' he said, ''allowing a better matching of equipment to the routes.''
Competition for business peeled away waste. Featherbedding demands by unions were cut back as competition grew fierce.
''You hear very few demands now,'' says Kahn, ''for three pilots in cabins built for two.'' Wage increases shrank as airline workers at all levels faced the choice of belt tightening or no jobs at all.
From what he says about deregulation, Kahn might be serving President Reagan, who deplores government bail-outs for troubled American firms.
But Kahn's stint as head of the CAB and later as chief White House inflation fighter came under former President Carter.
On the subject of deregulation, there is not much to choose between today's Republican President and his Democratic predecessor, though they differ on many other things.
As chairman of the CAB, Kahn shaped and pushed the 1978 Airlines Deregulation Act, which stripped from US carriers a mantle of government regulation, both stifling and protective.
Free to expand their routes, invade each other's turf, and cut ticket prices to the bone, some airlines wilted under the intense pressure of competition.
The first major casualty is Braniff International, now in bankruptcy.
Others are vulnerable. Of the nation's 12 largest airlines, 11 lost money in the first quarter of 1982.
Analysts name Pan American, Continental, Republic, and Western among the airlines most deeply mired in financial problems.
Did deregulation play a role in all this? ''Undeniably,'' says Kahn, ''deregulation accentuated the difficulties of the airlines in a number of ways.''
* New carriers sprang up. Local service operators--the commuter or feeder lines--invaded long-haul markets rather than hand their passengers over to the trunk lines, as they previously had done.
* Excess capacity led to rate wars, with airlines scrambling to fill their seats by slicing ticket prices below the break-even point.
In some cases, when airlines were competing head-to-head on lucrative routes, it cost less to fly from coast to coast than to take a bus.
Deregulation coincided with other problems, notably sharply higher fuel prices and reduced passenger loads due to recession. These hit all airlines hard.
Last year's air traffic controllers' strike, leading to a mass firing of controllers by President Reagan, caused the Federal Aviation Administration to limit traffic at the nation's busiest airports.
Most airlines found this combination of circumstances hard to surmount, even when management was prudent. But Braniff, analysts agree, compounded its problems by an overly ambitious expansion that saddled the company with more than $730 million of debt.
At the end, when creditors refused to extend new loans, Braniff - which had brightened the airport scene with its colorfully painted jets - lacked enough cash to meet its payroll.
No one can be sure what the airline industry will look like when the recession ends, except that it should be leaner and more toughly managed, better able to cope with special factors such as the high cost of jet fuel.