AVIATION: Cheaper than Potatoes

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How much does it cost U.S. taxpayers to subsidize U.S. airlines? Nobody knows for sure, but last week Joseph J. O'Connell Jr., chairman of CAB, told the New York City Bar Association that CAB soon hopes to find out. CAB expects to break down the Government payments to airlines into outright subsidies and the amount airlines have earned carrying the mail.

Last year, said Joe O'Connell, the Post Office paid the airlines $94 million in mail pay; in 1949 the bill might run to $125 million. This, he conceded, "is not small change by any means. On the other hand, it is considerably less than what we are spending to support the price of potatoes." In view of the airlines' importance to the economy and to national defense, he thought a good air transport system would be cheap at many times the price. But he favored the Hoover Commission's proposal that subsidies be plainly labeled, instead of being masked as mail pay.

To O'Connell, the 1938 Civil Aeronautics Act, which provides for mail payments to the airlines mainly on the basis of whatever they need in order to keep operating, robs them of proper incentives. It offers little inducement to economically run routes and operations. It "tends to operate as a shield between the air carriers, and the ultimate in economic penalties—bankruptcy."

Before asking for revision of the act, CAB will finish four fact-finding inquiries into 1) mail-carrying costs; 2) the economy and efficiency of the major airlines; 3) the feasibility of joint airport and ticket facilities; and 4) air freight rates. It seemed to O'Connell that somewhere between the "meat-ax approach" to the problem of subsidies and the present tendency to higher & higher mail pay there must be a road to a system of sounder and more profitable airlines.